OPINION:
The rapid growth in federal debt has exposed the country to high risk of loss of confidence in the ability of the federal government to put its finances in order, which would have a devastating impact on international financial markets. Total federal debt now equals about 120% of national income, an all- time record, and it is projected to grow dramatically by midcentury.
In contrast, state and local debt today is equal to 13% of national income, about the same level as that three decades ago. Clearly state and local governments have had much greater success than the federal government in constraining their debt to sustainable levels.
The fiscal rules enacted at the federal level have been ineffective in containing the growth of federal debt. That is because, unlike in 50 states, the federal government does not have any fiscal constraints in the Constitution. Because the federal fiscal rules are statutory, it is easy for legislators to circumvent or suspend them, which they have done routinely over the years. State and local governments, on the other hand, have enacted effective constitutional as well as statutory fiscal rules, including debt limits, balanced budget requirements, tax and expenditure limits, rainy day funds, and veto authority.
Tax and expenditure limits (TELs) were enacted by over 30 states in response to the rapid growth in spending linked to Great Society programs. Many of the early TELs were not effective, which led citizens to enact a new generation of TELs. For example, Colorado enacted a statutory TEL in 1978 that was easily circumvented and suspended. Colorado citizens responded by enacting the TABOR Constitutional Amendment through citizen initiative in 1992.
TABOR caps the rate of growth in state revenue and spending to the sum of the rate of growth in population and inflation. Surplus revenue above that limit must be rebated to taxpayers. The fiscal rules apply to all levels of government, if any government in Colorado wants to raise taxes, issue new debt, or spend surplus it must have voter approval.
Incorporating fiscal rules in the Constitution increases transparency and accountability. In addition, unlike statutory debt or spending limits, only a Constitutional provision can bind both current and future legislatures.
There are several lessons that the federal government can learn from the fiscal rules in Colorado and other states. Incorporating fiscal rules in the Constitution can prevent legislators from behaving in a fiscally irresponsible manner. If legislators fail to balance the budget and/or stabilize debt at reasonable and sustainable levels, they face the wrath of citizens who voted to incorporate the fiscal rules in their state Constitution. Citizens then have recourse through the legal system to enforce the Constitutional fiscal rules.
State legislators and citizens have the power under Article V of the U.S. Constitution to address federal fiscal irresponsibility as well. Efforts to enact a fiscal responsibility amendment in the U.S. Constitution date back to the early years of the Republic. But Constitutional fiscal rules have never been enacted at the federal level. The reason is that for two centuries elected officials followed the unwritten principle of balanced budgets absent a declared war or a real national emergency, often referred to as the ‘Old Time Fiscal Religion.’ Total federal debt at the turn of the 20th century was less than 10% of national income.
As the federal government started to grow and abandon fiscal discipline after World War II the states responded by submitting many specific applications for a fiscal responsibility amendment. By 1979 more than the requisite number of states (34 states) had submitted applications for a fiscal responsibility amendment, yet Congress failed to call a Convention of States as required under
Article V.
As citizen support for a fiscal responsibility amendment to the U.S. Constitution gained momentum, special interests mounted opposition, claiming that a convention of the states would ‘runaway.’ But the Constitution contains safeguards against a runway convention. For example, any fiscal responsibility amendment proposed by a convention must be submitted for ratification by three quarters of the states (38 states), preferably by a vote of the people, as was the case with the 21st amendment.
Legislation introduced in Congress this year (H.C.R. 24) would require Congress to fulfill its obligation under Article V to certify and count state applications and call the convention. Several states are considering filing a Declaratory Judgement that would require Congress to discharge its express, enumerated, and non-discretionary responsibility to call a convention under Article V. This matter would have to be decided by the Supreme Court.
Solving the debt crisis is a bipartisan issue. Legislators on both sides of the aisle agree that the nation faces an eventual debt crisis, but Congress has failed to act. A fiscal responsibility amendment enacted through an Article V amendment convention is now the only recourse that citizens have to prevent the country from going over a fiscal cliff.
As President Ronald Reagan argued, when it comes to important decisions such as a fiscal responsibility amendment to the Constitution, ‘trust but verify.’ It is time for the states to step up and demand that Congress set the time and place for such a convention as required under Article V. Doing so will help to create a better future for America and Americans.
• Barry W. Poulson is on the Board of Directors of the Federal Fiscal Sustainability Foundation. Hon. David M. Walker is the immediate former Comptroller General of the United States.
Please read our comment policy before commenting.