top of page

Want a Balanced Budget Amendment that's Flexible Enough to Handle Genuine Crises Without Loopholes?

The Balanced Budget Amendment at the heart of the Compact for a Balanced Budget contains no exceptions for war or natural disaster, but it remains the only practical solution to our runaway federal debt. The reason is two-fold.

First of all, the Compact's Balanced Budget Amendment is flexible enough to handle genuine crises. The initial debt limit it enforces can be lifted for any reason that can command the support and approval of 26 state legislatures–including war or natural disaster. The initial debt limit is set at 105% of the outstanding federal debt at ratification. This gives Congress upwards of $600 billion cushion of additional debt spending–enough for about a year of borrowing under current spending trajectories before the initial debt limit kicks in.

Keep in mind, cash flow from taxes will continue during all but the most devastating crises and it can be prioritized to address immediate exigencies (if a crisis were so devastating that tax revenue ceases, it is unlikely markets would exist to purchase public debt either, so an exception for borrowing during such crises would be meaningless). During that time, Congress has the power to seek state legislative approval to raise the debt limit either based on a persuasive budget or based on a clearly defined crisis contingency–like war or natural disaster.

If the states nevertheless refuse such approval, that would mean that a wide national consensus does not support additional federal debt under the circumstances proffered by Congress, which would be reason enough to disapprove the request. Military adventures and pork barrel spending disguised as crises will have a hard time getting financing. But the practical reality, as evidenced by Pearl Harbor and 9-11, is that our Nation has always risen to the occasion when challenged by a genuine crisis.

Secondly, the problem with writing in an exception to balancing the budget is that it will become a loophole when interpreted by Washington. Congress and the President clearly have an addiction to unsustainable debt spending. The temptation to interpret a crisis exception to allow needless borrowing is too great. It is like telling an alcoholic to avoid liquor except for medicinal purposes.

Giving Washington the opportunity to borrow through exceptions that Washington alone would interpret would defeat the purpose of the Balanced Budget Amendment, which is to divide the otherwise unlimited power of borrowing between Washington and state legislatures acting as a fiscal control board. State legislatures–not Washington–need to be the ultimate judge about the legitimacy of any request to lift the federal debt limit because an addict cannot be trusted.

Featured Posts
Recent Posts
Follow Us
  • Wix Facebook page
  • YouTube App Icon

Visit CFA on Facebook

Get Educated about CFA on YouTube

Search By Tags
No tags yet.
bottom of page