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FAQ Series Question #2: Should Congress Have the Unilateral Power to Suspend the Balanced Budget Ame

Today's blog is the second in a multi-part series that will quickly and directly answer some of the most frequently asked questions we get about the Compact for America initiative. Enjoy!

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Should Congress Have the Unilateral Power to Suspend the Balanced Budget Amendment’s Debt Limit in Times of Declared War or Other Emergency?

No. The Compact’s Balanced Budget Amendment already allows for flexibility to borrow for wars and emergencies—as much flexibility as is consistent with fiscal responsibility.

First, the Amendment allows for a line of credit for borrowing by Congress—which is initially fixed at 105% of the outstanding debt on ratification. If the amendment were ratified in the near future, that means as much as $21 trillion in borrowing capacity would be available under the Amendment. That would be six times as much borrowing capacity as annual tax revenue: think of it as like a home equity line of credit that was six times your income. This is plenty of borrowing capacity for a fiscally responsible federal government to manage all of its affairs, including the need to finance declared wars and emergency actions. All the federal government needs to do is pay down the debt during good times, and conserve adequate borrowing capacity for bad times.

Second, the Amendment provides for even more borrowing capacity if a simple majority of Congress and a simple majority of state legislatures can be persuaded respectively to refer and approve an increase in the Amendment’s debt limit. This state referendum process could very well be deemed the “war” or “emergency” exception to the Amendment's debt limit. But the interpretation of the exception is wisely not placed in Washington's sole hands.

Securing approval from a majority of state legislatures for new borrowing above the Amendment's debt limit would not be impractical during times of war or emergency. The Amendment authorizes states to establish by state law the specific process by which their referendum authority is exercised. We can expect that the states will use that authority to enjoy their restored power in national policy making; and that means that states can be expected to establish procedures for rapidly responding to emergency requests for more borrowing capacity. The states will have plenty of time to develop those procedures because the Amendment will not be advanced and ratified overnight, and because its debt limit allows for a cushion of one to two years of additional borrowing capacity at current deficit spending rates. And Congress likewise will have plenty of time to develop credible procedures, such as a lock box reserving a portion of its unused borrowing authority for war or emergency spending, that would enable it to credibly represent to the states that any increase in its borrowing authority would be reserved for just that.

Further, tax cash flow even in today’s budget allows for doubling or tripling military spending before borrowing becomes necessary. Once borrowing reaches 98% of the debt limit, the President can use his impoundment power under the Amendment to redirect spending to the military, subject to Congressional override by simple majority. The redirection of available tax cash flow to military spending will give Congress and the states plenty of time to propose and approve respectively any increase in the Amendment’s debt limit that truly commanded a national consensus.

Requiring Washington to secure a consensus from the representative bodies that are closest to the people is nothing more than what a wise statesman would do. Before undertaking borrowing for any war, Washington should ensure that it has the backing of the nation, not just the denizens of Washington. The Amendment ensures that this exact consensus will happen. Moreover, if we need to undertake borrowing for an emergency, Washington should ensure that a national consensus stands behind that purpose, especially when emergency spending tends to benefit only certain regions, communities, and special interests directly.

Of course, the basic reason for state intervention is that Washington is a debt addict. We should expect Washington to abuse any exception to any limit on borrowing capacity that it alone interprets and enforces. We must strike at the root of our national debt problem by ensuring that the federal government debtor is not free to write itself blank checks with a line of credit it alone determines. To encourage fiscal responsibility in all spending decisions, outside intervention is necessary to oversee Congress’ borrowing decisions beyond the Amendment’s initial debt limit. Assigning that intervention responsibility to the states is consistent with the Constitution’s original design, which gave the states control over the U.S. Senate.

The Amendment would eventually become useless if it included any exception that Congress unilaterally applied. Even if Congress regained its fiscal composure for a few years with the “right” people in charge, the structural flaw that originally caused our national debt problem would remain; namely, allowing the debtor to have the unilateral power to write its own credit limit. Faced with the ability to spend with the costs shifted to future non-voting generations, we can reasonably predict that Congress would eventually yield to the pressure placed on them by special interests to invoke any debt limit exception. There would be a real risk that wars and emergencies would be declared by Congress in order to enable more borrowing. And this would not be as hard as it might seem.

Our nation is always in a state of minor military conflict and constantly afflicted by emergencies of all shapes and sizes. Just because declarations of war have been rare in the past, and reserved only for the largest conflagrations; nothing in the Constitution so restricts the power to declare war. We already see that emergencies are declared for all shapes and sizes of catastrophes. If the Amendment’s restrictions on borrowing capacity did not apply during declared wars or emergencies, Congress would need only to officially declare micro-wars and mini-emergencies; insiders could bury the declarations in vague language in the middle of a giant bills few congressmen actually read; and instantly Washington would again be able to borrow without limit or outside oversight. Very soon the federal government would be back in the same position of near-bankruptcy in which we find it today. An amendment that retains Washington’s unilateral power to engage in unlimited debt spending is designed to fail.

In the final analysis, national security requires the fiscal responsibility that would be promoted by only allowing the federal government limited borrowing capacity, with any flexibility subject to outside oversight; preserving a system of unlimited debt spending, in which we must borrow from our adversaries to keep the ship of state afloat, is not the best national defense strategy.

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