State Intervention: Part 3 of 7 in the Compact BBA Series


This posting is the third in a 7 part series explaining the Balanced Budget Amendment at the heart of the Compact for a Balanced Budget.

Previously, we explained that section 1 of the Balanced Budget Amendment ensures that the federal government cannot spend more than cash on hand from taxes, unencumbered revenue sources, and authorized full faith and credit borrowing. Then we discussed how section 2 of the Amendment sets an initial constitutional debt limit that limits authorized borrowing capacity to 105% of the outstanding full faith and credit debt, plus any increase approved by a majority of state legislatures. This posting explains section 3 of the Amendment, which fleshes-out the state legislative approval process for any debt limit increase.

The state approval process specified in section 3 requires: (1) a measure to be passed by Congress (requiring simple majority vote support) unconditionally requesting the debt limit increase; and (2) unconditional approval of the debt limit increase by a simple majority of state legislatures (26) "within 60 days" and in accordance with "state law."

Bringing the debt limit increase debate to every state capitol and requiring approval in 60 days in accordance with state law will be a powerful means of ensuring transparency in the public policy debate. Most likely, the logistical hurdle in securing such approval will mean that only true emergencies or a powerful broad-based consensus will prompt more borrowing. The burden of proof will firmly rest on those who want to borrow beyond the nearly $20 trillion in outstanding national debt. The states will finally be restored to an oversight role in determining national policy, which undoubtedly will garner long lost respect from the DC political class.

For the first time ever, Congress will have to prioritize its spending, find efficiencies, and eliminate waste, fraud and abuse because it will be unable to guarantee itself the limitless ability to borrow.

In short, the state approval mechanism simultaneously furnishes a crucial release valve for emergency borrowing and a powerful check and balance on Washington’s abuse of that release valve.

Stay tuned for a discussion of section 4 of the Compact's BBA.

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