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Want to Make a Difference?

Some folks claim that a federal Balanced Budget Amendment would not make a difference. That may be true of some BBA proposals.

But it is not true about the BBA at the heart of the Compact for a Balanced Budget.

  • There’s a reason why Georgia, Alaska, Mississippi and North Dakota have already signed onto it.

  • There’s a reason why more than twenty leading think tanks have joined the educational movement.

  • There’s a reason why it has been endorsed by Lawrence Reed of the Foundation for Economic Education, George Will of the Washington Post, and George Leef of Forbes Magazine, among many others.

The reason why is that the Compact's Balanced Budget Amendment is uniquely powerful and effective.

Here are the facts:

  • The Amendment will limit the federal government’s borrowing capacity to an absolute dollar amount, creating a real sense of resource scarcity, which will strongly incentivize the conservation of borrowing capacity for bad times, prioritization, and budget planning. The use of an absolute dollar amount to specify the federal debt limit will also incentivize the preservation of the value of a dollar because the economic impact of the federal government’s borrowing capacity will be diminished by inflation—and also because there will be only a limited supply of treasury bonds for the federal reserve to buy for purposes of inflating the money supply.

  • The Amendment will provide flexibility for emergencies, but only with external discipline. Any increase in the federal debt limit will require the approval of a majority of state legislatures within 60 days of the proposal. This is because we can’t give the debt addict control over his supply if we want to wean him off his addiction. To keep the referendum clean, the Amendment requires the proposal to be a single-subject, unconditional measure and referred without any extortion or favoritism.

  • The Amendment will stop the games of chicken that characterize debt limit battles in Congress. It does this by requiring the President to designate spending delays when 98% of the federal government’s borrowing capacity is spent. A specific line item proposal designating the President’s spending priorities will have to be produced. That proposal will be subject to Congressional override within thirty days, and with simple majorities and no presidential signature. This enforcement feature will simultaneously create the fiscal transparency needed to build a real budget, stop panic-driven debt limit increases, create a clear line of accountability for spending policy, enable reprioritization of spending during unforeseen emergencies, and allow state legislatures to assess deliberatively any proposal for an increase in the federal debt limit.

  • Finally, the Amendment will protect us from a “taxmageddon” by incentivizing the consideration of spending reductions before revenue increases, and by encouraging positive tax policy reforms if revenues are raised. It does this by limiting simple majority approval of revenue increases to those that result from switching from an income tax to a consumption “fair” tax, eliminating tax loopholes, new or increased tariffs, or new or increased fees. All other income or sales tax levies will require two-thirds approval from each house of Congress.

All of these features poll-test at levels ranging from 61% to 81% approval from the American People.

The bottom line is that the BBA advanced by the Compact for a Balanced Budget would be effective and is popular.

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