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    "ocrText": "Ronald Reagan Presidential Library\nDigital Library Collections\nThis is a PDF of a folder from our textual collections.\nCollection: Roberts, John G.: Files\nFolder Title: JGR/Balanced Budget Amendment\n(1 of 2)\nBox: 5\nTo see more digitized collections visit:\nhttps://reaganlibrary.gov/archives/digital-library\nTo see all Ronald Reagan Presidential Library inventories visit:\nhttps://reaganlibrary.gov/document-collection\nContact a reference archivist at: [email protected]\nCitation Guidelines: https://reaganlibrary.gov/citing\nNational Archives Catalogue: https://catalog.archives.gov/\nOFFICE OF THE OF MANAGE PRESIDENT STATE OF THE UNITED\nEXECUTIVE OFFICE OF THE PRESIDENT\nOFFICE OF MANAGEMENT AND BUDGET\nWASHINGTON, D.C. 20503\nMarch 3, 1986\nMEMORANDUM FOR JOHN ROBERTS\nWhite House Counsel's Office\nFROM:\nJohn Cooney\nSUBJECT:\nBalanced Budget Amendment\nDick Hauser suggested I send you for review the papers on the\nBalanced Budget Amendment. Senate Republicans have asked us to\nsubmit today, as soon as possible, an Administration floor\nposition on the matter.\nThe proposed position is that the Administration supports S.J.\nRes. 225, with the consensus tax amendment. The tax amendment is\nsection 2 of the attached text. I enclose for your review\nexcerpts from the Committee report on S.J. Res. 225, prior to\namendment, and the Committee report on S.J. Res. 13, a more\ntraditional version of the Balanced Budget Amendment which is\nnearly identical to the version the Administration endorsed in\n1982. (If you need more information, I am also enclosing my only\ncopies of the full reports -- please return).\n-- Both Resolutions would limit outlays to receipts, but\nS.J. Res. 13 would also limit the growth rate in receipts to the\nrate of growth in the prior year's national income, thereby\npreventing balancing the budget simply through tax increases.\n--- S.J. Res. 13 requires completion of action on the budget\nbill prior to the start of the applicable fiscal year. This\ncorresponds to the practice under State balanced budget\nrequirements, which generally require the balance to be\ndetermined on the basis of good faith estimates reached before\nthe start of the fiscal year.\n- S.J. Res. 13 provides that actual outlays may not exceed\nestimated receipts. This retains effective control of the\nprocess in the hands of Congress and the President. Furthermore,\nif actual receipts come in under projections, outlays would not\nneed to be decreased or taxes raised during the course of the\nfiscal year.\n-- By contrast, S.J. Res 225 requires that actual outlays\nnot exceed actual reciepts. This version also does not have an\nimplementation mechanism built into it; this question apparently\nwould be left for further legislation. As a result, this version\nis subject to an interpretation that Congress and the President\nare under a \"continuing obligation\" to ensure that actual outlays\nand receipts are balanced throughout the fiscal year. Thus,\nquestions about implementation might arise late in the fiscal\nyear -- for instance, during consideration of supplemental\nappropriations bills or other bills that might increase spending\nand exacerbate the deficit during the current fiscal year.\nThe proponents will seek to move S.J. Res. 225 because Simon and\nother Committee Democrats (Biden and Byrd) voted for this\nversions in Committee, and it is thought that this version\ntherefore has a chance of commanding enough Democratic votes to\nfly through the Senate and increase the pressure on the House\nDemocratic leadership to permit a floor vote on the matter.\nPlese let me know if you need any further information.\nSJ\nRes\n2\nCalendar No. 357\nwithin seven years after its submission to the States for\nratification:\n99TH CONGRESS\n}\nSENATE\n{\nREPORT\n1st Session\n99-162\n\"ARTICLE -\n\"SECTION 1. Prior to each fiscal year, the Congress shall\nadopt a statement for that year in which total outlays are\nnot greater than total receipts. The Congress may amend\nsuch statement provided amended outlays are not greater\nBALANCED BUDGET-TAX LIMITATION CONSTITUTIONAL\nthan amended receipts. With the approval of three-fifths of\nthe whole number of both Houses, the Congress, in such\nAMENDMENT\nstatement, may provide for a specific excess of outlays over\nreceipts. Actual outlays shall not exceed the outlays set\nforth in such statement.\nOCTOBER 23 (legislative day, OCTOBER 21), 1985.-Ordered to be printed\n\"SECTION 2. Total receipts in the statement adopted pur-\nsuant to this article shall not increase by a rate greater\nthan the rate of increase in national income in the previ-\nous year, unless a majority of the whole number of both\nMr. THURMOND, from the Committee on the Judiciary,\nHouses shall have passed a bill directed solely to approv-\nsubmitted the following\ning specific additional receipts and such bill has become\nlaw.\n\"SECTION 3. The Congress may waive the provisions of\nREPORT\nthis article for any fiscal year in which a declaration of\nwar is in effect.\n\"SECTION 4. This article shall take effect for the second\ntogether with\nfiscal year beginning after its ratification.\".\nADDITIONAL AND MINORITY VIEWS\nThe proposed amendment is cosponsored by the following Mem-\nbers of the Senate: Mr. Thurmond, Mr. Hatch, Mr. DeConcini, Mr.\nGrassley, Mr. Denton, Mr. Heflin, Mr. Specter, Mr. Abdnor, Mr.\n[To accompany S.J. Res. 13]\nBoren, Mr. Cochran, Mr. D'Amato, Mr. Goldwater, Mrs. Hawkins,\nThe Committee on the Judiciary, to which was referred the joint\nMr. Hecht, Mr. Lugar, Mr. Mattingly, Mr. McClure, Mr. Nickles,\nresolution (S.J. Res. 13) proposing an amendment to the Constitu-\nMr. Nunn, Mr. Packwood, Mr. Proxmire, Mr. Quayle, Mr. Symms,\ntion to require a balanced Federal budget and to limit taxing and\nMr. Trible, Mr. Wallop, Mr. Wilson, Mr. Zorinsky, Mr. Laxalt, Mr.\nspending, having considered the same, reports favorably thereon\nEast, Mr. Exon, Mr. Helms, Mr. Simpson, Mr. Danforth, Mr. Garn,\nwith amendments and an amendment to the title and recommend\nMr. Pryor, Mr. Gramm, Mr. Boschwitz, Mr. Rudman, Mr. Murkow-\nthat the joint resolution as amended do pass.\nski, Mr. Dole, Mr. Humphrey, Mr. Warner, Mr. Johnston, Mr. Pres-\nsler, Mr. Burdick, Mr. Roth, Mr. Stevens, Mr. Kasten, Mr. Bentsen,\nI. TEXT OF SENATE JOINT RESOLUTION 13\nMr. Stennis, and Mr. McConnell.\nThe text of Senate Joint Resolution 13 as reported by the Com-\nII. SUMMARY\nmittee on the Judiciary reads as follows:\nEfforts to secure a constitutional rule to require a balanced Fed-\nJoint resolution proposing an amendment to the Constitu-\neral budget and to limit the growth of Federal spending have inten-\ntion relating to a Federal balanced budget and tax limi-\nsified as the Federal government's persistent failure to balance its\ntation\nbudget has produced debt of nearly $2 trillion ($2,000,000,000,000)\nResolved by the Senate and House of Representatives of\nand as the Federal share of the economy has continued to increase.\nthe United States of America in Congress assembled (two-\nIt is the Committee's view that, in large measure, the nation's\nthirds of each House concurring therein), That the follow-\neconomic problems are attributable to these facts. Unacceptable\ning article is proposed as an amendment to the Constitu-\nlevels of inflation, and unemployment, as well as enormous foreign\ntion of the United States, which shall be valid to all in-\ntrade imbalances, can be traced directly or indirectly to the fiscal\ntents and purposes as part of the Constitution if ratified by\npolicies and practices of the national government.\nthe legislatures of three-fourths of the several States\nIn proposing Senate Joint Resolution 13, the Committee seeks to\nre-establish constitutional limitations upon Federal spending and\ndeficit practices that existed in earlier years through an array of\n2\nARTICLE -\nCalendar No. 358\nSection 1. Outlays of the United States for any fiscal\n99TH CONGRESS\nREPORT\nyear shall not exceed receipts to the United States for that\n1st Session\n}\nSENATE\n99-163\nyear, unless three-fifths of the whole number of both\nHouses of Congress shall provide for a specific excess of\noutlays over receipts.\nSection 2. The Congress may waive the provisions of this\narticle for any fiscal year in which a declaration of war is\nin effect.\nSection 3. This article shall take effect for the second\nBALANCED BUDGET CONSTITUTIONAL AMENDMENT\nfiscal year beginning after its ratification.\nThe proposed amendment, introduced originally in the Commit-\ntee on the Judiciary, is cosponsored by the following Members of\nOCTOBER 23 (legislative day, OCTOBER 21), 1985.-Ordered to be printed\nthe Senate: Mr. Thurmond, Mr. Hatch, Mr. DeConcini, Mr. Simon,\nand Mr. Simpson.\nII. SUMMARY\nMr. THURMOND, from the Committee on the Judiciary,\nEfforts to secure a constitutional rule to require a balanced Fed-\nsubmitted the following\neral budget have intensified as the Federal government's persistent\nfailure to balance its budget has produced a public debt of approxi-\nmately $2 trillion ($2,000,000,000,000).\nREPORT\nIt is the Committee's view that, in large measure the nation's\neconomic problems are attributable to this fact. Unacceptable\ntogether with\nlevels of inflation, and unemployment, as well as enormous foreign\ntrade imbalances, can be traced directly or indirectly to the fiscal\nSUPPLEMENTAL, ADDITIONAL, AND MINORITY VIEWS\npolicies and practices of the national government.\nIn proposing Senate Joint Resolution 225, the Committee seeks to\n[To accompany S.J. Res. 225]\nre-establish constitutional limitations upon Federal deficit practices\nthat existed in earlier years through an array of formal and infor-\nThe Committee on the Judiciary, to which was referred the joint\nmal constitutional provisions and which have been eroded over the\nresolution (S.J. Res. 225) proposing an amendment to the Constitu-\ncourse of recent years. The abandonment of the \"unwritten consti-\ntion to require a balanced Federal budget, having considered the\ntution\" requirement of balanced budgets, the passage of the 16th\nsame, reports favorably thereon with amendments and an amend-\nAmendment, and the development of new judicial doctrines con-\nment to the title and recommends that the joint resolution as\ncerning the Federal spending authority are some of the features\namended do pass.\nthat have contributed to the present situation in which there is a\nvirtual absence of external constraints upon the ability of Congress\nI. TEXT OF SENATE JOINT RESOLUTION 225\nto spend.\nThe text of Senate Joint Resolution 225 as reported by the Com-\nSpecifically, the proposed amendment addresses a serious spend-\nmittee on the Judiciary reads as follows:\ning bias in the present fiscal process arising from the fact that\nMembers of Congress do not have to cast votes in behalf of new\nJoint resolution proposing an amendment to the\ntaxes in order to accommodate new spending programs. Rather\nConstitution relating to a Federal balanced budget\nthan having to cast such politically disadvantageous votes, they\nmay simply resort to increased levels of deficit spending.\nResolved by the Senate and House of Representatives of\nMembers of Congress, thus, are free to respond to the concentrat-\nthe United States of America in Congress assembled (two-\ned pressures of spending interest groups-and reap the political ad-\nthirds of each House concurring therein), That the follow-\nvantages of doing so-without having to reap concomitant political\ning article is proposed as an amendment to the Constitu-\ndisadvantages by reducing spending programs favored by some\ntion of the United States, which shall be valid to all in-\nother spending interests or by expressly raising taxes.\ntents and purposes as part of the Constitution if ratified by\nThe result is that spending continues inexorably to rise whatever\nthe legislatures of three-fourths of the several States\nthe genuine will of the people. The result is an essentially undemo-\nwithin seven years after its submission to the States for\ncratic and unresponsive process that enables Members of Congress\nratification:\nto avoid ultimate accountability for their spending and taxing deci-\n52-916\nJohn Corney\nCalendar No. 358\n99TH CONGRESS\n1st Session\n}\n{\nREPORT\nSENATE\n99-163\nBALANCED BUDGET CONSTITUTIONAL\nAMENDMENT\nREPORT\nOF THE\nCOMMITTEE ON THE JUDICIARY\nUNITED STATES SENATE\nON\nS.J. Res. 225\ntogether with\nSUPPLEMENTAL, ADDITIONAL, AND MINORITY\nVIEWS\nOCTOBER 23 (legislative day, OCTOBER 21), 1985.-Ordered to be printed\nU.S. GOVERNMENT PRINTING OFFICE\n52-916 o\nWASHINGTON 1985\nCONTENTS\nPage\nI. Text of Senate Joint Resolution 225\n1\nII. Summary\n2\nIII. Concept of Senate Joint Resolution 225\n3\nIV. Provisions of Senate Joint Resolution 225\n8\nV. History of Senate Joint Resolution 225\n8\nVI. History of constitutional amendment effort\n14\nVII. History of balanced budget concept\n17\nVIII. Senate Joint Resolution 225 and the Constitution\n24\nIX. Economic background\n30\nCOMMITTEE ON THE JUDICIARY\nX. Statutory law versus constitutional amendment\n40\nXI. Detailed analysis of Senate Joint Resolution 225\n41\nSTROM THURMOND, South Carolina, Chairman\nXII. Implementation of Senate Joint Resolution 225\n54\nCHARLES McC. MATHIAS, JR., Maryland\nJOSEPH R. BIDEN, JR., Delaware\nXIII. Enforcement\n56\nPAUL LAXALT, Nevada\nEDWARD M. KENNEDY, Massachusetts\nXIV. State experience\n63\nORRIN G. HATCH, Utah\nROBERT C. BYRD, West Virginia\nXV. Public attitudes on a balanced budget amendment\n72\nALAN K. SIMPSON, Wyoming\nHOWARD M. METZENBAUM, Ohio\nXVI. Some questions concerning Senate Joint Resolution 225\n72\nJOHN P. EAST, North Carolina\nDENNIS DECONCINI, Arizona\nXVII. Regulatory impact statement\n76\nCHARLES E. GRASSLEY, Iowa\nPATRICK J. LEAHY, Vermont\nXVIII. Changes in existing law\n76\nJEREMIAH DENTON, Alabama\nHOWELL HEFLIN, Alabama\nXIX. Cost of the legislation\n76\nARLEN SPECTER, Pennsylvania\nPAUL SIMON, Illinois\nXX. Conclusion\n77\nMITCH McCONNELL, Kentucky\nSupplemental views of Mr. Biden\n78\nDENNIS W. SHEDD, Chief Counsel and Staff Director\nAdditional views of Mr. Denton\n80\nDIANA WATERMAN, General Counsel\nAdditional views of Mr. Heflin\n83\nAdditional views of Mr. Simon\n85\nDEBORAH G. BERNSTEIN, Chief Clerk\nMARK H. GITENSTEIN, Minority Chief Counsel\nMinority views of Mr. Mathias\n88\nMinority views of Mr. Metzenbaum\n91\n(III)\nSUBCOMMITTEE ON THE CONSTITUTION\nORRIN G. HATCH, Utah, Chairman\nSTROM THURMOND, South Carolina\nDENNIS DECONCINI, Arizona\nCHARLES E. GRASSLEY, Iowa\nPAUL SIMON, Illinois\nSTEPHEN J. MARKMAN, Chief Counsel and Staff Director\nRANDALL RADER, General Counsel\nBoB FEIDLER, Minority Chief Counsel\nNATHALIE BLACKWELL, Clerk\n(II)\nCalendar No. 358\n99TH CONGRESS\n1st Session\n}\nREPORT\nSENATE\n99-163\nBALANCED BUDGET CONSTITUTIONAL AMENDMENT\nOCTOBER 23 (legislative day, OCTOBER 21), 1985.-Ordered to be printed\nMr. THURMOND, from the Committee on the Judiciary,\nsubmitted the following\nREPORT\ntogether with\nSUPPLEMENTAL, ADDITIONAL, AND MINORITY VIEWS\n[To accompany S.J. Res. 225]\nThe Committee on the Judiciary, to which was referred the joint\nresolution (S.J. Res. 225) proposing an amendment to the Constitu-\ntion to require a balanced Federal budget, having considered the\nsame, reports favorably thereon with amendments and an amend-\nment to the title and recommends that the joint resolution as\namended do pass.\nI. TEXT OF SENATE JOINT RESOLUTION 225\nThe text of Senate Joint Resolution 225 as reported by the Com-\nmittee on the Judiciary reads as follows:\nJoint resolution proposing an amendment to the\nConstitution relating to a Federal balanced budget\nResolved by the Senate and House of Representatives of\nthe United States of America in Congress assembled (two-\nthirds of each House concurring therein), That the follow-\ning article is proposed as an amendment to the Constitu-\ntion of the United States, which shall be valid to all in-\ntents and purposes as part of the Constitution if ratified by\nthe legislatures of three-fourths of the several States\nwithin seven years after its submission to the States for\nratification:\n52-916\n2\n3\nARTICLE -\nsions. It is the existence of this institutional bias that convinces\nthis Committee that a constitutional solution is now required.\nSection 1. Outlays of the United States for any fiscal\nSenate Joint Resolution 225 proposes to overcome this spending\nyear shall not exceed receipts to the United States for that\nyear, unless three-fifths of the whole number of both\nbias by restoring the linkage between Federal spending and taxing\ndecisions. It does not propose to read any specific level of spending\nHouses of Congress shall provide for a specific excess of\nor taxing forever into the Constitution and it does not propose to\noutlays over receipts.\nintrude the Constitution into the day-to-day spending and taxing\nSection 2. The Congress may waive the provisions of this\ndecisions of the representative branch of the government. It merely\narticle for any fiscal year in which a declaration of war is\nin effect.\nproposes to create a fiscal environment in which the competition\nSection 3. This article shall take effect for the second\nbetween the tax-spenders and the tax-payers is a more equal one-\none in which spending decisions will once more be constrained by\nfiscal year beginning after its ratification.\navailable revenues.\nThe proposed amendment, introduced originally in the Commit-\nThe amendment would establish a balanced budget as a norm of\ntee on the Judiciary, is cosponsored by the following Members of\nFederal fiscal policy. It could be overcome, however, by three-fifths\nthe Senate: Mr. Thurmond, Mr. Hatch, Mr. DeConcini, Mr. Simon,\nvotes in both Houses of Congress. The amendment would create an\nand Mr. Simpson.\neffective spending limitation, unless Congress was willing to vote\nfor new taxes to account for increased spending.\nII. SUMMARY\nThe Committee does not view this amendment as a panacea for\nEfforts to secure a constitutional rule to require a balanced Fed-\nthe economic problems of the nation. Its Members have differing\neral budget have intensified as the Federal government's persistent\nprescriptions for overcoming these problems. The Committee, how-\nfailure to balance its budget has produced a public debt of approxi-\never, does view the amendment as a major step toward securing a\nmately $2 trillion ($2,000,000,000,000).\npolitical environment in which fiscally responsible policies will be\nIt is the Committee's view that, in large measure the nation's\nmore easily attainable, as well as an environment more conducive\neconomic problems are attributable to this fact. Unacceptable\nto honest and accountable fiscal decisionmaking.\nlevels of inflation, and unemployment, as well as enormous foreign\nThe Committee believes Senate Joint Resolution 225 to represent\ntrade imbalances, can be traced directly or indirectly to the fiscal\nboth responsible economic policy and responsible constitutional\npolicies and practices of the national government.\npolicy. It believes, too, that passage of this resolution would consti-\nIn proposing Senate Joint Resolution 225, the Committee seeks to\ntute an appropriate response by Congress to the pending applica-\nre-establish constitutional limitations upon Federal deficit practices\ntions by nearly two-thirds of the States for a constitutional conven-\nthat existed in earlier years through an array of formal and infor-\ntion on this issue.\nmal constitutional provisions and which have been eroded over the\nIn these views, the Committee believes that it is in agreement\ncourse of recent years. The abandonment of the \"unwritten consti-\nwith President Ronald Reagan who wrote in 1980:\ntution\" requirement of balanced budgets, the passage of the 16th\nExcessive Federal spending and deficits have become so\nAmendment, and the development of new judicial doctrines con-\nengrained in government today that a constitutional\ncerning the Federal spending authority are some of the features\namendment is necessary to limit this spending. I shall con-\nthat have contributed to the present situation in which there is a\ntinue to emphasize the need for such an amendment.\nvirtual absence of external constraints upon the ability of Congress\nto spend.\nAnd, in these views, the Committee believes that it is in agreement\nSpecifically, the proposed amendment addresses a serious spend-\nwith the overwhelming number of the American people who have\ning bias in the present fiscal process arising from the fact that\nconsistently expressed their support for such a constitutional\nMembers of Congress do not have to cast votes in behalf of new\namendment.\ntaxes in order to accommodate new spending programs. Rather\nIII. CONCEPT OF SENATE JOINT RESOLUTION 225\nthan having to cast such politically disadvantageous votes, they\nmay simply resort to increased levels of deficit spending.\nThe primary purpose of Senate Joint Resolution 225 is to correct\nMembers of Congress, thus, are free to respond to the concentrat-\na bias in the present political process in behalf of ever-increasing\ned pressures of spending interest groups-and reap the political ad-\nlevels of Federal government spending. Whether such spending is\nvantages of doing so-without having to reap concomitant political\nfinanced by higher taxes or new debt, most of the economic prob-\ndisadvantages by reducing spending programs favored by some\nlems suffered by the nation in recent years are ultimately caused\nother spending interests or by expressly raising taxes.\nby excessive government spending. High interest rates, and the re-\nThe result is that spending continues inexorably to rise whatever\nsulting decline in investment and productivity, as well as unaccept-\nthe genuine will of the people. The result is an essentially undemo-\nable levels of unemployment, all follow when the government uses\ncratic and unresponsive process that enables Members of Congress\nan excessive share of the nation's resources, leaving too little for\nto avoid ultimate accountability for their spending and taxing deci-\nproductive use by the private sector. If the Federal Reserve Board\n4\n5\nattempts to reduce these economic problems by increasing the\nurging the voters that sound and enlightened patriotism\nmoney supply faster than increases in the supply of goods and serv-\ncalls for the success of their modest proposal. They will go\nices, inflation results.\nfurther if need be, and are quite prepared to lay out cash\nWhile it is true that much of the enormous growth in Federal\nto get the necessary votes for returning candidates in their\ngovernment spending over the past two decades may be a response\ninterest. In contrast the individual who is threatened with\nto evolving notions of the rule of the public sector on the part of\nlosing one franc a year-even if he is fully aware of what\nthe American citizenry-i.e., a genuine shift in the will and desire\nis afoot-will not for SO small a thing forego a picnic in the\nof the people-it is the contention of this Committee that a sub-\ncountry, or fall out with useful or congenial friends, or get\nstantial part of this growth stems from far less benign factors.\non the wrong side of the mayor or the perfect. In these cir-\nIn short, it is the Committee's view that the American political\ncumstances the outcome is not in doubt; the spoilators will\nprocess is defective insofar as it is skewed toward artificially high\nwin hands down. Cours 'Economie Politique (1896)\nlevels of spending. It is skewed in this direction because of the\nMore recently, Arthur Burns, former Chairman of the Federal\ncharacteristics of the fiscal order that have developed in this coun-\ntry in recent decades. It is a fiscal order in which Members of Con-\nReserve Board, expressed similar thoughts:\ngress have every political incentive to spend money and almost no\nThe proximate causes of this governmental bias are\nincentive to forego such spending. It is a fiscal order in which\nquite clear. In general, spending programs are more popu-\nspending decisions have become increasingly divorced from the\nlar with people than higher taxes. The potential benefici-\navailability of revenues.\naries of a spending program are often a numerical minori-\nty, but they have a stonger incentive to keep informed, to\nConcentrated benefits-dispersed costs\norganize, and to lobby for their favorite program than\nIt is important first to understand what some economists and po-\nthose who bear the cost have to oppose it. The rising cost\nlitical scientist have described as the \"concentrated benefit-dis-\nof political campaigns and the concurrent proliferation of\npersed cost\" phenomenon. This describes the fact that the benefits\nfundraising committees put intense pressure on legislators\nof any given spending program normally are concentrated within a\nto vote for spending programs favored by such groups. We\nrelativey small class of beneficiaries, while the costs of such a pro-\nmay, in fact, be entering an era in which governmental\ngram are dispersed throughout a relatively large class of persons,\nprocesses are overwhelmed by the naked demands of in-\ni.e., the taxpayers. Thus, those parties who benefit from a particu-\ncreasingly well-organized and effective interest groups. It\nlar spending measure stand to benefit greatly while those who bear\nis this concern that has led me to look with favor on even\nthe costs are affected insignificantly. The Italian economist Pareto\npreemptory devices for offsetting the existing bias toward\ndescribed it in these terms:\nlarger Federal spending and borrowing. AEI Economist,\nLet us suppose that in a country of thirty million inhab-\nApril 1979\nitants it is proposed, under some pretext or other, to get\nThe proposed amendment addresses an important element of the\neach citizen to pay out one franc a year, and to distribute\nspending bias: the access members of Congress have to deficit\nthe total amount amongst thirty persons. Every one of the\nspending. This enables Members of Congress to avoid having to\nbeneficiaries will receive one million francs a year. The\nvote new taxes in order to finance new spending.\ntwo groups will differ very greatly in their response to this\nsituation. Those who hope to gain a million a year will\nDeficit spending\nknow no rest by day or night. They will win newspapers\nA principal cause of the spending bias involves the virtually un-\nover to their interest by financial inducements and drum\nlimited access that members of Congress have to deficit spending.\nup support from all quarters. A discreet hand will warm\nAs the \"unwritten constitution\" requirement of budget balance has\nthe palms of needy legislators, even of ministers.\nbeen disregarded in recent years, Members of Congress no longer\nOn the other hand, the despoiled are much less active. A\nare constrained in their ability to increase spending by the concom-\ngreat deal of money is needed to launch an electoral cam-\nitant need to increase ordinary revenues. Permissible levels of\npaign. Now there are insuperable material difficulties mili-\nspending no longer are defined, as they traditionally have been, by\ntating against asking each citizen to contribute a few cen-\nlevels of revenue available. In consequence, Members of Congress\ntimes. One has to ask a few people to make substantial\nare free to obtain the resulting political advantages, without\ncontributions. But then, for such people, there is the likeli-\nhaving either to (a) reduce spending for some other spending inter-\nhood that their individual contribution to the campaign\nest and incur the resulting political disadvantages, or (b) increase\nagainst the spoliation will exceed the total amount they\ntax revenues and incur the resulting political disadvantages.\nstand to lose by the measure in question.\nWhen elec-\nMembers of Congress do not have to reduce levels of spending for\ntion day comes, similar difficulties are encountered.\none program in order to accomplish increases in other programs\nThose who hope to gain a million apiece have agents ev-\nbecause there is no effective limit as to how much Congress may\nerywhere, who descend in swarms on the electorate,\nspend in its budget. Once the traditional linkage has been severed\n7\n6\nAs a result, Senate Joint Resolution 225 effects a subtle, but im-\nbetween spending and revenues, there is no need for Members to\nportant, change in the psychology of the budget process. Under the\nestablish priorities as between alternative spending proposals; each\npresent system, each spending interest, in effect, competes to raise\ncan be satisfied simply by increasing the level of the deficit. The\nthe total ante in the Federal treasury. Under a system, however, in\navailability of deficit spending enables Members to avoid the hard\nwhich some form of spending ceiling is in effect, these same inter-\npolitical decision of having to choose among spending proposals and\nests suddenly will be competing with one another in order to ensure\nthereby insure for themselves some element of political disadvan-\nthemselves a certain proportion of a fixed ante in the Federal\ntage as well as political advantage.\nMembers of Congress do not have to increase revenues in order\ntreasury. Not only will spending interests have to convince Con-\nto accommodate increased spending because levels of spending no\ngress that their favored programs merit funding at a certain level,\nlonger are related in any meaningful way to levels of revenue.\nbut they will, in addition, have to establish the priority of their pro-\nThus, not only is there no need for Congress to antagonize any\ngrams. A spending ceiling comprised of something beyond mere\nother spending interest in the process of supporting a given spend-\nCongressional self-restraint will force Members of Congress to view\ning measure, but there is no need to antagonize taxpayers general-\nspending requests in terms of relative desirability, not simply in\nly by appearing to raise their tax burdens. Again, there is no ele-\nterms of whether or not a program is desirable at all. An element\nment of political disadvantage Members of Congress are required to\nof competition among the spending interests will be introduced into\nincur in order to reap the political advantages of responding to the\nthe budget process, undoubtedly to the long-term interests of those\nspending interests.\nwho finance the spending programs favored by these interests.\nIn this respect, the availability of unlimited deficit spending\nThus, the proposed amendment would make it easier for well-\nallows the political costs of spending measures to be deferred in\nmeaning, but beleaguered, Members of Congress to exercise fiscal\ntime, while enabling the political benefits to be enjoyed immediate-\nresponsibility in making their policy decision. There would be an\nly. While the benefits of the measure usually will be understood\nexternal constraint, something beyond their own ability to resist\nimmediately by its beneficiaries, the costs-in the form of higher\nthe importunities of the spending interests, upon which they could\nfuture taxes, higher future inflation, and higher future interest\nrely. As Professor Roger Freeman of the Hoover Institution has\nrates-usually will be evident only at some remote time. Indeed,\nnoted:\nthere may be no political costs whatsoever unless those who suffer\nIt is not that Members of Congress do not wish to\nfrom these economic ills are sophisticated enough to understand\nproduce a balanced budget but that under the circum-\nthe cause-effect relationship between the earlier spending and the\nstances they can only do so at a grave political risk to\nlater symptoms.\ntheir survival. They need a defense against excessive de-\nmands which allows them to say \"no\" to a multitude of\nApproach of Senate Joint Resolution 225\npressure groups. Such a defense cannot be built by statute\nIn seeking to reduce the spending bias in our present system-\nbecause any act of Congress can be amended or repealed\nthe unlimited availability of deficit spending-the major purpose of\nby this Congress or the next. Only a constitutional amend-\nSenate Joint Resolution 225-is to ensure that, under normal cir-\nment can impose credible and effective spending re-\ncumstances, votes by Congress for increased spending will be ac-\nstraints.\ncompanied either by votes (a) to reduce other spending programs or\n(b) to increase taxes to pay for such programs. For the first time\nProfessor James Buchanan goes on to elaborate:\nsince the abandonment of the traditional balanced budget require-\nThe fault lies not in the bad intentions of elected politi-\nment, Congress will be required to cast some politically difficult\ncians. The basic causes for the dramatic, and readily ob-\nvote as a precondition for a politically attractive vote to increase\nservable, shift in U.S. fiscal habits after World War II and\nspending.\nnotably after 1960 are not hard to identify. Keynesian\nSection 1 of the proposed amendment would address the spend-\nteachings had succeeded in effectively repealing an impor-\ning bias-unlimited access by Members of Congress to deficit\ntant element of the unwritten fiscal constitution within\nspending-by requiring a three-fifths vote of each House of Con-\nwhich American politics had been carried out throughout\ngress before the Federal government could engage in such spend-\nalmost two centuries of its history.\ning. Such a procedure would not prohibit deficit spending, but\nMuch of the argument in this and other sections has drawn upon\nwould simply reestablish, as a norm, a budget in balance rather\nProfessor Buchanan's work, in conjunction with Professor Richard\nthan one in deficit. A consensus greater than a normal majority\nWagner, Democracy in Deficits, Academic Press (1977).\nwould be required to violate this norm. Unless such a consensus ex-\nIn summary, the purpose of Senate Joint Resolution 225 is to\nisted, Congress would be bound in its spending by its available rev-\neliminate political process which allows members to avoid having\nenues and would be forced to account for new spending in one pro-\nto vote for higher taxes in order to pay for higher spending and to\ngram area by either reduced spending in another program area or\nestablish a more genuinely neutral environment within which the\nby increased taxes. The political advantages resulting from support\nbudget competition occurs. The proposed amendment does not\nfor new spending then would be matched, at least to some degree,\ndefine what constitutes or what does not constitute a responsible\nby countervailing political disadvantages.\n8\n9\nbudget, but only defines the institutional framework within which\nAlthough sporadic efforts at calling a national convention on the\nsuch budgets can be put together.\nsubject of a balanced budget had been made in the past, the effort\nbegun in 1975-under the leadership of such organizations as the\nIV. PROVISIONS OF SENATE JOINT RESOLUTION 225\nNational Taxpayers Union and the American Farm Bureau Feder-\nSection 1\nation-is the first to attract serious national attention. To date,\nthirty-two states (see table 1) have applied for a constitutional con-\nSection 1 of the proposed amendment addresses the present\nvention on this subject, although there remains some dispute as to\nspending bias resulting from the unlimited access Congress has to\nwhether or not each of these applications are constitutionally valid.\ndeficit spending. It would establish the norm of a balanced Federal\nUnder Article V, Congress is \"obliged\" (to use the words of Alexan-\nbudget, i.e., one in which government outlays do not exceed govern-\nder Hamilton in The Federalist No. 85) to call a convention upon\nment receipts. This norm could be overcome upon the vote of three-\nthe applications of 34 of the present fifty states.\nfifths of the total membership of each House of Congress to ap-\nA companion effort in the States also deserves mention for con-\nprove a specific level of deficit. This provision establishes no specif-\ntributing to a political environment receptive to constitutional ini-\nic procedures for ensuring a balanced budget but simply imposes a\ntiative concerning spending and taxing. Under the leadership of\ngeneral obligation upon both the Congress and the President to es-\nthe National Tax Limitation Committee, a growing. number of\ntablish whatever procedures are necessary and proper for achiev-\nStates in the mid-1970's began to consider placing spending and\ning such a result.\ntaxing limitations within their constitutions (see section XIII). The\nmost highly publicized of these efforts were the successful Proposi-\nSection 2\ntion 13 and Proposition 4 efforts in California.\nSection 2 would authorize Congress to waive any of the require-\nIn response to these efforts in the States, as well as out of their\nments imposed upon it by this amendment for a fiscal year in\nown conviction as to the need for a constitutional restraint upon\nwhich a declaration of war is in effect.\nCongress' fiscal authority, members of the Senate Judiciary Sub-\ncommittee on the Constitution began efforts early in the 96th Con-\nSection 3\ngress to develop a constitutional proposal satisfying State demands\nSection 3 establishes as the effective date of this amendment the\nfor an effective and appropriate limitation upon the fiscal author-\nsecond fiscal year beginning after its ratification. The requirements\nity of Congress. Given the broad range of diverse constitutional\nof this amendment would, in their entirety, be applicable for such\namendments introduced by different members to require balanced\nfiscal year.\nbudgets or to establish various spending and tax limitations, the\npriority of this Committee was to develop a consensus measure that\nV. HISTORY OF SENATE JOINT RESOLUTION 225\nwould attract the support of as many proponents of a constitution-\nal initiative as possible. The achievement of this consensus has\nIn 1975, efforts commenced within the States to petition Congress\nbeen the focus of much of the efforts that have taken place in the\nfor a constitutional convention under Article V of the Constitution\nCommittee on the Judiciary since that time.\nfor the purpose of considering a balanced budget constitutional\namendment. Under Article V, there are two methods by which the\nTABLE 1.-STATE LEGISLATURES WHICH HAVE PASSED BALANCED BUDGET AMENDMENT\nConstitution can be altered. The first method, the method by which\nAPPLICATIONS\neach of the first 26 amendments to the Constitution has been ef-\nfected, requires the proposal of an amendment by two-thirds of\nState\nMeasure\nYear adopted\neach House of Congress, and ratification by three-fourths of the\nAlabama\nStates. The second method, that being currently pursued by the\nHJR 227, Act 302\n1976.\nAlaska\nHJR 17\n1982,\nStates with regards to the balanced budget amendment, requires\nArizona\nSJR 1002, HCM 2003\n1979, 1977.\nthe proposal of an amendment by a constitutional convention\nArkansas\nHJR 1\n1979.\ncalled by Congress in response to the applications of two-thirds of\nColorado\nSJM 1\n1978.\nDelaware\nHCR 36\n1975\nthe States. Ratification by three-fourths of the States is then neces-\nFlorida\nSen. Memorial No. 234, HM 2801\n1976.\nsary before the amendment becomes part of the Constitution. (For\nGeorgia\nRes. Act No. 93, HR No. 469-1267\n1976.\nmore discussion of this procedure, see Senate Report No. 99-135,\nIdaho\nHCR 7\n1979.\nIndiana\nSJR 8\n1979.\nthe \"Constitutional Convention Implementation Act\".)\nlowa\nSJR 1\n1979.\nWhile the second method has never been directly responsible for\nKansas\nSCR 1661\n1978.\nsecuring an amendment to the Constitution, efforts in the early\nLouisiana\nSCR 4, SR 73, HCR 269\n1979, 1978, 1975.\nyears of this century by the States to call a convention to propose\nMaryland\nSJR 4 (Original), Md JR 77 (Enrolled)\n1975.\nMississippi\nHCR 51\n1975.\nan amendment to provide for the direct election of Senators were\nMissouri\nSCR 3\n1983.\nforestalled only when Congress on its own proposed the 17th\nNebraska\nLR 106\n1976,\nAmendment.\nNevada\nSJR 8, SJR 2\n1979, 1977.\nNew Hampshire\nHCR 8.\n1979\n10\n11\nTABLE 1.-STATE LEGISLATURES WHICH HAVE PASSED BALANCED BUDGET AMENDMENT\nlisher of Quest Publications. On February 22, 1980, testimony was\nAPPLICATIONS-Continued\nheard in Salt Lake City, Utah from Robert Crawford, Professor of\nEconomics at Brigham Young University, Jefferson Fordham, Pro-\nState\nMeasure\nYear adopted\nfessor of Law at the University of Utah, Timothy Meeding, Assist-\nant Professor of Economics at the University of Utah, Jewell Ras-\nNew Mexico\nSJR 1\n1976.\nNorth Carolina\nResolution 5\nmussen, University of Utah, Glenn Lewis, Utah Council of Small\n1979.\nNorth Dakota\nSCR 4018\n1975.\nBusiness David Tomlinson, Chairman of the Utah delegation to the\nOklahoma\nHJR 1049\n1976.\nWhite House Conference on Small Business, Jack Olson, Utah Tax-\nOregon\nSJ Memorial No. 2\n1977.\npayers Association, Charles Ackerlow, businessman in Salt Lake\nPennsylvania\nHR 236\n1976.\nCity, Robert Hansen, Utah Attorney General, and Utah State Rep-\nSouth Carolina\nS 1024, S 670\n1978, 1976.\nSouth Dakota\nSJR 1\n1979.\nresentative Norman Bangerter, Gray Brockbank, and Kevin Watt.\nTennessee\nHJR 22\n1977.\nFollowing these hearings as well as extensive consultation with\nTexas\nHCR 13, HCR 31\n1978, 1977.\nthe Senate Balanced Budget Caucus, under the leadership of Sena-\nUtah\nHJR 12\n1979.\ntors Richard Lugar, David Boren, and William Armstrong, five\nVirginia\nSJR 36\n1976.\nmembers of the Subcommittee on the Constitution introduced\nWyoming\nHJR 12 (original) JR 1 (Enrolled)\n1977.\nSenate Joint Resolution 126 (Senator Orrin Hatch, Strom Thur-\nSource: National Taxpayers Union.\nmond, Dennis DeConcini, Howell Heflin, and Alan Simpson). On\nDecember 18, 1979, this measure was reported out of the Subcom-\nEight days of hearings were held on this subject during the 96th\nmittee on the Constitution by a 5-2 vote. On March 15, 1980, how-\nCongress by the Subcommittee on the Constitution. On March 12,\never, Senate Joint Resolution 126 was defeated by a narrow 9-8\n1979, testimony was heard from Senator Robert Dole of Kansas,\nmargin in the full Committee on the Judiciary.\nSenator Edmund Muskie of Maine, Senator Strom Thurmond of\nSenate Joint Resolution 126 was re-introduced during the 97th\nSouth Carolina, Senator John Stennis of Mississippi, and Senator\nCongress, first as Senate Joint Resolution 9, then as Senate Joint\nHarry Byrd, Jr., of Virginia. On May 23, 1979, testimony was heard\nResolution 43, and finally as Senate Joint Resolution 58 with the\nfrom Senator James McClure of Idaho, Secretary of Treasury Mi-\nsame principal sponsors as during the previous Congress. A com-\nchael Blumenthal, Senator Dennis DeConcini of Arizona, and Sena-\npanion bill (H.J. Res. 100) was introduiced in the House by Rep.\ntor Carl Levin of Michigan. On July 25, 1979, testimony was heard\nSkip Bafalis of Florida. Four additional days of hearing were con-\nfrom Senator Richard Lugar of Indiana, Senator John Heinz of\nducted, again by the Senate Subcommittee on the constitution\nPennsylvania, Senator Richard Stone of Florida, and Senator Mal-\nunder the chairmanship of Senator Hatch. On March 11, 1981, tes-\ncolm Wallop of Wyoming. On October 4, 1979, testimony was heard\ntimony was heard from Senator William Armstrong of Colorado,\nfrom Lane Kirkland, Secretary-Treasurer of the AFL-CIO, Thomas\nSenator David Boren of Oklahoma, Senator Richard Lugar of Indi-\nO'Neil, III, Chairman of Citizens for the Constitution, James David-\nana, Senator Howell Heflin of Alabama, State Senator James Clark\nson, Chairman of the National Taxpayers Union, and Marshall\nof Maryland, and Roger Freeman, Senior Fellow, Hoover Institu-\nBeil, a representative of the New York Bar Association's Commit-\ntion. On April 9, 1981, testimony was heard from Senator John\ntee on Federal Legislation. On October 11, 1979, testimony was\nHeinz of Pennsylvania, Laurence Silberman, Vice-President of\nheard from Senator David Pryor of Arkansas, Alice Rivlin, Direc-\nCrocker National Bank, San Francisco, California, Lowell Harris,\ntor of the Congressional Budget Office, Martin Gerber, Vice-Presi-\nProfessor of Economics at Columbia University, Charles Baird, Pro-\ndent of the United Auto Workers, Allan Grant, President of the\nfessor of Economics at California State University (Hayward),\nAmerican Farm Bureau Federation, and Jay Van Andel, Chairman\nHarry Bell, President, South Carolina Farm Bureau representing\nof the Board of the United States Chamber of Commerce.\nthe American Farm Bureau Federation, and Professor George\nOn November 1, 1979, testimony was heard from Senator Roger\nHaimbaugh, Professor of Law at the University of South Carolina.\nJepsen of Iowa, Alan Greenspan, former member of the Council of\nOn May 20, testimony was heard from George Snyder, President,\nEconomic Advisers, Philip Saunders, Professor of Economics at the\nDavid Keating, Legislative Director, National Taxpayer's Union,\nUniversity of Indiana, Richard Everett, Vice President of the Chase\nWilliam Shaker, Executive Vice President of the National Tax\nManhattan Bank, Merlyn Carlson, Vice-President of the National\nLimitation Committee, Craig Stubblebine, Director of the Center\nCattleman's Association, Lewis Uhler, President of the National\nfor the Study of Law Structures at Claremont Men's College, and\nTax Limitation Committee, and Craig Stubblebine, Director of the\nformer Senator Carl Curtis of Nebraska. On May 29, testimony was\nCenter for the Study of Law Structures at Claremont Men's Col-\nheard in Phoenix, Arizona, from Alvin Rabushka, Senior Fellow,\nlege. On January 14, 1980, testimony was heard in Mobile, Ala-\nHoover Institution, Robert Matthews, Phoenix Chamber of Com-\nbama, from Senator Thad Cochran of Mississippi, Ronald E. Bird,\nmerce, Melvin Morris, Arizona Tax Research Association, Robert\nProfessor of Economics at the University of Alabama, Tyrone\nRobb, Arizona Chamber of Commerce, Paul Jones, Valley National\nBlack, Professor of Economics at the University of Southern Missis-\nBank, and James Weaver, Sun City Homeowners Association.\nsippi, Kenneth Giddens, President of WKRG-TV, William Hearin,\nOn May 6, 1981, the Subcommittee on the Constitution favorably\nPublisher of the Mobile Press Register, and Thomas Druey, Pub-\nreported out Senate Joint Resolution 58 by a 4-0 vote following an\n12\n13\namendment in the nature of a substitute offered by Senator Hatch.\ntimony: James Davidson, National Taxpayers Union; Carol Cox,\nWhile maintaining the basic concept of Senate Joint Resolution 126\nCommittee for a Responsible Federal Budget; Lew Uhler, National\nand its successors, a number of substantive and perfecting changes\nTax Limitation Committee; Professor Steven A. Reiss; Professor\nwere made, some drawn from such measures as Senate Joint Reso-\nWilliam Craig Stubblebine; the National Association of Manufac-\nlution 56 introduced by Senators Heinz and Nunn. On May 19,\nturers; the National Assocation for the Advancement of Colored\n1981, the full Senate Committee on the Judiciary favorably report-\nPeople (NAACP); the National Education Association; the Ameri-\ned out S.J. Res. 58 by an 11-5 vote, following several additional\ncan Farm Bureau Federation; and the National Association of Re-\ntechnical changes offered by Senator Dole.\naltors.\nOn July 12, 1982, the Senate began consideration of S.J. Res. 58.\nOn March 15, 1984, the Subcommittee on the Constitution ap-\nFollowing the adoption of a package of amendments by Senators\nproved S.J. Res. 5 by a 4-1 vote and recommended the measure to\nDomenici and Chiles (clarifying that nothing in the amendment\nthe full Committee. On September 13, 1984, the Senate Judiciary\nwas designed to confer impoundment authority upon the President;\nCommittee approved S.J. Res. 5 with an amendment offered by\naltering the base period in section 2 for determining growth in the\nSenator DeConcini approved on June 7, 1984, by the margin of 11-\neconomy; and adding a new section obligating Congress to \"enforce\n4. The DeConcini amendment added a new section 3 relating to ex-\nand implement\" the provisions of the amendment); and the accept-\necutive authority and renumbered subsequent sections.\nance of an extremely controversial amendment by Senator Arm-\nDue to an early adjournment to accommodate the 1984 Presiden-\nstrong (establishing a permanent level of national debt and requir-\ntial election, time ran out in the 98th Congress before S.J. Res. 5\ning a three-fifths vote to increase the size of the debt), the Senate\ncould come to the Senate for a vote.\non August 4, 1982, by a vote of 69-31 proposed S.J. Res. 58 as an\nIn the 99th Congress, S.J. Res. 13, a resolution identical to S.J.\namendment to the United States Constitution. This marked the\nRes. 5 from the prior Congress, was introduced on January 3, 1985,\nfirst time either House of Congress had approved such a measure.\nthe first day of the new Congress. It was referred to the Senate Ju-\nOn October 1, 1982, the House of Representatives, following a su-\ndiciary Committee and subsequently to the Subcommittee on the\ncessful discharge petition effort, considered H.J. Res. 450, the\nConstitution. On May 7, the Subcommittee held a hearing on S.J.\nHouse counterpart of S.J. Res. 58. This occurred under the leader-\nRes. 13. The following witnesses were heard: Senator Pete Wilson\nship of Representative Barber Conable (R-NY) and Representative\nof California; Governor Dick Thornburgh of Pennsylvania; the Hon-\nEd Jenkins (D-Ga.). Although a substantial majority of the House\norable Manuel Johnson, Assistant Secretary of Treasury; Mr. Roy\nvoted in behalf of the amendment, it fell short of the necessary\nL. Ash, Committee for Economic Development; Dr. Martin Ander-\ntwo-thirds vote by a 236-187 margin. This followed the rejection of\nson, Senior Fellow, Hoover Institution; Dr. Rudolf Penner, Director,\na substitute balanced budget amendment which was endorsed by a\nCongressional Budget Office.\nsufficient number of Members such that more than two-thirds of\nOn May 15, 1985, the Subcommittee held a markup to consider\nthe Members of the House were recorded as being in favor of one\nS.J. Res. 13. On a voice vote, the Subcommittee accepted a substi-\nform or another of a balanced budget constitutional amendment.\ntute amendment offered by Senator Strom Thurmond of South\nIn the 98th Congress, S.J. Res. 5 was introduced on January 26,\nCarolina. This amendment streamlined S.J. Res. 13, but left its sub-\n1983, and referred to the Senate Judiciary Committee. On Febru-\nstance unaltered. On a vote of 3 to 2, the Subcommittee rejected an\nary 22, 1983, S.J. Res. 5 was referred to the Subcommittee on the\namendment by Senator Paul Simon of Illinois which would have\nConstitution. The Subcommittee, chaired by Senator Orrin G.\ndeleted section 2 of the Resolution (providing that total receipts\nHatch, held 2 days of hearings on the resolution. On December 12,\nshall not grow faster than the rate of increase in the national\n1983, the Subcommittee met in Los Angeles, California, and re-\nincome). Finally, on a unanimous 5-0 vote, the Subcommittee ap-\nceived testimony from Senator Pete Wilson of California; James D.\nproved S.J. Res. 13 as amended by the Thurmond amendment. Sen-\nDavidson, National Taxpayers Union; Congressman William E.\nator Simon, however, reserved his right to oppose the measure at\nDannemeyer of California; Lew Uhler, National Tax Limitation\nfull Committee in the absence of section 2 being deleted.\nCommittee; Roy Ash, Committee for a Responsible Federal Budget;\nDuring May, June, and July, as the Judiciary Committee debated\nProfessor John T. Noonan, University of California Berkeley Law\nthe implications of S.J. Res. 13, some members of the Committee\nSchool; Gerald W. McEntee, President of the American Federation\nexpressed a desire to further simplify the proposed constitutional\nof State, County, and Municipal Employees; Martyn Hopper, Na-\namendment to balance the budget. Consequently on July 11, at the\ntional Federation of Independent Business; Richard Johnson, Cali-\nsame time the Committee voted 11-7 in favor of reporting S.J. Res.\nfornia Chamber of Commerce; Carl Jones, Legislative Director of\n13 to the Senate, Chairman Thurmond and Senators Hatch, DeCon-\nCongress of California Seniors; John Gamper, California Farm\ncini, and Simon proposed an alternative resolution for committee\nBureau Federation; George C. Shaw, California Teachers Associa-\nconsideration. This proposal, S.J. Res. 225, was approved by the\ntion; Professor Robert Goldstein, UCLA School of Law on behalf of\nCommittee on a vote of 14 to 4. The following members of the Com-\nthe Southern California Region of the American Jewish Congress;\nmittee voted in favor of S.J. Res. 225:\nand Professor William Craig Stubblebine, Claremont-McKenna Col-\nlege. On March 6, 1984, the Subcommittee held a second day of\nThurmond\nhearings The following witnesses and organizations presented Les-\nLaxalt*\n15\n14\nFollowing the War, Congress made renewed efforts to introduce\nHatch\nbroad budgetary reforms. In 1919, the Victory Liberty Loan Act (40\nSimpson\nStat. 1311) established a sinking fund for debt retirement. During\nEast\nthe decade of the 1920's, this resulted in a one-third reduction in\nGrassley\nthe level of the total national debt, from approximately $24 billion\nDenton\nto $16 billion. As in earlier years, the clear national consensus in\nSpecter\nsupport of the balanced budget principle resulted in little need to\nMcConnell\nfocus Congressional attention on statutory or constitutional legisla-\nBiden\ntion to mandate a balanced budget. Indeed, the policy of gradual\nByrd\ndebt retirement during the 1920's necessitated Congressional com-\nDeConcini\nmitment to regular surplus budgets.\nHeflin\nThe Budget and Accounting Act of 1921 (42 Stat. 20) was impor-\nSimon*\ntant both in defining the role of the executive and legislative\nThe following members voted against reporting S.J. Res. 225:\nbranches in the budgetary process and in formally incorporating\nKennedy*\ngovernment expenditures and revenues into an official budget.\nMetzenbaum\nUnder the Act, the President was to take responsibility for formu-\nLeahy*\nlating an initial budget and submitting it on an annual basis to the\nMathias*\nCongress. Congress then was to act on the recommendations in this\nbudget.\n*By proxy.\nIn addition to extensive input from the Balanced Budget Caucus\nNot until the mid-1930's did concern about budget deficits find\nand other Senators not members of the Committee, the Committee\nregular expression on the floor of Congress. The Great Depression\non the Judiciary in developing the proposed amendment has bene-\nwas accompanied by large, uninterrupted deficits between 1931 and\nfitted significantly from consultation with large numbers of econo-\n1940. In addition, such deficits generally were of a significantly\nmists, constitutional scholars, state legislators, and other interested\nlarger scale than earlier deficits. A debate emerged during this\nindividuals and organizations. The National Tax Limitation Com-\nperiod-one continuing to this day-as to whether such deficits\nmittee and the National Taxpayers Union deserve particular men-\nwere necessary for government management of economic crises, or\ntion in this regard, as does the Center for the Study of Law Struc-\nwhether they in fact contributed to the creation of such crises.\ntures at Claremont Men's College under its director, Professor\nIn 1935, Senator Millard Tydings of Maryland introduced the\nfirst measure seeking to require an annual balanced Federal\nCraig Stubblebine.\nbudget (S.J. Res. 36, 74th Congress). This resolution sought to pro-\nVI. HISTORY OF CONSTITUTIONAL AMENDMENT EFFORT\nhibit appropriations from exceeding revenues, unless new taxes or\ndebt were reauthorized. Any new debt incurred would have to be\nEfforts to secure a constitutional balanced budget requirement\nliquidated over a 15-year period. In the following year in the House\nhave become more intense as the Federal government has run\nof Representatives, Representative William McFarlane of Texas in-\nmore frequent budget deficits of increasingly large magnitude.\ntroduced a bill to invest authority in the President to modify tax\nDuring the 19th century, when the balanced budget norm was ef-\nrates in order to cover proposed deficits in the budget (H.R. 11895,\nfectively part of the \"unwritten constitution\" of the land, there\n74th Congress). Neither the Tydings nor the McFarlane proposals\nwas little need for Congress to focus on this problem. The deficits\nwere considered seriously by Congress.\nthat did occur generally were insignificant, often related to war-\nThe first constitutional amendment to balance the budget was\ntime circumstances, and generally were compensated for by subse-\nproposed in 1936 by Minnesota Representative Harold Knutson\nquent government surpluses. The occasionally troublesome deficit,\nsuch as those developing from the depression of the early 1870's,\n(H.J. Res. 579, 74th Congress). The proposed measure established a\nper capita limitation on the Federal public debt during peacetime.\nmet with legislative responses designed to secure their elimination.\nFollowing a series of recommendations by Presidental commis-\nDeficits might be run by Congress, but only to the extent that the\nsions on Federal budgetary practices and reforms, Congress in 1909\nper capita ceiling was not breached. The particular limit suggested\napproved the Sundry Civil Appropriation Act (35 Stat. 959), the\nby this measure was lower than the outstanding debt at the time\nfirst major legislative initiative seeking to establish explicit limita-\nand would have mandated significant budgetary surpluses in order\ntions upon Government fiscal practices. This act directed the Presi-\nto conform to the level.\ndent and the Secretary of the Treasury to propose measures to\nAgain, a World War distracted attention from efforts to secure\nreduce expenditures or increase revenues if a deficit appeared prob-\nannual balanced budgets, although Senator Tydings and Represent-\nable. Though the Act did not expressly mandate a balanced budget,\native Wesley Disney of Oklahoma joined during this period to in-\nit clearly suggested that efforts to achieve such a balance should\ntroduce several constitutional amendments to prohibit government\nprecede the issuance of a new debt. World War I soon diverted at-\napproprations from exceeding receipts (e.g., S.J. Res. 97 and H.J.\nRen 195, 78th Congress).\ntention from this issue.\n17\n16\nits receipts (P.L. 96-389, section 3). Again, in 1979, a provision in a\nFollowing World War II, the balanced budget debate was re-\nmeasure to increase the public debt limit stated that \"Congress\nsumed. Senate Joint Resolution 61, introduced by Senator Tydings\nshall balance the Federal budget\" (P.L. 96-5, section 5). Under this\nand Styles Bridges of New Hampshire, was reported out by the\nlegislation, the Congressional Budget Committees were required to\nCommittee on Appropriations in 1947 (Sen. Rept. No. 80-154) but\npropose balanced budgets for FY 1981 and subsequent years.\nreceived no further consideration. In 1949, the Senate unanimously\nIn addition to concerns about balanced Federal budgets, many\napproved a proposal by Arkansas Senator John McClellan to re-\nMembers of Congress have been equally concerned about the rela-\nquire the President to submit for FY 1951, in addition to his pre-\ntive size of public sector spending over the years. Reflecting this\nferred budget, a balanced budget (S.J. Res. 131, 81st Congress). Con-\nconcern, legislation linking Federal spending to the gross national\ngress then would compare these budgets in an effort to identify\nproduct, was introduced shortly after the Second World War. In\npossible areas of expenditure reductions or revenue increases. This\n1952, Senators Robert Taft of Ohio and Homer Ferguson of Michi-\nproposal was stricken during conference, however. A similar pro-\ngan introduced a proposed constitutional amendment to prohibit\nposal during the subsequent Congress also failed to proceed\nthe authorization of expenditures for non-military purposes in\nthrough the entire legislative process (H.R. 1689, 82d Congress).\nexcess of 5 percent of the estimated national income for any fiscal\nDuring the 1950's, an increasing number of Constitutional initia-\nyear (S.J. Res. 155, 82d Congress). During the subsequent Congress,\ntives for balanced budgets came to be introduced regularly in Con-\nRepresentative Ralph Gwinn of New York offered a measure to\ngress. Constitutional amendments were proposed first by Senators\nlimit public expenditures to one-seventh of the national personal\nBridges and Harry Byrd of Virginia, and later by Senator Strom\nincome (H.J. Res. 326, 83d Congress), while Representative Richard\nThurmond of South Carolina and Carl Curtis of Nebraska, to re-\nPoff of Virginia offered an amendment to prohibit appropriations\nquire the submission by the President of an annual balanced\nin excess of twenty percent of the preceding year's national income\nbudget and to prevent Congress from adjourning without having\n(H.J. Res. 217, 83d Congress).\nenacted such a budget. Another amendment, introduced by Sena-\nDuring this period, as well, a sustained effort was made to call\ntors Byrd and Bridges during this period, would have required Con-\nan Article V constitutional convention for the purposes of limiting\ngress to earmark $500 million annually for debt reduction activi-\nthe Federal taxing power. Initiated during the late 1930's in re-\nties, in effect mandating an annual $500 million budget surplus. No\naction was taken on any of these measures, although one hearing\nsponse to sharply increasing tax rates, 17 States had submitted ap-\nwas held in 1956 by the Senate Judiciary Committee (June 14,\nplications by the end of the Second World War. By 1963, there\nwere 31 extant applications although many were, by that time,\n1956, on S.J. Res. 126 and S.J. Res. 133, 83d Congress).\nSince the outset of the 84th Congress in 1955, an average of four\nstale or had been rescinded by subsequent State legislative ses-\nsions.\namendments to the Constitution to require a balanced Federal\nWhile few constitutional amendments were introduced to limit\nbudget have been proposed during each Congress. In addition, nu-\nmerous statutory proposals to achieve this end have been intro-\nFederal spending during the 1960's, new constitutional initiatives\nduced and considered during this period. The Revenue Act of 1964\nemerged with the next decade. In 1973, an amendment offered by\nRepresentative Jack Kemp sought to limit Federal expenditures\n(P.L. 88-272), for example, stated:\nand receipts to a percentage of the previous year's National Income\nTo further the objective of balanced budgets in the near\n(H.J. Res. 816, 93rd Congress), while an amendment proposed 6\nfuture, Congress by this action recognizes the importance\nyears later by Representatives Barber Conable and Ed Jenkins and\nof taking all reasonable means to restrain government\nSenators John Heinz and Richard Stone (and later by Senator Sam\nspending-Section 1.\nNunn) sought to limit the growth of Federal outlays to the growth\nThe Budget and Impoundment Control Act of 1974 (P.L. 93-344)\nof the Gross National Product (H.J. Res. 395, S.J. Res. 56, 96th Con-\nenacted major reforms in the Congressional budget process de-\ngress). This latter amendment drew upon a draft prepared by the\nsigned to enable Congress to consider individual spending measures\nNational Tax Limitation Committee. The Humphrey-Hawkins Full\nin light of overall budget objectives.\nEmployment Act (P.L. 95-523) established as a national target the\nIn the Humphrey-Hawkins Full Employment Act (P.L. 95-523), a\nreduction of Federal outlays to \"the lowest ratio of outlays to GNP\nbalanced budget was declared to be a national public policy priori-\nconsistent with national needs and priorities.\" Section 2(j). This\nty. Section 2(a); 6(i).\nlanguage replaced that proposed earlier by a Senate Committee to\nAn amendment offered by Senator Sam Nunn of Georgia to a\nset this level at twenty-one percent of the GNP by 1981 and twenty\n1978 tax reduction measure to make such reductions contingent\npercent by 1983.\nupon a balanced budget by 1982 was rejected during conference, al-\nthough it has been adopted in varying forms by both the full\nVII. HISTORY OF BALANCED BUDGET CONCEPT\nSenate and House. Later during the Congress, however, Rep, (now\nNo concept is more a part of traditional American fiscal policy\nSenator) Charles Grassley of Iowa and Senator Harry Byrd, Jr.,\nthan that of a balanced budget. Throughout most of the nation's\ncombined to enact into law an amendment to an IMF loan program\nhistory, the requirement of budget balancing under normal eco-\nauthorization measure requiring that, beginning with FY 1981,\nnomic circumstances was considered part of our \"unwritten consti-\ntotal budget outlays of the Federal government \"shall not\" exceed\n18\n19\ntution\". As University of Virginia Professor William Breit has ob-\nEarly American Presidents were in virtually unanimous agree-\nserved:\nment on the dangers of excessive public debt. In his Inaugural Ad-\nThe balanced-budget rule which served as part of the\ndress, President John Adams stated:\nConstitution was, of course, not in the form of a written\nThe consequences arising from the continual accumula-\nstatement that every expenditure had to be balanced by a\ntion of public debts in other countries ought to admonish\ntax. But it nevertheless had constitutional status. For ex-\nus to be careful to prevent their growth in our own.\npenditures in excess of receipts were considered to be in\nviolation of moral principles. The imperative of the bal-\nPresident James Madison stated that one of the primary goals of\nhis Administration would be:\nanced budget was an extra-legal rule or custom that grew\nup around the formal document. It existed outside the pre-\nTo liberate the public resources by an honorable dis-\ncise letter of the Constitution on all fours with the system\ncharge of public debts.\nof political parties, the presidential cabinet, the actual op-\nPresident James Monroe held a similar position observing that:\neration of the electoral college system, and the doctrine of\nAfter the elimination of the public debt, the Government\njudicial review. Buchanan & Wagner, Fiscal Responsibility\nwould be left at liberty\nto apply such portions of the\nin Constitutional Democracy 10 (1978).\nrevenue as may not be necessary for current expenses to\nThe balanced-budget rule was an effective constitutional con-\nsuch other objects as may be most conducive to the public\nstraint in the sense of being part of a set of fixed principles ante-\nsecurity and welfare.\ncedent to and controlling the day to day decisions of the national\nPresident John Quincy Adams also found a balanced budget to\nlegislature.\nbe a sound maxim of political economy:\n18th and 19th centuries\nStewards of the public money should never suffer with-\nInfluenced by individuals such as Adam Smith, David Hume, and\nout urgent necessity to be transcended the maxim of keep-\nDavid Ricardo, the drafters of the Constitution and their immedi-\ning the expenditures of the year within the limits of its re-\nate successors at the helm of the new government strongly feared\nceipts.\nthe effects of public debt. As Thomas Jefferson stated [the quota-\nAmong the most uncompromising advocates of budget balance\ntions in this section are taken from Kimmel, Lewis, Federal Budget\nwas President Andrew Jackson, who viewed public debt in unique-\nand Fiscal Policy: 1789-1958]:\nly populistic terms:\nThe public debt is the greatest of dangers to be feared by\nOnce the budget is balanced and the debts paid off, our\na republican government.\npopulation will be relieved from a considerable portion of\nAlexander Hamilton, who perhaps more than any other individ-\nits present burdens and will find not only new motives to\nual, influenced the course of American economic policy during our\npatriotic affection, but additional means for the display of\nindividual enterprise.\nnation's first century, noted:\nAs the vicissitudes of nations begat a perpetual tendency\nPrior to the Civil War, customs duties ordinarily were more than\nto the accumulation of debt, there ought to be a perpetual,\nadequate to cover the limited expenditures of the national govern-\nment. During these years, deficits were rare. The majority of\nanxious, and unceasing effort to reduce that which at any\ntime exists, as fast as shall be practicable, consistent with\nbudget deficits that did occur were attributed to foreign conflicts-\nthe War of 1812 and the Mexican War of 1846-and to several brief\nintegrity and good faith.\nrecessions in the late 1830's and the late 1850's. Whatever occasion-\nEarlier, in the Federalist # 30, Hamilton had recognized the un-\nal deficits occurred, efforts normally would follow to repay them as\nhealthy propensity for public debt on the part of most governments\nexpeditiously as possible.\nwhen he wrote:\nDespite the enormous debts accumulated by the national govern-\nI believe that it may be regarded as a position warrant-\nment as a result of the Civil War, the period following it through\ned by the history of mankind that, in the usual progress of\nthe end of the century brought little change with respect to the\nthings, the necessities of a nation, in every stage of its ex-\nbalanced budget philosophy. A run of 28 years of consecutive\nbudget surpluses occurred during this period. The norm of an\nistence, will be found at least equal to its resources.\nannual balanced budget continued to exert considerable influence\nBoth Hamilton and Jefferson were in agreement that, whatever\non the exercise of public policy. Any significant departures from\ndebt happened to be accrued by a nation, it ought to be repaid\nbalance or from efforts to repay existing public debt were treated\nwithin some prescribed period of time. In Jefferson's view, the prof-\nan sources of alarm.\nligacy of one generation ought not to forever burden its successors.\nPresident Andrew Johnson, in proposing to effect substantial re-\nductions in the war debt, observed:\n20\n21\nWe should look at the national debt, as just as it is, not\nand early 1930's. While there are many economic explanations for\nas a national blessing but as a heavy burden on the indus-\nthe Great Depression, it is extremely difficult to understand the ar-\ntry of the country to be discharged without necessary\ngument of a small minority of individuals that the commitment of\ndelay.\nthe Hoover Administration to a balanced budget was in any way\nPresident William McKinley took the position that, even during\nresponsible. It is an argument that even most proponents of the\nunsatisfactory economic conditions, \"the government should not be\n\"new economics\" have rejected. Apart from this argument's failure\npermitted to run behind its debt.\" President Benjamin Harrison de-\nto explain why the commitment of earlier administrations to bal-\nscribed unnecessary public debt as \"criminal\".\nanced budgets failed to trigger similar economic collapses, it is an\nThe principal arguments raised throughout most of the 19th cen-\nargument that is inconsistent with the facts of Hoover Administra-\ntury to public debt were as follows: first, interest on the debt was a\ntion policies. Despite the fact that there was at that time a sub-\nheavy burden upon the working classes; second, interest payments\nstantial bipartisan consensus in favor of the need to balance the\nrepresented a redistribution of income in favor of the well-to-do-\nFederal government's budget, such budgets were not produced. In\nthe words of Lewis H. Kimmel in his historical analysis of Federal\nclasses; and finally, the capital freed from unproductive employ-\nment through debt reduction invariably would find its way into\nbudget and fiscal policy, \"The fight for a balanced budget had been\nmade, but the battle was never won.\"\nmore productive and enterprising uses. As Samuel Inghams, Secre-\nThis is not to say that budget deficits were responsible for the\ntary of the Treasury under Andrew Jackson, noted:\nDepression, either. The Federal budget was probably not a major\nInterest is now paid to capitalists out of the profits of\nfactor-one way or another-in causing the Depression. First, there\nlabor; not only will this labor be released from the burden,\nwas the far smaller scale of the Federal budget at that time. In the\nbut the capital, thus thrown out of an unproductive use,\nyear 1929, the gross national product of the United States was ap-\nwill seek a productive employment; giving thereby a new\nproximately $100 billion. Federal expenditures for FY 1929 repre-\nimpetus to enterprise in agriculture, the arts, commerce,\nsented approximately 3 percent of the GNP and the surplus for\nand navigation.\nthat fiscal year of $734 million represented approximately three-\nquarters of one percent of the GNP. Thus even from the most de-\n20th century\ntermined Keynesian perspective, it is difficult to argue that the\nThe strong national consensus favoring a balanced national\nFederal government was engaged in any significant removal of pur-\nbudget continued through the early decades of the 20th century.\nchasing power from that private sector. The fiscal posture was one\nPresident Wilson argued in behalf of balanced peacetime budgets\nof moderate restraint at best. Second, the Federal budget is ab-\nin observing:\nsolved of responsibility because the movement of the budget from\nMoney being spent without new taxation and appropria-\nnominal surplus to substantial deficit-the consequence of a rapid\ntion without accompanying taxation is as bad as taxation\ndecline in the level of receipts-was such as to mitigate rather\nwithout representation.\nthan aggravate the severity of the downturn, from the Keynesian\nperspective. Later efforts to increase spending on emergency relief\nIt was President Calvin Coolidge's goal to run actual surpluses in\nprograms acted in precisely the same fiscal direction. Finally, the\norder to repay the large national debt (for that time) of $24 billion\nnational downturn during this period was accompanied by a mone-\nthat had resulted from the First World War. He stated as his Ad-\ntary deflation of unprecedented severity, one that took an extreme-\nministration's primary fiscal objective-maintaining revenues at a\nly long period of time to reverse.\nlevel \"not too greatly in excess of expenditures.\" He stated further:\nWhile there are various theories of the cause for the Depres-\nThe nation must make financial sacrifices accompanied\nsion-Milton Friedman's analysis of trends in the supply of money\nby a stern self denial in public expenditures until we have\nduring this period (A Monetary History of the United States; 1867-\nconquered the disabilities of our public finance\n1960, 1960), Charles Kindleberger's observations on the absence of\nwe\nmust keep our budget balanced for each year.\nan international lender of last resort (The World in Depression,\n1973), Jude Wanniski's account of the Smoot-Hawley tariff (The\nThe surpluses of the 1920's, however, were followed by an unbro-\nWay the World Works, 1980) and so forth-there is little basis for\nken string of ten peace-time deficits during the 1930's and then 6\nattributing the Depression to the state of the Federal budget, much\nwar-related deficits. This sustained period of deficit spending repre-\nless to the idea that this budget normally should be in balance.\nsented something entirely unprecedented in United States history,\nThe Federal budget for fiscal year 1931 was the first budget to be\nalthough the nation had suffered a prolonged series of deficits in\nprepared following the crash of the stock market in late 1929. It\nrelation to the Civil War. New economic theories that placed great\nwas submitted by President Hoover about six weeks after the col-\nweight upon the ability of the Federal government to \"manage\"\nlapse of the market. In this budget, surpluses were estimated for\nfiscal policy through deficits and surpluses emerged during this\nfiscal year 1931 and 1932, of $758 million and $499 million respec-\nperiod.\ntively. These estimations remained in effect even after a reduction\nThe new theories found a fertile climate in part as a result of the\nin personal and corporate income taxes was enacted into law in De-\nGreat Depression that had overcome the economy in the late 1920's\ncember of 1929, carrying with it an expected, immediate revenue\n22\n23\nloss of $80 million for each of these two years. It was not until\npublic debt of the United States stood at a figure approximately six\nApril of 1930 that President Hoover conceded that not only would\ntimes as large as the debt existing before the War and approxi-\nthe predicted surpluses not accrue, but that deficits could be ex-\nWar. mately ten times that of the total debt following the first World\npected for fiscal year 1931 of $20 to $30 million. The final deficit\nfor fiscal year 1931 was $462 million or approximately fifteen per-\nFollowing World War II, although the annual balanced budget\ncent of the total level of public expenditures. The final deficit for\nwas no longer the sole standard by which fiscal policy was judged,\nthe succeding fiscal year was an overwhelming $2.7 billion, or ap-\nthere was continued expression of support for the idea of balanced\nproximately sixty percent of the total level of public expenditures.\nbudgets, particularly during times of economic expansion. Even the\nAnnual deficits of a similar magnitude recurred during the remain-\n\"new economics\" required the achievement of surpluses during\nder of the decade as first one, then a second depression took place.\nthese periods in order to overcome the deficits incurred during eco-\nThe depression that struck the country in the late 1930's-nearly\nnomic downturns. President Truman observed in his budget mes-\nas powerful as that in the early 1930's-finally was overcome only\nsage for 1984 that:\nby this country's entry into the Second World War.\nAs long as business, employment and national income con-\nWhile the Hoover Administration never retreated from its tradi-\ntinue high, we should maintain tax revenues at levels that\ntionalist attitude toward the balanced budget, the trend in expendi-\nwill not only meet current expenditures but also leave a\ntures during its tenure was upward, primarily because of greater\nsurplus for retirement of the public debt.\noutlays for public works and the Reconstruction Finance Corpora-\ntion. Total Federal expenditures had increased by nearly $2 billion\nThe idea of budget deficits as a regular instrument of fiscal\nbetween fiscal year 1927 and fiscal year 1932, an increase of ap-\npolicy, however, was increasingly evident during this period, al-\nproximately 64 percent. Growing levels of public spending became\nthough the Truman Administration managed to balance half of its\na major issue in the 1934 Presidential campaign as Franklin Roose-\nvelt criticized the incumbent administration for failing to achieve\nby only a small amount.\nbudgets while incurring total deficits that exceeded total surpluses\nthe \"one sound foundation of permanent economic recovery\"-a\nPresident Eisenhower continued along much the same lines, al-\n\"complete and honest balancing of the federal budget\". Only six\nthough he expressed far more public support for the concept of a\ndays after his inauguration, President Roosevelt summarized his\nregularly balanced budget than did his predecessor. He observed in\nviews concerning the growing level of budget deficit:\nhis 1957 budget message:\nWith the utmost seriousness, I point out to Congress the\nWe strengthen our financial position by a balanced budget.\nprofound effect of this fact upon our national economy. It\nWe must make sure that we do not undermine our finan-\nhas contributed to the recent collapse of our banking\ndeficits. cial strength by laying the groundwork for future budget\nstructure. It has accentuated the stagnation of the econom-\nic life of our people. It has added to the ranks of the unem-\nIt was not until the recession of 1957-58 that the Eisenhower Ad-\nployed. Our Government's house is not in order and for\nministration proved incapable of compensating for deficits with\nmany reasons no effective action has been taken to restore\nsubsequent surpluses. The $12.9 billion budget deficit in 1985 was\nit to order.\n(at nation. the time) the largest peace-time deficit in the history of the\nThe Economy Act of 1933 (48 Stat. 8) was enacted at this time,\nproviding for spending reductions of approximately $500 million, in\nThe real turning point in the history of U.S. fiscal policies OC-\nan effort to reduce the alarming growth of the public debt. During\ncurred during the 1960's. Even the Keynesian objective of balanc-\nmuch of its first term in office, despite mounting public deficits,\nlar, annual, uncompensated deficits.\ning surplus years with deficit years succumbed to the idea of regu-\nthe Roosevelt Administration continued to express its support for\nthe achievement of a balanced budget. It was not until such deficits\nDuring the past 25 years, the Federal government has run defi-\nhad persisted for several years that the Administration attempted\ncits in all but a single year. The deficits have come during good\npublicly to explain its fiscal policies in terms of the \"new econom-\ntimes and they have come during bad times. They have come from\nics\" and in terms of the need for the Federal government to engage\nPresidents who have pledged themselves to balanced budgets as\nin the kind of demand management or \"pump priming\" required\nwell as from Presidents whose fiscal priorities were elsewhere.\nby this school of economic theory. For much of his first term, Presi-\nThey have come from Presidents of both parties.\ndent Roosevelt argued that it was the \"deficit of today\" that was\nEven more alarmingly, the magnitude of these deficits has in-\nmaking possible the \"surplus of tomorrow\". The proposed budget\ncreased enormously during this period. For the 7 fiscal years\nfor fiscal year 1937 was reported by the Administration as being in\nending in fiscal year 1967, the total deficit was approximately $35\nbalance, \"except for recovery and relief\".\nbillion. For the next seven fiscal years ending in fiscal year 1974,\nWorld War II had an indelible impact upon Federal government\nthe total deficit was approximately $91 billion. For the next 7 fiscal\nfiscal policies. During the war years, Federal expenditures rose\nyears, ending in fiscal year 1981, the total deficit was approximate-\nfrom $9 billion to almost $100 billion, with the total national debt\nly $450 billion. The estimated deficit for fiscal year 1982-86 will be\nstanding about $250 billion when the fighting ended. The total\napproximately $920 billion. The total national debt today stands at\n25\n24\nA linkage existed between spending and revenue in the sense\napproximately $2 trillion, with nearly half of that total incurred\nthat public expenditures generally were set at levels that were\nduring the past 8 years alone.\nmatched by public revenues. Revenue estimates generally were es-\nWhatever lip service may have been given to the concept of a\ntablished prior to expenditure estimates and served to define per-\nbalanced budget during the past two decades, it is clear that there\nmissible levels of expenditures. It was an historical norm, described\neither is the lack of will to conform with this ideal, or that funda-\nby Professor Alvin Rabushka of the Hoover Institution, as one in\nmental obstacles to its achievement exist, within the political\nwhich:\nsystem. It is possible then to summarize the history of the Federal budg-\nPublic officials first determined what resources were\netary record into several distinct periods of varying lengths. Over\navailable to Government and against that constraint chose\nthe longest of these periods-from 1789 to 1932-balanced budgets\namong the many competing claims on public spending.\nor surplus budgets were the norm. While budget procedures had\nUnder this system, public officials could support new spending\nlittle of their present organization, the concept of a balanced\nprograms but only when they also were prepared to reduce other\nbudget was accepted widely as the hallmark of fiscal responsibility.\nspending programs commensurately or to raise revenues to cover\nThose deficits that did occur-during wartime or during the most\nsuch new spending. This political reality served as an effective\nsevere recessions-normally were compensated for by subsequent\ncheck upon the creation of unlimited numbers of new spending ini-\nsurpluses. During the second period-from 1932 to 1960-the rigid\ntiatives.\nrule of annual balanced budgets gave way to a fiscal policy in\nAs new economic theories began to take hold in the middle years\nwhich balanced budgets remained an overall objective but in which\nof the twentieth century and as the traditional balanced budget re-\ndeficit spending nevertheless was viewed as a tool occasionally\nquirement came increasingly to be disregarded, an entirely new\nuseful to effect appropriate economic results. Finally, the most\nfiscal environment evolved. With the severing of the historical link-\nrecent period-1960 to date-has seen unrelieved instances of defi-\nage between spending and revenue, spending decisions increasingly\ncit spending and increasingly high levels of deficit spending. The\nhave become divorced from revenue decisions. Spending decisions\nbalanced budget concept, a concept which had exercised a decisive-\nincreasingly have been reached without consideration of whether\nly restraining influence during the first period, and a diminished\nor not revenues existed to finance such spending. The virtually un-\nthough still restraining influence during the second period, had\nlimited accessibility to deficit spending has served to bridge what-\ndwindled into almost total irrelevance by the end of this latter\never gaps have developed between levels of expenditures and levels\nperiod. Not coincidentally, in the view of this Committee, the end\nof revenues.\nof this period saw the United States still engaged in some of the\nAs Professor Craig Stubblebine of Claremont College has noted:\nmost prolonged and intractable economic difficulties in its history.\nPlanned deficits in years good and bad signify Congres-\nVIII. SENATE JOINT RESOLUTION 225 AND THE CONSTITUTION\nsional rejection of the fiscal rule which served America for\nthe greater part of its life\nwith erosion of these fiscal\nIn developing Senate Joint Resolution 225, the committee has\ndisciplines, understood by and adhered to by the founders\nbeen concerned not only with developing an amendment reflecting\nof this nation, no one should be surprised that the Con-\nsound economic policy but one reflecting sound constitutional\ngress has been unable to exercise the restraint necessary\npolicy as well. The committee fully appreciates the differing im-\nto secure and maintain economic stability.\nperatives in putting together a constitutional provision, as opposed\nThe implications of this access to deficit spending as a substitute\nto a simple statutory provision.\nfor the traditional balanced budget norm are important for our po-\nSpending bias\nlitical system. It means that Members of Congress invariably have\nThe purpose of the proposed amendment is not to write into the\npolitical incentives to respond to the demands of spending interest\nConstitution any permanent economic policy; rather, as is more\ngroups for greater public spending. Such spending, unlike in past\nfully discussed in section III, it is to eliminate a pronounced struc-\nyears, need not be accompanied by votes to reduce spending in\ntural bias toward increased levels of spending that has developed\nother areas or by votes to increase public revenues. In other words,\nwithin the political system without corresponding increases in rev-\nthe political advantages to be accrued by responding favorably to a\nenue. The existence of this bias has led to a fiscal process in this\nspending interest no longer are accompanied by equivalent political\ncountry resulting in repeated substantial deficits which are detri-\ndisadvantages growing out of the need to antagonize some other\nmental to all facets of the economy.\nspending interest or to antagonize the taxpaying public generally.\nThroughout most of the history of this country, public spending\nDr. William Niskanen, a member of the President's Council of\nwas constrained by an \"unwritten Constitution\" requirement of a\nEconomic Advisors, has remarked in this regard:\nbalanced budget. While occasional deficits would be incurred, gen-\nOnce the nexus between Federal spending and tax reve-\nerally during wartime, public debt was regarded as something un-\nnues was broken, no consensus developed on any other\ndesirable, something to be reduced and eliminated as quickly as\nrule to constrain the level of spending and the deficit.\n26\n27\nProfessor Buchanan has remarked further:\nThe simple arithmetic of politics suggests a regime of\nproposed amendment that would prevent Congress from approving\nany particular item of expenditure or taxation. There is nothing in\npermanent and continuing deficits in democratic society\nthe proposed amendment that would establish any permanent level\nwhere there exists no constraint that dictates some balanc-\nof expenditure or taxation in the Constitution. And there is noth-\ning of the costs and the benefits of spending programs. \"To\ning that would make it significantly more difficult to increase ex-\nspend without taxing\"-this stuff of politician's dreams\npenditures or taxation than to reduce expenditures or taxation.\nmust somehow be held in check by rules of fiscal prudence.\nWhat the proposed amendment would do is modify the elements\nRecognition of the difficulties posed for the body politic by spe-\nwithin the present political system that enable Members of Con-\ncial interest groups stems at least as far back as Madison's dis-\ngress to spend public funds without having to account for this\ncourses in the Federalist Papers. In the Federalist No. 10, Madison\nspending. There is nothing in Senate Joint Resolution 225 that\nemphasized the paramount responsibility of the new Government\nwould preclude Congress from continuing to increase public spend-\nto \"break and control the violence of faction.\" Later in the same\ning; all that would be required is that the costs of such spending no\nessay, he proceeded to define such \"factions\" as a:\nlonger be obscured or deferred beyond public recognition. Unlike\nmajority or minority of the whole, who are united and ac-\nsome proposed constitutional amendments that would make it diffi-\ntuated by some common impulse or passion, or of interest\ncult for Congress to respond to even genuine public sentiment for\nadverse to the rights of other citizens, or to the permanent\nincreased levels of spending or taxing, Senate Joint Resolution 225\nand aggregate interests of the whole.\nhowever, it would ensure that no insuperable obstacles existed to\nwould not pose an insuperable obstacle to this end. Concomitantly,\nThe causes of such \"factions\" are \"sown in the nature of man\" and\nreduced levels of spending or taxing, as now is the case.\nmust be controlled by the institutions created by the new Constitu-\nAs Professors Buchanan and Wagner have observed:\ntion.\nWhile not necessarily anticipating the precise harm that would\nWe must restore some rule that will restrict politicians\nbe done to the \"interests of the whole\" by \"factions\" in the area of\nin their natural, understandable proclivity to spend and to\nrefrain from taxing\nnational economic policy, Madison did discourse upon the need for\nbudgets will tend toward chronic\nthe institutions of the new Government to temper the influence of\ndeficits until and unless politicians are constrained by\nfactions, not to compound it. \"Ambition must be made to counter-\nsome constitutional rule which requires that the taxing\nand spending sides of the fiscal account be balanced.\nact ambition,\" Madison observed in the Federalist No. 51.\nSenate Joint Resolution 225 would democratize the budget proc-\nRepresentativeness of process\ness by making it a more honest and open process. Congress, as al-\nThe objective of Senate Joint Resolution 225 then is not to \"read\nready noted, would remain fully capable of increasing public spend-\neconomic policy into the Constitution\", as some have suggested, but\ning or taxing, but only in the event that it was equally willing to\nto alter the spending bias in order to make the budget process one\ncast the \"difficult\" votes necessary to accomplish this. The amend-\nthat is more responsive and more democratic. It does not seek to\nment would mandate that increased public spending for a program\nestablish an alternative bias in behalf of reduced levels of expendi-\nbe matched either by votes to reduce spending for some other pro-\ntures, but simply to restore a semblance of neutrality. As Professor\ngram, or by votes for increased taxes. Members of Congress would\nAntonin Scalia (now U.S. Circuit Court Judge) has observed:\nhave to go on record either in support of cutting some spending\nwhile the extraordinary legislative requirements [of the\nprogram, or of raising taxes generally, before it could effect higher\nproposed amendment] pertain to economic measures, they\npublic spending. Tax increases would have to be voted explicitly,\nare motivated by political science and governmental\nrather than implicitly imposed through deficit spending and infla-\ntion. As Professor Friedman has stated:\ntheory rather than economics, and their intended effect is\nto eliminate rather than produce an economic bias or pre-\ndeficits are bad\nThey are bad because they encourage\nsumption.\npolitical irresponsibility. They enable our representatives\nPassage of this amendment would ensure that the political equa-\nin Washington to buy votes at our expense without having\ntion confronting Members of Congress who must vote on spending\nto vote explicitly for taxes to finance the largesse.\nmeasures carries some element of countervailing political advan-\nProfessor Robert Crawford of Brigham Young University has ob-\ntage and disadvantage.\nserved that the proposed amendment:\nIt is the premise of Senate Joint Resolution 225 that the repre-\nWould increase the flow of economic information into\nsentative political processes ought to be charged with primary re-\nthe political marketplace.\nsponsibility for making day-to-day decisions with respect to spend-\ning and taxing. Unlike many other proposed constitutional amend-\nRather than having to analyze hundreds of rollcall votes annual-\nments on this subject. Senate Joint Resolution 225 minimizes con-\nly in order to assess the performance of their Representatives and\nstitutional intrusion into these decisions. There is nothing in the\nSenators, members of the public (and their intermediaries) would\nhave to analyze a mere handful of key votes in order to determine\n28\n29\nwhich legislators were responsible for increased levels of public ex-\nWhile there is no formal limitation in the Constitution regarding\npenditure, taxation, and debt. If the citizenry genuinely were desir-\nthe subject matter of amendments, it may be fair, nevertheless, to\nous of increases, no doubt this would be reflected by their ballots;\nsuggest that: (1) a proposed amendment may be inconsistent with\nif, however, as many Members of this Committee suspect is pres-\nthe purpose and spirit of that document; (2) the object of the pro-\nently the case, the citizenry was not SO desirous, this too would be\nposed amendment is an inappropriate object to be addressed by the\nreflected by their ballots.\nConstitution; or (3) the form or structure of the amendment is in-\nIn summary, the key provision in Senate Joint Resolution 225\nconsistent with the Constitution.\nthe balanced budget norm in section 1-is a necessary element of\nAs discussed above, what Senate Joint Resolution 225 seeks to\nany measure to promote a more neutral budget process; it is not\nachieve is the elimination of a structural bias within our political\nnecessarily an end in itself. So long as unlimited deficit spending\nsystem that has arisen through the confluence of growing interest\nremains available to Members of Congress, and SO long as Congress\ngroup power and the abolition of the historical balanced budget\ndoes not have to vote higher taxes if it wants higher spending, the\nconstraint upon national fiscal policy.y\nbudget process will continue to be skewed sharply in behalf of\nBeyond that fact, however, it must be stated that the growth in\nhigher levels of spending and only minimally responsive to the will\nthe Federal Government in recent decades-a growth that never\nof the electorate in this regard.\ncould have been anticipated by our Founding Fathers-does have\nPerhaps most importantly, so long as these elements remain in\nimplications for the freedom and well-being of the citizenry. As\nplace, the budget process will continue to be a dishonest one, with\nJohn Maynard Keynes has observed:\nmembers of Congress perpetually able to avoid accountability for\ntheir spending and taxing decisions, perpetually able to escape\nThere is no subtler, no surer, means of overturning the\npublic identification for their policies, and perpetually able to reap\nexisting basis of society than to debauch the currency. The\nprocess engages all of the hidden forces of economic law on\nthe immediate political benefits of their actions while postponing\nthe side of destruction and does it in a manner in which\nindefinitely the political costs.\nnot one man in a million is able to diagnose. Economic\nEconomic policy and Constitution\nConsequences of the Peace (1920).\nWhile it is the view of the Committee that Senate Joint Resolu-\nIn short, national solvency, the ability to pay one's debts, is a fun-\ntion 225 primarily proposes an amendment of process, and that it\ndamental value of any nation.\nreads into the Constitution a political principle of enduring value\nThe concept of \"limited government\" or \"enumerated powers\"\nrather than a transient economic policy, it is still worth addressing\nthat was at the root of the Constitution and that served to check\nthe objections of those who find difficulty with the concept of plac-\nthe growth of the public sector during most of the history of our\ning a balanced budget provision or taxing limitation in the consti-\ncountry has been altered drastically by the evolution of public\ntution. Professor Lawrence Tribe of the Harvard Law School, for\npolicy and constitutional interpretation during the 20th century in\nexample states:\na manner that never could have been predicted by the drafters of\nthe Constitution.\nThe Constitution embodies fundamental law and should\nnot be made the instrument of specific social or economic\nThese include the continued expansion of the notion of what con-\nstitutes \"commerce\npolicies\nto endure as a source of unity rather than di-\namong the several States\"; the develop-\nvision, the constitution must embody only our most funda-\nment of new theories of Congressional authority under the 14th\nmental and lasting values\nbut unlike the ideals em-\nAmendment; the acceptance of the Hamiltonian conception of the\nbodied in the Constitution, fiscal austerity-hower sound\nbreadth of the general welfare clause; the adoption of the 16th\nas a current goal-speaks neither of the structure of gov-\nAmendment allowing the imposition of income taxes; and the ero-\nernment nor to the rights of the people\nit should be\nsion of the traditional norm of a balanced Federal budget. In place\namended only to modify fundamental law-not to accom-\nof a spending power limited to the \"enumerated\" powers of Article\nplish policy goals.\nI of the Constitution, the Courts have transformed this section into\nIt is first worth noting that, with a single exception (mainte-\none investing Congress with broad and virtually unlimited spend-\ning authority. Professor Milton Friedman has stated:\nnance of equal State representation in the Senate), there is no\nextant limitation upon the subject matter of Constitutional amend-\nSuch limits on total government spending were provided\nments. Although efforts were made at the Constitutional Conven-\nat an earlier date by the gold standard, an unwritten con-\ntion to place substantive limitations in the Article V amending\nstitutional prohibition on deficit budgets, and Supreme\nclause, they were largely unsuccessful. Periodic amendments\nCourt interpretation of \"inter-State commerce\", \"due proc-\nduring the 19th century to place substantive limitations upon the\ness\" and similar terms in the Constitution in such a way\namending authority were also unsuccessful. Later challenges to\nas narrowly to limit Federal action in the economic area.\nboth the 18th and 19th Amendments on the grounds of \"unconsti-\nThese limits have now been swept away. They cannot be\ntutionality\" failed as well. National Prohibition Cases, 253 U.S. 350\nrestored in their initial form. But some replacement is des-\n(1920); Leser V. Garnett 258, U.S. 130 (1922).\nperately needed.\n30\n31\nProfessor Breit states further that:\ncreasingly prone to deficit financing since World War II, and (2)\nThe Federal sector, during that period, has come to command an\nThe balanced budget norm was SO deeply ingrained\nincreasing share of the nation's economic output and income.\nduring this time as to form a constraint of considerable\npower on the actions of government\nthe unwritten\nFederal deficits: increasingly frequent and large\nconstitution maxim of the balanced budget\nhad the\nThe Federal government has run a budget deficit in twenty-four\nresult of chaining Leviathan. Buchanan & Wagner, Fiscal\nof the past twenty-five years, and in forty-seven of the past fifty-\nResponsibility in Constitutional Democracy 17 (1978).\nfive years. Deficit spending has come to occur during good econom-\nThe new economics (as well as the new jurisprudence) has thus\nic conditions and during bad economic conditions. While the past\nhad the impact of removing these formal and informal limitations\ndecade has seen little change in the frequency of these deficits, it\nupon the growth of the Federal public sector-a sector that today\nhas seen, however, significant change in the size of deficits.\nconsumes approximately one-fourth of the Gross National Product,\nSince 1970, the United States has incurred the eleven largest\nup from approximately 3 percent in 1930, 10 percent in 1940, 14\npeacetime deficits in the history of the Nation with nine deficits\npercent in 1950, 18 percent in 1960, and 20 percent in 1970.\nover the past decade in excess of $50 billion. Following FY 1970,\nNot only has the public sector grown relative to the economy\nthe total national debt of the Nation stood at $383 billion; following\ngenerally, but it has increasingly grown through public expendi-\nFY 1985 just fifteen years later, this figure will stand at approxi-\ntures that are not financed by tax revenues-deficit spending. But\nmately $2 trillion ($2,000,000,000,000). Nearly half of this total debt\nit is not simply the economic health that is being threatened: it is\nhas been incurred during the past eight years alone, with well over\nthe political health as well. As Professor (now U.S. Circuit Court\ntwo-thirds having been incurred in the past two decades alone. (See\njudge) Robert Bork has observed:\ntable 2.)\nThe long-term growth of government's share of national\nTABLE 2.-NATIONAL DEBT IN THE 20TH CENTURY\nwealth is a serious near-term threat to the vitality of the\nless obviously perhaps rising government\n(In billions of dollars)\neconomy\nspending is a long-term threat to American political free-\nYear\nDebt\nYear\nDebt\nYear\nDebt\ndom. Social and political discontents may increase beyond\ntolerable levels as the decreased size of the pie intensifies\n1900\n1\n1929\n17\n1958\n280\ndisputes about its division. Inflation, which may become\n1901\n1\n1930\n16\n1959\n288\nendemic if spending is not controlled, has destroyed democ-\n1902\n1\n1931\n17\n1960\n291\n1903\n1932\n19\n1961\n293\nracies before. Increasing subsidies with conditions attached\n1904\n1933\n23\n1962\n303\nare a mode of coercion that may evade constitutional guar-\n1905\n1934\n27\n1963\n311\nantees allowing government to buy decreased freedom it\n1906\n1935\n29\n1964\n317\ncould not order directly. Rising spending also fosters the\n1907\n1936\n34\n1965\n323\n1908\n1937\n36\n1966\n329\ngrowth of great bureaucracies whose choices increasingly\n1909\n1938\n37\n1967\n341\ndisplace those of elected representatives. Even if the rule\n1910\n1939\n48\n1968\n370\nof the bureaucracies proves both stable and benevolent,\n1911\n1940\n51\n1969\n367\nwhich is by no means to be assumed, it is not the sover-\n1912\n1941\n58\n1970\n383\n1913\n1942\n79\n1971\n410\neignty of the people. Wall Street Journal, April 4, 1979.\n1914\n1943\n143\n1972\n437\nHe goes on to conclude:\n1915\n1944\n204\n1973\n468\n1916\n1945\n260\n1974\n486\nAny systemic malfunction of government serious enough\n1917\n3\n1946\n271\n1975\n544\nto threaten prosperity and freedom may properly be ad-\n1918\n12\n1947\n257\n1976\n632\n1919\n25\n1948\n252\n1977\n709\ndressed by the Constitution.\n1920\n24\n1949\n253\n1978\n780\nThe amendment does not read a particular economic theory into\n1921\n24\n1950\n257\n1979\n834\n1922\n23\n1951\n255\n1980\n914\nthe Constitution; it does not read precise spending or taxing levels\n1923\n22\n1952\n259\n1981\n1,004\npermanently into the Constitution; it does not preempt the day-to-\n1924\n21\n1953\n266\n1982\n1,147\nday legislative decisions of the representative branch of the nation-\n1925\n21\n1954\n271\n1983\n1,382\nal government; and it is a sufficiently flexible provision to permit\n1926\n20\n1955\n274\n1984\n1,577\n1927\n19\n1956\n273\n1985 1\n1,850\nthe government to respond to economic circumstances of a widely\n1928\n18\n1957\n272\nvarying nature.\n1 Estimated in fiscal year 1986.\nIX. ECONOMIC BACKGROUND\nSource: Office of Management Budget.\nTwo statements summarize the economic issues addressed by\nWith the rising national debt has come rising interest payments.\nSenate Joint Resolution 225: (1) The Federal sector has become in-\nWhere interest absorbed approximately six percent of the national\n32\n33\nbudget twenty years ago, in fiscal year 1985 interest payments will\nlater in fiscal year 1977; the first $500 billion budget in fiscal year\nrepresent over thirteen percent of the total budget. Total interest\n1980; the first $600 billion budget in fiscal year 1981; the first $700\nof $130 billion for fiscal year 1985 represents a total larger than\nbillion budget in fiscal year 1982; the first $800 billion budget in\nthe entire Federal budget during the early 1960's, and comprised\nfiscal year 1984. (See table 4.)\nthe third largest expenditure item in the Federal budget. It is a\nfigure nearly half as large as spending for national defense and\nTABLE 4.-BUDGET RECEIPTS AND OUTLAYS, 1789-1986 1\nnearly one-third as large as spending for income security programs,\nincluding Social Security.\n[In millions of dollars]\nFederal spending and taxing: an increasing share\nFiscal year\nBudget receipts\nBudget outlays\nBudget surplus or\ndeficit(-)\nPrior to World War I, Federal spending represented a minor\nshare of the nation's economic output of goods and services. Other\n1789-1849\n1,160\n1,090\n+70\n1850-1900\n14,462\n15,453\n-991\nthan in times of war, the relatively small amounts of Federal\n1901-1905\n2,797\n2,678\n+119\nspending were financed primarily by import duties. Government\n1906-1910\n3,143\n3,196\n-52\nspending at all levels represented less than 9 percent of the Gross\n1911-1915\n3,517\n3,568\n-49\nNational Product (GNP).\n1916-1920\n17,286\n40,195\n-22,909\n1921\n5,571\n5,062\n+509\nBeginning with ratification of the 16th Amendment in 1913, pro-\n1922\n4,026\n3,289\n+736\nviding Federal access to taxation of incomes, and with the onset of\n1923\n3,853\n3,140\n+713\nWorld War I, the Federal sector has demonstrated a continuing\n1924\n3,871\n2,908\n+963\npropensity for growth, whatever the economic circumstances. Over\n1925\n3,641\n2,924\n+717\n1926\n3,795\n2,930\n+865\nthe next twenty years, government spending nearly doubled as a\n1927\n4,013\n2,857\n+1,155\npercentage of the economy. Since that period, however, spending\n1928\n3,900\n2,961\n+939\nhas accelerated at an even more rapid pace, particularly Federal\n1929\n3,862\n3,127\n+734\ngovernment spending. In 1929, Federal expenditures of $3 billion\n1930\n4,058\n3,320\n+738\n1931\n3,116\n3,577\n-462\nrepresented just three percent of the total GNP. By 1950, the\n1932\n1,924\n4,659\n-2,735\npeacetime share had risen to fifteen percent of GNP or $43 billion.\n1933\n1,997\n4,598\n-2,602\nFor fiscal year 1984, Federal government spending of $852 billion\n1934\n3,015\n6,645\n-3,630\ncommanded nearly 24 percent of GNP-the highest in the peace-\n1935\n3,706\n6,497\n-2,791\n1936\n3,997\n8,422\n-4,425\ntime history of the United States. (See table 3.)\n1937\n4,956\n7,733\n-2,777\n1938\n5,588\n6,765\n-1,177\nTABLE 3.-FEDERAL REVENUES AND OUTLAYS AS PERCENTAGE OF GNP\n1939\n4,979\n8,841\n-3,862\n1940\n6,361\n9,456\n-3,095\n26\n1941\n8,621\n13,634\n-5,013\nActual\nProjectd\n1942\n14,350\n35,114\n-20,764\n1943\n23,649\n78,533\n-54,884\n20\n1944\n44,276\n91,280\n-47,004\n1945\n45,216\n92,690\n-47,474\n1946\n39,327\n55,183\n-15,856\n22\nOutlays\n1947\n38,394\n34,532\n+3,862\n1948\nPerson\n41,774\n29,773\n+12,001\n1949\n39,437\n38,834\n+603\n20\n1950\n39,485\n42,597\n-3,112\n1951\n51,646\n45,546\n+6,100\n1952\n66,204\n67,721\n-1,517\n12\n1953\n69,574\n76,107\n-6,533\n1954\n69,719\n70,890\n-1,170\n1955\n65,469\n68,509\n-3,041\n1965\n1970\n1975\n1980\n1985\n1956\n74,547\n70,460\n+4,087\nFiscal Years\n1957\n79,990\n76,741\n+3,249\n1958\n79,636\n82,575\n-2,939\nSource: Baseline Budget Projections for Fiscal Years 1985-1989, CBO February\n1959\n79,249\n92,104\n-12,855\n1984.\n1960\n92,492\n92,223\n+269\n1961\n94,389\n97,795\n-3,406\nTo illustrate this growth in another way, the first $100 billion\n1962\n99,676\n106,813\n-7,137\n1963\n106,560\n111,311\n-4,751\nbudget in the history of the nation occurred as recently as fiscal\n1964\n112,662\n118,584\n-5,922\nyear 1962, more than 170 years after the founding of the Republic.\n1965\n116,833\n118,430\n-1,596\nThe first $200 billion budget, however, followed nine years later in\n1966\n130,856\n134,652\n-3,796\n1967\nfiscal year 1971. The first $300 billion budget occurred four years\n148,906\n157,608\n-8,702\n1968\n152,973\n178,134\n-25,161\nlater in fiscal year 1975; the first $400 billion budget two years\n34\n35\nTABLE 4.-BUDGET RECEIPTS AND OUTLAYS, 1789-1986 1-Continued\nneeded restricting, a fiscal surplus was called for. Debt creation, ac-\n[In millions of dollars]\ncording to Keynes, was a valuable tool for economic policy; but at\nother times, or in the wrong amounts, debt creation could be a dan-\nFiscal year\nBudget receipts\nBudget outlays\nBudget surplus or\ndeficit(\ngerous force.\nUnderlying these deficits, however, was a genuine concern for ef-\n1969\n186,882\n183,645\n+3,236\nfective fiscal management. The real value of national debt-that is,\n1970\n192,807\n195,652\n-2,845\n1971\n187,139\n210,172\n-23,033\nnational debt expressed in constant (1972) dollars-has shown a re-\n1972\n207,309\n230,681\n-23,373\nmarkable stability over the years 1950 to 1976, swinging up slightly\n1973\n230,799\n245,647\n-14,849\nin recession years and down slightly in boom years. (Table 5.)\n1974\n263,224\n267,912\n-4,688\n1975\n279,090\n324,245\n-45,154\nTABLE 5.-NATIONAL DEBT/GNP PRICE DEFLATOR\n1976\n298,060\n364,473\n-66,413\nTQ 2\n81,232\n94,188\n- 12,956\n[Billions of 1972 dollars]\n1977\n355,559\n400,506\n-44,948\n1971\n427\n1978\n1929\n52\n399,516\n448,368\n-48,807\n1979\n1933\n92\n1972\n437\n463,302\n490,997\n-27,694\n1980\n1939\n169\n1973\n442\n517,112\n576,675\n-59,563\n1940\n175\n1974\n422\n1981\n599,272\n657,204\n-57,932\n1982\n1945\n686\n1975\n432\n617,766\n728,375\n-110,609\n1950\n479\n1976\n478\n1983\n600,562\n795,969\n-195,407\n1955\n451\n1977\n506\n1984\n666,457\n851,786\n-185,324\n1960\n424\n1978\n518\n1985 est\n736,859\n959,085\n-222,226\n1965\n434\n1979\n510\n1986 est\n793,729\n973,725\n-179,996\n1966\n428\n1980\n512\n1\nData for 1789-1939 are for the administrative budget data for 1940 and all following years are for the unified budget.\n1967\n431\n1981\n513\n2 In calendar year 1976, the Federal fiscal year was converted from a July 1-June 30 basis to an Oct. I-Sept. 30 basis. The TQ refers to the\n1968\n448\n1982\n553\ntransition quarter from July 1 to Sept. 30, 1976.\n1969\n448\n1983\n642\n1970\n419\n1984\n713\nDespite the fact that an increasing share of this spending has\nbeen accounted for through deficit financing, Federal tax burdens\nhave had to increase enormously in recent years to pay for these\nBut as newer theories became popular (supply side, monetarism,\nexpenditures. Per capita tax receipts have nearly doubled in the\namong others), the traditional Keynesian concern with the size of\npast 8 years alone, while the number of individual taxpayers\nthe deficit was largely abandoned. And deficits correspondingly ex-\npaying more than 20 percent of their income to the Federal govern-\nploded.\nment has more than tripled in the past 15 years. Approximately 75\nThe average real national debt in the 1981-1984 period was $602\npercent of all American families, through a combination of taxes\nbillion (1972 dollars), an increase of some 39 percent over the\nand inflation, now have fewer real, after-tax dollars currently than\nperiod from 1950-77.\n15 years ago.\nWithout the traditional constraint on deficits, the spending bias\nhas come into full operation. According to projections by the Con-\nNature of the debt\ngressional Budget Office, Federal outlays will be some $260 billion\nThe enormity of the current deficits has raised the need for a\nhigher, and revenues will be more than $1.2 trillion lower, in the\nbalanced budget to emergency levels. Yet, many continue to argue\n1980's.\nthat we have had deficits for half a century and the sky has not\nNational debt as a ratio of Gross National Product serves as a\nfallen. The sad truth is that in the past decade we have have begun\nmeasure of the importance of federal debt in the economy. As table\nto run an entirely new type of deficit that is much more destruc-\n6 shows, Federal debt declined steadily as a share of the economy\ntive than the relatively smaller ones of the past.\nfrom the end of World War II until the beginning of the 1980's.\nThe debt we are now incurring is a radically different character\nthan the debt in the recent past. It is of unprecedented size in real\nTABLE 6.-NATIONAL DEBT/GROSS NATIONAL PRODUCT\nterms. And there is no plausible possibility that new debt issues\n[1972 dollars]\nwill end at any foreseeable date in the future. Most importantly, it\n1929\n.16\n1971\n.38\nreverses the long downward trend in the size of the national debt\n1933\n.41\n1972\n.37\nand as a share of the country's economic activity.\n1939\n.53\n1973\n.35\nPrior to the Great Depression, Congress was bound by a moral\n1940\n.51\n1974\n.34\nrule against budget deficits. But the economic tragedies of the\n1945\n1.22\n1975\n.35\n1950\n.90\n1976\n.37\n1930's, and the advent of the theories of John Maynard Keynes in\n1955\n.69\n1977\n37\n1936, caused legislators to rethink their policies on budget deficits.\n1960\n.58\n1978\n.36\nWhen the economy needed stimulating, deficits were seen as an ap-\n1965\n.47\n1979\n36\n1966\n.43\n1980\n.35\npropriate remedy to the problem. Conversely, when the economy\n1967\n42\n1981\n.34\n36\n37\nTABLE 6.-NATIONAL DEBT/GROSS NATIONAL PRODUCT-Continued\nFIGURE 1.-Two HUNDRED YEARS OF PRICE STABILITY\n[1972 dollars]\n1968\n.39\n1982\n.37\nIndes\n1969\n.39\n42\n500\n1983\n1970\n.38\n1984\n44\n400\nWithin a few short years, debt as a share of the economy has\nreached levels unheard of, except in time of war. And the spiral\n300\ncontinues ever higher. Congressional Budget Office projections\nRevolutionary\nWorld War #\nWar\nshow federal debt increasing in importance for the remainder of\n200\nWar of 1812\nCivil War\nthe decade. (Table 7.)\nTABLE 7.-DEBT HELD BY THE PUBLIC AS A PERCENT OF GNP CONGRESSIONAL BUDGET OFFICE\n100\nWorld Was \"\nPROJECTIONS\n0\n1986\n41.8\n1989\n47.9\n1750\n1800\n1850\n1900\n1950\n2000\n1987\n44.0\n1990\n49.7\nDepression\n1988\n46.0\nSource: Claremont Economics Institute, \"Forecast, Update, May 10, 1979.\"\nIn short, national debt as a share of the economy today is grow-\ning for the first time since World War II. The situation is without\nprecedent in our history.\nThe pattern of U.S. price levels from the beginning of our nation\nto the present is shown in Figure 1. Typically, war-time inflation\nEconomic symptoms\nhas been followed by a period of falling prices. As late as the\nFrom modest beginnings, the Federal government has grown to\n1930's, the index of prices was essentially at the same level as that\nbecome the dominant economic influence in the United States. No\nof 150 years earlier. By contrast, the period following World War II\nother entity comes close to it in ability to condition the course of\nis distinguished precisely by the failure of prices to return to their\neconomic events. It is the view of the Committee that most of the\npre-war levels. Only in response to the price stabilizing policies of\neconomic difficulties currently being suffered by the nation are at-\nthe 1950's was there a period of relative price equilibrium during\ntributable, directly or indirectly, to recent economic policies pur-\nthe early 1960's. This period of stability, however, signaled only an\nsued by the Federal government. Three statements summarize the\nend to the World War II and Korean War inflations; it did not con-\nconsequences of increasing Federal deficits, taxation, and spending:\ntribute to a return to pre-war price levels. Since the mid-1960's, in-\n(1) After two centuries of relatively stable prices, inflation-al-\nflation has come to dominate the economy-an inflation unmistak-\nthough improving in recent years-has not been fully under con-\nably associated with the Federal deficits of the late 1960's and\ntrol for two decades; (2) Rather than sustained economic growth,\n1970's. Although recent efforts to restrain inflation have been rela-\nthe economy over the past two decades has been characterized by\ntively successful, nevertheless the 1939 dollar which had declined\nextended periods of economic stagnation; and (3) Rather than high\nto a value of forty cents by 1968, has declined to a value of well\nlevels of savings and capital formation, the economy has come to be\nunder twenty cents today.\ncharacterized by relatively low levels of savings and capital forma-\nAs Federal spending and deficits have achieved peacetime record\ntion.\nlevels, the nation's economy has crested and fallen. From sub-\nstained high annual growth rates in the 1960's of 5 to 6 percent,\nthe real economic growth of the country declined toward zero in\n1980. The real gross national product actually declined in four sep-\narate years over the decade prior to 1980. The more that the Feder-\nal sector has drawn from the nation's economic product, the less\nrobust the economy has been. As the nation's annual growth de-\nclined, SO too did its relative economic position among world econo-\nmies.\n38\n39\nAlso closely associated with the pattern of rising Federal spend-\nDecades of inflation have done damage beyond swift correction.\ning and deficits has been the sharply declining pattern of personal\nFor instance, Congress has been under pressure to \"index\" a varie-\nsavings and private investment. In recent years, personal savings\nty of its funding programs-from school lunches to Social Securi-\nhave declined from seven to eight percent of disposable personal\nty-in an effort to maintain relative levels of funding. Such spend-\nincome to less than five percent, a greater than 50 percent reduc-\ning has, of course, contributed to still higher levels of Federal defi-\ntion. At the same time, private domestic investment has steadily\ncits.\ndeclined as a proportion of the GNP. These levels are now among\nProfessor Lowell Harris of Columbia University summarizes the\nthe lowest in the world among industrialized, Western nations.\nissue in the following manner:\nProximate cause and effect\nEasing the financing of a Federal deficit by supplying\nnew bank credit (money) has appeal. New money can be\nThe inflation which began in 1968 has been closely associated\ninjected into the economy, easing someone's problems.\nwith large and continuing Federal deficits. These deficits have\nBusinesses and governments get dollars that had not exist-\nplaced the Federal Reserve Banking System in an increasingly un-\ned. Such injections seem to permit the accomplishment of\ntenable position. If the Federal Reserve refuses to purchase the\ngood things. But as the funds thus created add to the flow\nnew debt offered by the Treasury, increasing pressure is placed\nthrough the economy, the cumulating results will differ\nupon private capital markets. Federal financing of deficits is com-\nfrom the initial results. The dollar loses buying power.\npetitive with private demand for borrowed funds. As a result,\nBudget deficits invite the creation of money, and monetary\n'crowding out\" occurs as Federal borrowing displaces private bor-\nexpansion lies at the base of inflation\nFederal deficits\nrowing, leading both to higher rates of interest and lower rates of\ntempt the use of money creation as a means of getting dol-\nprivate capital formation. As Professor Roger Freeman of the\nlars for the Treasury without evident pain.\nHoover Institution summarizes it,\nIn the face of unusually high levels of Federal spending, the al-\nIf the Treasury competes for funds, it drives up interest\nternative to deficit financing is, of course, increased taxation. This,\nrates and crowds out other would-be-borrowers. Thereby, it re-\ntoo, has adverse economic consequences, apart from the diminished\nduces the funds which are available for private investment,\nfreedom of the citizen to consume, as he chooses, the fruits of his\nholds back industrial expansion and improvement in productiv-\nown labor. More taxes mean less post-tax personal income. On the\nity and limits job creation.\none hand, less income means less money to save, less money for\nIf, on the other hand, the Federal Reserve purchases the new\nprivate investment in future output, and less economic growth. On\ndebt, the monetization of this debt may lead to a money supply\nthe other hand, less income after taxes means less incentive to\ngrowing faster than the economy's ability to absorb this growth\nengage in productive economic activity generally-less incentive to\nwithout adding to prices. More money generally means higher\nwork, less incentive to invest, and less incentive to do the things\nprices for goods and services available in the economy. Higher\nthat contribute to economic growth. High rates of income taxation\nprices today further generate expectations of even higher prices to-\nfurther distort the allocation of productive resources, invariably\ntoward less efficient use.\nmorrow. As former Chairman of the Federal Reserve, Arthur\nBurns, has observed:\nU.S. competitiveness in world markets\nWhen the Government runs a budget deficit, it pumps\nExperience with persistent large deficits in the 1980's has fo-\nmore money into the pocketbooks of people than it takes\ncused attention on another problem associated with excessive gov-\nout of their pocketbooks\nThe persistence of substan-\nernment borrowing: undermining the Nation's trade position in\ntial deficits in Federal finances is mainly reponsible for\nworld markets.\nthe serious inflation that got under way in this country in\nThe huge borrowing needs of the Federal Government, coupled\nthe mid-1960's\nwhen the deficit increases at a time of\nwith the credit demands of businesses and consumers, have re-\neconomic expansion, as it has done lately, we should not\nquired a huge influx of capital into the U.S., making the U.S. at-\nbe surprised to find the rate of inflation quickening.\ntractive to foreign investment. This has helped avoid any severe ef-\nProfessor Milton Friedman notes further:\nfects from \"crowding out\" private credit needs and has helped keep\ninflation and interest rates lower than they might otherwise be.\nInterest rates are high because inflation is high. Infla-\nBut clearly the day of reckoning cannot be postponed for long\ntion is high because the rate of money creation is high.\nwhen the Federal Government incurs massive deficits year after\nFaced with abnormally large Federal budget deficits, the Federal\nyear.\nReserve has tended to purchase a significant portion of the new\nAmerica's need for foreign capital has had a major-some would\ndebt. As inflation has resulted, individuals have accelerated their\nsay disastrous-impact on the balance of trade. A strong dollar\npurchase of consumer goods and services, in the process bidding up\nmakes it more difficult for U.S. producers to sell their goods over-\nprices further, reducing personal savings, and reducing private cap-\nseas, and easier for foreign producers to market their goods in the\nital formation.\nU.S. At least in the short run, that means slower growth and fewer\n40\n41\njobs in those sectors of the American economy that depend heavily\nof $50 billion for that fiscal year. Statutory limitations remain ef-\non export markets. The decline in our manufacturing sector, the\nfective only as long as no majority coalition forms to overcome\nloss of markets for our agricultural products, and our record trade\nsuch statutory constraints.\ndeficit with Japan are bringing calls for new measures to protect\nIt is the premise of the proposed amendment that some greater\nAmerican industries from foreign competition: measures which\nrule is required if Congress is to overcome the spending bias exist-\ncould threaten the prospects for healthy economic growth around\ning within our political system. So long as simple majorities are\nthe globe, ultimately destroying jobs and economic opportunity for\nable to engage in the same scope of fiscal practices as under\nAmericans.\npresent law-and they will always be able to do SO if they are limit-\nIt is clear in any event that continuing massive budget deficits\ned by nothing more than a simple statutory constraint-this spend-\nwill have an enormous cost for the American economy. As econom-\ning bias will continue to exist. Congress will continue to have un-\nic growth accelerates in other developed countries, they will\nlimited access to deficit spending and it will continue to have avail-\nbecome more attractive to investment. The foreign investment that\nable automatic tax increases.\nsustains our debt-ridden economy could dry up, and we would face\nSince the adoption of the congressional budget reforms in 1974,\nthe prospect of massive inflation or of skyrocketing interest rates\nfor example, it is worth noting, Congress has achieved regular\nthat would bring the economy to a halt. The dangers of persistent\nbudget deficits of unprecedented proportions.\ndeficits have never been clearer than they are today.\nIt is the existence of this fundamental bias that also mitigates\nIn the view of the Committee, a constitutional rule limiting the\nagainst the effectiveness of the other alternatives: increased resolve\ngrowth of Federal deficits, spending, and taxation would contribute\nsubstantially toward the restoration of stable prices, stable employ-\nto exercise fiscal restraint by Members of Congress or the election\nof Members who will demonstrate such restraint.\nment, and stable economic growth.\nThe premise of Senate Joint Resolution 225 is that there is a struc-\nX. STATUTORY LAW VERSUS CONSTITUTIONAL AMENDMENT\ntural bias within our political system that causes higher levels of\nspending than fiscal prudence dictates, not that a majority of Mem-\nAn amendment to the Constitution is a serious step, one to be\nbers of Congress are determined to engage in fiscally irresponsible\ntaken if and only if no other response is perceived as likely to\npolicies. Senate Joint Resolution 225 is designed to enable Members\nprove effective. Alternatives to constitutional change deserve seri-\nof Congress to overcome this bias by establishing an external con-\nous consideration. The major alternatives to a constitutional\nstraint upon the ambit of their fiscal activities. If this analysis is\namendment of the kind proposed in this resolution are: (1) some\ncorrect, the spending bias can be overcome only by an external con-\nmeasure of statutory restraint; (2) new resolve by Members of Con-\nstraint-something upon which Members of Congress can rely\ngress to restrain levels of Federal spending, taxation, and deficit; or\nwhen spending interest pressures become excessive.\n(3) the election to Congress of new Members who possess such re-\nThe alternatives to a Constitutional amendment are not viable\nsolve.\nprecisely because the fiscal history that Congress has written over\nIt is the view of the Committee that these alternatives are not\nrecent decades reflects a serious defect in the institutional setting\neffective alternatives. In one form or another, each of these alter-\nwithin which it operates. Only a Constitutional amendment can\nnatives has been employed in the past, with unsatisfactory results.\ncorrect this. Periodic efforts by Congress during times of economic\nThere is little reason to believe that these alternatives will be any\ncrisis to exercise unusual fiscal restraint are simply insufficient.\nmore effective in the future.\nThe first alternative is for Congress to resort to some form of\nRather, there must be continuing efforts in this regard in order to\nstatutory constraint. As pointed out in section VI, a large number\nprevent such crisis in the first place.\nof such constraints have been proposed over the years, with several\nIn a democracy, constitutions establish the structure of govern-\nof these having been enacted into law. None, however, has succeed-\nment by imposing restraints on the behavior of those who repre-\ned in constraining the congressional propensity to spend tax, and\nsent them. For years, the body politic has suffered from the remov-\nengage in deficit financing. The most obvious reason for this, ulti-\nal of constraints upon the Congress imposed explicitly or assumed\nmately, is that no Congress can bind a succeeding Congress by a\nimplicitly by the framers of the Constitution. The present amend-\nment would reimpose, explicitly, those constraints as only a Consti-\nsimple statute.\nPut another way, no statutory measure can contain provisions\ntutional amendment can.\nrequiring a greater or more onerous voting rule for its repeal than\nXI. DETAILED ANALYSIS OF SENATE JOINT RESOLUTION 225\nfor its adoption. Any balanced budget or tax limitation statute can\nbe repealed, in whole or in part, by the simple expedient of adopt-\nThe key provision of Senate Joint Resolution 225 is contained in\ning a new statute or a new budget which is in conflict with the ear-\nSection 1. This section establishes, as a fiscal norm, the concept of\nlier measure. The existence of the Byrd-Grassley amendment, for\na balanced Federal budget. This balance is achieved by the man-\nexample, requiring a balanced Federal budget for FY 1981 (P.L. 95-\ndate of the section that \"Outlays of the United States for any fiscal\n435) has provided no deterrent whatsoever to Congress engaging in\nyear shall not exceed receipts to the United States for that\n\"business as usual\" and adopting a budget with a deficit in excess\nyear,\n42\n43\nThe section does not state the process that Congress must follow\nintended to exclude from outlays repurchase and/or retirement of\nin achieving the result of a balanced budget. The Committee recog-\nFederal debt.\nnizes that there are numerous equitable ways of achieving a budget\n\"\nreceipts\n\"\nis intended to include all moneys received by\nthat is in balance. It recognizes that some traditional practices as-\nthe Treasury of the United States, either directly or indirectly,\nsociated with the budget process are valid and will continue while\nthrough Federal or quasi-Federal agencies created under the au-\nother processes will need to be modified in order to assure compli-\nthority of acts of Congress. In present usage, receipts is intended to\nance with the amendment.\nbe synonoymous with the definition of \"budget receipts\" as found\nThe Committee in reporting out Senate Joint Resolution 13 (the\nin \"A Glossary of Terms Used in the Budget Process\" (1984). It is\nbalanced budget/tax limitation amendments, reported simulta-\nintended to exclude from receipts the proceeds of debt issuance and\nneously with S.J. Res. 225), felt that such amendment could best be\nto not include \"off-setting collections\".\nimplemented by requiring a statement of receipts and outlays for\nfiscal year\nis intended as a term defined by statute\nthe following fiscal year prior to such fiscal year. Although Senate\nand, as such, is to have no constitutional standing apart from its\nJoint Resolution 225 contains no such mandate, it is the Commit-\nstatutory definition. Under current law, the Federal fiscal year\ntee's belief that such a procedure also makes sense in the context\nbegins on 1 October of one calendar year and ends on 30 September\nof this amendment but that it was unnecessary and potentially re-\nof the following calendar year. The amendment does not require an\nstrictive to build this particular process explicitly into an amend-\nimmutable definition of fiscal year; other fiscal years could be de-\nment of the immediate form. If the Congress decided to use \"state-\nfined without straining the intent of the amendment.\nments\" as the planning vehicle to conform to the dictates of this\n\"Outlays\", \"receipts\", \"fiscal year\" are all terms defined by or to\namendment, it is clear that such statements could be revised at\nbe defined by statute and, as such, have no constitutional standing\nany time before or during the fiscal year which the statement re-\napart from these statutory definitions. The intentions of the Com-\nflects.\nmittee with regard to current concepts have been set out elsewhere\nSection 1 does contain an exceptions or escape clause to the bal-\nin the report. At the same time, the Committee is sensitive to the\nanced budget requirement; namely, by three-fifths vote of both\nlikelihood that such concepts will undergo modification through\nHouses of Congress a specific excess of outlays over receipts may be\ntime. Provided these modifications are not designed to subvert the\nprovided. Such a vote could come at any time prior to or during the\nrestrictions imposed by the amendment, but rather are designed to\nfiscal year the budget for which consideration is being given. The\nfurther those purposes, there is no intention that the meanings\nvote would also have to be specific as to the amount of excess of\ngiven here are immutable.\noutlays over receipts that are permitted. A three-fifths vote approv-\nshall not\n\" is a term readily obvious in its intent and\ning a deficit would only be required if the proposed deficit were\nspirit to all who read these words except those intent on obviating\ngreater than a deficit already approved for that fiscal year.\ntheir purpose through deception of the public and to the Supreme\nIt is the intent of the Committee that the Congress and the\nCourt. Simply put, it means you cannot. The amendment contains\nPresident, pursuant to legislation or through exercise of their\nno enforcement clause because it feels that this mandate is perfect-\npowers under the first and second articles, shall ensure that out-\nly clear, and that the retribution that would be felt by Members\nlays do not exceed receipts for a fiscal year. There is a mandate\nand the President for blatantly violating the highest law of the\ngenerally to monitor the flow of outlays and to take such steps as\nland would be sure and quick.\nare necessary and proper to prevent them from exceeding the total\n\"\nexceed\n\" means that outlays may not be greater than\nof receipts. This neither anticipates nor necessitates any alteration\nreceipts. Receipts may exceed outlays. The term is not meant in an\nin the balance of powers between the legislative and executive\nabsolute sense. It is not possible to monitor outlays and receipts in\nbranches of the National Government, but merely imposes an addi-\na trillion dollar budget SO that there will be an exact balance at the\ntional responsibility upon each of these, to be achieved through the\nclose of business on the final day of a fiscal year. The intent of the\nexercise of existing authorities. The amendment imposes an obliga-\nCommittee is that the Congress should use every reasonable means\ntion upon the Congress to react to the flow of actual receipts and\nto achieve substantial balance in outlays and receipts for each\noutlays during the fiscal year and to assure that at the end of the\nfiscal year. For example, the spirit of the amendment would not be\nyear outlays do not exceed receipts.\nviolated if at the close of the fiscal year a de minimus imbalance\nwas determined to have occurred. What is de minimus is subject to\nSection 1, first clause\nsome interpretation, but given present-day monitoring abilities and\n\"Outlays\" is intended to include all disbursements from the\nthe size of the Federal budget, it would be fair to say that a $10\nTreasury of the United States, either directly or indirectly through\nbillion imbalance-or roughly 1 percent of the Federal outlays-\nFederal or quasi-Federal agencies created under the authority of\nwould not reflect an intent to avoid the purpose of this amend-\nacts of Congress, and either \"on-budget\" or \"off-budget\". With cer-\nment. Greater imbalances may conceivably occur, and as they grow\ntain exceptions, outlays are those withdrawals subject to Article I,\nmore regular and larger in amount it is anticipated that public\nsection 9, which provides that \"no money shall be drawn from the\nsentiment will sharpen the estimating abilities of the executive and\nTreasury, but in consequence of appropriations made by law\". It is\nlegislative branches.\n44\n45\nSection 1, second clause\n1, section 8, neither adding to nor subtracting from those powers.\n\"\nthree-fifths of the whole number\n\" is intended to identi-\nThe committee intends that ordinary and prudent defense appro-\nfy the minimum proportion of the total membership of each House\npriations and preparations for a war perceived by the Congress to\nneeded for action by the Congress. Under current law, three-fifths\nbe imminent be funded fully within the limitations imposed by the\nof the Senate membership is 60 and of the House of Representa-\namendment, although Congress may establish higher levels of\ntives is 261. Vacancies would reduce the minimum majorities.\nspending and/or deficits for these or any other purposes under sec-\n\"\nthe whole number of both Houses\n\" is intended to be\ntions 1 and 2.\nconsistent with the use of the phrase \"the whole number of Sena-\nfor any fiscal year\nis in effect\n\" is intended to re-\ntors\" in the 12th amendment to the Constitution, denoting the\nquire a waiver of the provisions of the amendment on a year-by-\nentire membership of the individual House of Congress in question;\nyear basis. That is, Congress cannot adopt a waiver resolution\n\"both Houses\" is intended to identify the Senate and the House of\nwhich shall apply to more than one fiscal year. Rather, the Con-\nRepresentatives, each acting separately, in keeping with uses of the\ngress annually must adopt a separate waiver for the fiscal year at\nterms \"both Houses\", the \"Senate\", and \"House of Representa-\nissue.\ntives\" now in the Constitution. Specifically, \"both Houses\" is not\nAlthough this section is identical to language contained in each\nintended to connote a joint session of Congress or of its equivalent.\nof the earlier versions of S.J. Res. 225, including that approved by\n\"\nshall provide for\nis intended to be a mandatory re-\nthe Senate in 1982, some proponents of the measure have raised\nquirement that when Congress determines that outlays shall\nconcern about whether the language of section 3 goes far enough in\nexceed receipts they must do so by affirmative action that includes\nassuring that Congress could respond to urgent threats to national\na three-fifths vote to have the imbalance and that the degree of im-\nsecurity.\nbalance be specifically stated in dollars.\nSenator Heflin offered an amendment in Committee, which was\n\"\na specific excess of outlays over receipts.\" is intended to\ndefeated 10-7, designed to respond to this concern. The Heflin\nidentify the maximum number of dollars by which outlays may\namendment would automatically waive the balanced budget re-\nexceed receipts in the statement of receipts and outlays for the\nquirement in time of declared war; authorize the Congress to waive\nfiscal year adopted by the Congress pursuant to the first and\nsuch requirement if the United States is engaged in military con-\nsecond sentences of this section.\nflict which causes an \"imminent military threat to the national se-\nOf necessity, there would be a rollcall vote in determining wheth-\ncurity\"; and enable Congress to provide for additional outlays for\ner there exists a three-fifths majority in each House in favor of a\nthe defense of the nation if Congress declares by an absolute major-\nspecific level of deficit. The Committee intends that the substance\nity of the whole number of each House that there is an \"unforseen\nof such a vote be restricted to the issue of such a deficit. For exam-\nand imminent military threat to the national security\", through a\nple, it would be inconsistent with the objectives of this provision if\njoint resolution enacted into law.\nsuch a deficit were conditioned or qualified by particular circum-\nAlthough there was virtually unanimous consensus that Con-\nstances (e.g., \"whenever the measure of unemployment exceeds ten\ngress ought to retain maximum flexibility in responding to nation-\npercent\"), or if there was specification of the uses to which the\nal security crises, the majority of the Committee felt that S.J. Res.\nexcess outlays were to be allocated. Neither a provision for excess\n225 already dealt adequately with this. In the event of a defense-\noutlays attached as a rider to a resolution addressing some other\nrelated emergency, the Congress under S.J. Res. 225 could: (a)\nsubject nor a resolution to which a rider addressing some other\nwaive the entire amendment in case of declared war; (b) waive the\nsubject has been attached would be consistent with this provision.\nbalanced budget requirement by three-fifths vote; or (c) adjust\nSection 2\nspending levels or spending priorities within the existing budget by\na simple majority vote. Further, it was contended that the approxi-\nThe Congress may waive the provisions of this article for\nmately $70 billion Defense Department operation and maintenance\nany fiscal year in which a declaration of war is in effect.\naccount exists for the very purpose of ensuring that the armed\n\"\nmay waive\nis intended to provide Congress with discre-\nservices are always able to respond in a timely manner to military\ntionary authority to operate outside of the provisions of particular\nthreats.\nsections of this amendment in the event of declarations of war.\nProponents of Senator Heflin's amendment felt, on the other\nSuch a waiver would be by concurrent resolution of Congress, a res-\nhand, that the existing provisions of the amendment are excessive-\nolution which would not have to be submitted to the President for\nly restrictive and that a three-fifths vote requirement to allow for\napproval or disapproval.\ndefense spending may prove too difficult or time consuming. Con-\nthe provisions of this article\n\" is intended to refer pri-\ncern was expressed that appropriate military responses might be\nmarily to sections 1 and 2 of the amendment. The Congress may\ndependent on the expediency of the moment. Senator Heflin de-\nwaive any or all of these provisions. Waiver of sections 3, 5, or 6\nscribed his amendment as a \"safeguard mechanism\" to be used in\nwould seem pointless.\nthose situations in which 60 votes may be impossible to achieve but\ndeclaration of war\n\" is intended to be construed in the\nin which Congressional majorities (and the President) support the\ncontext of the powers of the Congress to declare war under Article\nuse of such funds.\n46\n47\nThe Committee acknowledges that the Heflin amendment has\nas deductions from budget authority and outlays rather\nsubstantial merit and it is expected that further efforts at negotia-\nthan as budget receipts.\ntion and compromise will continue on this important issue as S.J.\nSuch receipts are not intended to include \"off-setting collections\"\nRes. 225 approaches floor consideration.\nwhich Glossary defines as:\nSection 3\nCollections from Government accounts or from transac-\nThis article shall take effect for the second fiscal year\ntions with the public that are of a business-type or market-\nbeginning after its ratification.\noriented nature. They are classified into two major catego-\nries: (a) collections credited to appropriation or fund ac-\n\"\nshall\ntake effect \" is intended to be interpreted in the\ncounts, and (b) off-setting receipts (i.e., amounts deposited\nsame manner as the same phrase contained in Section 5 of the 20th\nin receipt accounts). In general, the distinction between\nAmendment.\nthese two major categories is that \"collections credited to\n\"\nfor the second fiscal year beginning \" means that all of\nappropriation or fund accounts\" normally can be used\nthe obligations imposed upon Congress and the President by this\nwithout appropriation action by Congress whereas funds in\namendment for any fiscal year shall be complied with for such\nfiscal year, the first day of which begins at least one full fiscal year\n\"receipt accounts\" cannot be used without being appropri-\nated. Offsetting collections are deducted from disburse-\nand less than two full fiscal years after the date of ratification.\n\"\nits ratification\nis intended to be construed as ratifica-\nments in calculating total outlays. Corresponding offsets\ntion of this article under Article V of the Constitution.\nare made in arriving at total budget authority and net ob-\nligations incurred.\nDefinitions\n\"Collections credited to appropriation or fund accounts\"\noccur in two circumstances:\nBecause it believed report language to be adequate in addressing\nthe issue, the Committee in approving S.J. Res. 225 excluded a defi-\nReimbursements\nnitional section contained in previous versions of the amendment\nWhen authorized by law, amounts collected for materi-\nwhich read as follows:\nals or services furnished are treated as reimbursements to\nTotal receipts shall include all receipts of the United\nappropriations. For accounting purposes, earned reim-\nStates except those derived from borrowing and total out-\nbursements are also known as revenues. These collections\nlays shall include all outlays of the United States except\nthose for repayment of debt principal.\ntions. are netted in determining outlays from such appropria-\nAlthough this language was believed to be unnecessary in the body\nRevolving funds\nof the proposed amendment, it continues to reflect the intent of the\nCommittee in approving the constitutional amendment. The follow-\nIn the three types of revolving funds-public enterprise,\ning is a further elaboration of these terms:\nintra-governmental, and trust revolving-collections are\nreceipts is intended to include all moneys received by\nnetted against spending and outlays are reported as the\nnet amount.\nthe Treasury of the United States, either directly or indirectly,\nthrough Federal or quasi-Federal agencies created under the au-\nOffsetting receipts are amounts deposited in receipts ac-\nthority of acts of Congress. In present usage, receipts is intended to\ncounts (i.e., general funds, special funds, or trust fund).\nbe synonymous with the definition of \"budget receipts\". \"A Glossa-\nThese receipts generally are deducted from budget author-\nry of Terms Used in the Budget Process\" (1981) defines \"budget re-\nity and outlays by function and/or subfunction, and by\nceipts\" as:\nagency.\nCollections from the public (based on the Government's\n\"Offsetting receipts\" are subdivided as follows:\nexercise of its sovereign powers) and from payments by\nProprietary receipts from the public\nparticipants in certain voluntary Federal social insurance\nprograms. These collections, also called governmental re-\nCollections from the public deposited in receipts ac-\nceipts, consist primarily of tax receipts and social insur-\ncounts of the general fund, special funds, or trust funds as\nance premium, but also include receipts from court fines,\na result of the Government's business-type or market-ori-\ncertain licenses, and deposits of earning by the Federal Re-\nented activities (e.g., loan repayment, interest, sale of prop-\nserve System. Gifts and contributions (as distinguished\nerty and products, charges for nonregulatory services, and\nfrom payments for services or cost-sharing deposits by\nrent and royalties). Such collections are not counted as\nState and local governments) are also counted as budget\nbudget receipts, and with one exception, are offset against\nreceipts. Budget receipts are compared with total outlays\ntotal budget authority and outlays by agency and by func-\nin caluclating the budget surplus or deficit. Excluded from\ntion. The exception consists of receipts from rents and roy-\nbudget receipts are offsetting receipts, which are counted\nalties from Outer Continental Shelf lands that are deduct-\n49\n48\n\"\nexcept those derived from borrowing\n\" is intended to ex-\ned from total budget authority and outlays for the Govern-\nclude from receipts the proceeds of debt issuance. To \"borrow\" is to\nment as an whole rather than from any single agency or\nreceive with the implied or expressed intention of returning the\nfunction.\nsame or an equivalent. As noted, budget receipts include contribu-\ntions to social insurance programs, even though they carry an im-\nIntragovernmental transactions\nplied intention of returning the same or an equivalent. It is intend-\nPayments into receipt accounts from Federal appropria-\ned that such contributions be included in \"receipts\" and not in\ntions or fund accounts. They are treated as an offset to\nthose receipts derived from borrowing. The differing treatment in-\nbudget authority and outlays, rather than as a budget re-\ntended turns on the distinction between those receipts which create\nceipt. Intragovernmental transactions may be intrabudget-\nobligations the title to which can be transferred by the present\nary (where both the payment and receipt occur within the\nowners to others, either by sale or by gift, and those receipts which,\nbudgetary universe) or they may result from the payment\nwhile creating an implied obligation to return the same, do not\nby an off-budget Federal entity whose funds are excluded\ncreate a transferable title. Treasury notes and bonds fall into the\nfrom the budget totals. Normally, intragovernmental\nfirst class of obligation; social insurance programs fall into the\ntransactions are deducted from both the outlays and the\nsecond class of obligations.\nbudget authority for the agency receiving the payment.\nAlso excluded from borrowings are those temporary obligations\nHowever, in two cases, these transactions are not deducted\nrepresented by accounts payable. While these obligations normally\nfrom the figures of any agency or function. Instead, intra-\nare transferable by their owners, they do not generate a flow of re-\ngovernmental transactions that involve agencies' pay-\nceipts to the Treasury at the moment of creation, although they do\nments (including payments by off-budget Federal entities)\nconstitute an \"outlay\" when extinguished.\nas employers into employee retirement trust funds and the\n\"\ntotal receipts\n\" is intended to be construed as the sum-\npayment of interest of nonrevolving trust funds appear as\nmation or total of all receipts, exclusive of borrowings and certain\nspecially deducted lines in computing total budget author-\nother classes of receipts, which the Congress reasonably can expect\nity and outlays for the Government.\nto be received by the Treasury of the Untied States during the\nAlso not intended to be a receipt for the purpose of this section\nfiscal year in question.\n\"\nare \"refunds\", defined by Glossary as:\noutlays\nis intended to include all disbursements from\nthe Treasury of the United States, either directly or indirectly\nReturns of advances or recoveries or erroneous disburse-\nthrough Federal or quasi-Federal agencies created under the au-\nments from appropriation or fund accounts that are direct-\nthority of acts of Congress, and either \"on-budget\" or \"off-budget\".\nly related to, and reductions of, previously recorded pay-\nWith certain notable exceptions, outlays are those withdrawals sub-\nments from the accounts. Also considered refunds are re-\nturns to the taxpayers of receipt collections in excess of\nject to Article I, section 9, which provides that \"no money shall be\ndrawn from the Treasury, but in consequence of appropriations\nliabilites (i.e., tax refunds). These refunds are recorded\nmade by law\". Glossary defines \"outlays\" in the following manner:\nonly if the cash is actually disbursed to the taxpayer. If\nthe taxpayer chooses to apply credits for tax refunds to\nObligations are generally liquidated when checks are\nsucceeding tax liabilities, the transaction is not recorded\nissued or cash disbursed. Such payments are called out-\nas a refund. In certain cases, payments are made under\nlays. In lieu of issuing checks, obligations may also be liq-\nrefund authority that exceed tax liabilities. Such excesses\nuidated (and outlays occur) by the maturing of interest\nover liabilities are treated as budget outlays rather than\ncoupons in the case of some bonds, or by the issuance of\nbonds or notes (or increases in the redemption value of\nrefunds or receipts.\nbonds outstanding). Outlays during a fiscal year may be\nSpecifically, receipts are to be distinguished from \"revenues.\"\nfor payment of obligations incurred in prior years (prior\nThe U.S. Department of Commerce's Governmental Finances de-\nyear outlays) or in the same year. Outlays, therefore, flow\nfines \"revenue\" as:\nin part from unexpended balances of prior-year budget au-\nAll amounts of money received by a government from\nthority and in part from budget authority provided for the\nexternal sources-net of refunds and other correcting\nyear in which the money is spent. Total budget outlays are\ntransactions-other than from issue of debt, liquidation of\nstated net of offsetting collections, and exclude outlays of\ninvestments, and as agency and private trust transactions.\noff-budget Federal entities. The terms expenditure and net\nExcludes noncash transactions such as receipts of services,\ndisbursement are frequently used interchangeably with\ncommodities, and other \"receipts in kind\".\nthe term outlays.\nWhile alike in excluding refunds and debt, revenues does not ex-\nGlossary defines \"budget authority\" as:\nclude offsetting receipts from the sale of services to the public. For\nAuthority provided by law to enter into obligations\nthe purposes of the amendment, it is intended that these offsetting\nwhich will result in immediate or future outlays involving\nreceipts not be construed to be a part of \"receipts\".\n50\n51\nFederal Government funds, except that budget authority\never, the outlays of off-budget Federal entities are added to\ndoes not include authority to insure or guarantee the re-\nthe budget deficit to derive the total Government deficit\npayment of indebtedness incurrred by another person or\nthat has to be financed by borrowing from the public or by\ngovernment. The basic forms of budget authority are ap-\nother means.\npropriations, authority to borrow, and contract authority.\nThe Glossary of the United States Budget in Brief (OMB, 1982)\nThe latter two types of authority are also commonly re-\nnotes that these \"transactions belong in the budget under current\nferred to as \"backdoor authority.\"\nbudget accounting concepts.\" It is the intention of the Committee\nThe major forms of budget authority include the following:\nthat the outlays of these off-budget entities be included with on-\nbudget outlays for the purposes of the various provisions of the\nAppropriations\namendment.\nAn authorization by an act of Congress that permits\nAmong the Federal programs that would not be covered by S.J.\nFederal agencies to incur obligations and to make pay-\nRes. 13 is the electric power program of the Tennessee Valley Au-\nments out of the Treasury for specified purposes. An ap-\nthority. Since 1959, the financing of that program has been the sole\npropriation usually follows enactment of authorizing legis-\nresponsibility of its own electric power ratepayers-not the U.S.\nlation. An appropriation act is the most common means of\nTreasury and the Nation's taxpayers. Consequently, the receipts\nproviding budget authority, but in some cases the authoriz-\nand outlays of that program are not part of the problem S.J. Res.\ning legislation itself provides the budget authority. Appro-\n13 is directed to solving.\npriations do not represent cash actually set aside in the\nSpecifically, outlays are to be distinguished from \"expenditures\"\nTreasury for purposes specified in the appropriation act;\nas currently defined. The U.S. Department of Commerce's Govern-\nthey represent limitations of amounts which agencies may\nment Finances defines \"expenditure\" as\nobligate during the period of time specified in the respec-\nAll amounts of money paid out by a government-net of\ntive appropriations act. Several types of appropriations are\nrecoveries and other correcting transactions-other than\nnot counted as budget authority, since they do not provide\nfor retirement of debt, investment in securities, extension\nauthority to incur additional obligations. Examples of\nof credit, or as agency transactions. Expenditure includes\nthese include:\nonly external transactions of a government and excludes\nAppropriations to liquidate contract authority-con-\nnoncash transactions such as the provision of perquisites\ngressional action to provide funds to pay obligations\nor other payments in kind.\nincurred against contract authority;\nAppropriations to reduce outstanding debt-congres-\nWhile alike in excluding debt and interagency transactions, ex-\nsional action to provide funds for debt retirement; and,\npenditures does not exclude those outlays reduced by offsetting re-\nceipts from the sale of services to the public. For the purposes of\nAppropriations for refunds of receipts.\nthe amendment, it is intended that these offset outlays not be con-\nAuthority to borrow\nstrued to be a part of \"outlays\". In addition, the concept of expend-\nAlso called borrowing authority or authority to spend\nitures does not include certain \"off-budget\" outlays treated as loans\nor exchanges of assets. For the purposes of the amendment, it is\ndebt receipts. Statutory authority that permits a Federal\nintended that all \"off-budget outlays\" be construed to be a part of\nagency to incur obligations and to make payments for\n\"outlays\".\nspecified purposes out of borrowed monies.\nLike \"receipts,\" \"outlays\" is intended to exclude interagency and\nContract authority\nintra-agency transactions.\nStatutory authority that permits obligations to be in-\nexcept those for repayment of debt principal\n\"\nis intend-\ncurred in advance of appropriations or in anticipation of\ned to exclude from outlays repurchase and/or retirement of Feder-\nal debt. Glossary defines \"federal debt\" as follows,\nreceipts to be credited to a revolving fund or other ac-\ncount. (By definition, contract authority is unfunded and\nThere are three basic tabulations of Federal debt: gross\nmust subsequently be funded by an appropriation to liqui-\nFederal debt, debt held by the public, and debt subject to\ndate obligations incurred under the contract authority, or\nstatutory limit.\nby the collection and use of receipts.)\nGross federal debt\nGlossary defined \"off-budget Federal entities\" as:\nConsists of public debt and agency debt and includes all\nCertain federally owned and controlled entities whose\npublic and agency debt issues outstanding. \"Public debt\" is\ntransactions (e.g., budget authority or outlays) have been\nthe portion of the Federal debt incurred when the Treas-\nexcluded from budget totals under provisions of law. The\nury or Federal Financing Bank (FFB) borrows funds direct-\nfiscal activities of these entities, therefore, are not reflect-\nly from the public or another fund account. To avoid\ned in either budget authority or budget outlay totals. How-\ndouble counting, FFB borrowing from the Treasury is not\n53\n52\n\"\nreceipts\n\"\n\"\nborrowing\n\"\n\"\noutlays\n\"\nincluded in public debt. (The Treasury borrowing required\nand\nrepayment of debt principal\n\"\nare terms defined by\nto obtain the money to lend the FFB is already part of the\nor to be defined by statute and, as such, have no constitutional\npublic debt.)\nstanding apart from these statutory definitions. The intentions of\n\"Agency debt\" is that portion of the Federal Debt in-\nthe Committee with respect to current concepts have been set forth\ncurred when a Federal agency, other than Treasury or the\nabove. At the same time, the Committee is sensitive to the likeli-\nFederal Financing Bank (FFB), is authorized by law to\nhood that such concepts will undergo modification through time.\nborrow funds directly from the public or another fund or\nProvided such modifications are not designed to subvert the restric-\naccount. To avoid double counting, agency borrowing from\ntions on the Congress imposed by the amendment, but rather are\nTreasury or the FFB and Federal fund advances to trust\ndesigned to further those purposes, there is no intention that the\nfunds are not included in the Federal debt. (The Treasury\nor FFB borrowing required to obtain the money to lend to\nmeanings given here be immutable through time.\nAn adoption of some new concept, definition, or computational\nthe agency is already part of the public debt.\nmethod need only be accompanied by a transition period during\nDebt held by the public\nwhich the measures of receipts and outlays are derived under both\nPart of the gross Federal debt held by the public. (The\nthe old and the next concept, definition, or computational proce-\nFederal Reserve System is included in the \"public\" for this\ndures.\npurpose.) Debt held by government trust funds (e.g., Social\nFor example, the Committee believes that Congressional budget-\nSecurity Trust Fund), revolving funds, and off-budget Fed-\ning decisions with respect to loan guarantees might be enhanced by\neral entities is excluded from debt held by the public.\nincluding in outlays the present value of such obligations in the\nfiscal year of obligation, rather than in the fiscal year of discharge.\nDebt subject to statutory limit\nShould a consensus emerge with respect, first, to an acceptable\nAs defined by the Second Liberty Bond Act of 1917, as\nmethod of computing their present value and, second, to the desir-\namended, it currently includes virtually all public debt.\nability of their inclusion in current year outlays, the Committee\nHowever, only a small portion of agency debt is included\nwould believe that such inclusion would constitute a furthering of\nin this tabulation of Federal debt.\nthe purposes of the amendment.\nrefers to a capital sum due as a debt. Specifically excluded from\n\"Principal\" is intended to be distinguished from \"interest\" and\nSimilarly, should the Congress come to conclude that budgeting\nand accounting operations of the Federal Government were better\nprincipal is any interest accrued or paid in conjunction with the\nconducted on an accrual basis, continuing compliance with the\namendment would not necessarily be subverted by such a change;\ndebt obligation.\nAs with receipts, there is no intention to exclude from outlays\nrather compliance might be enhanced.\nthose benefit payments arising from social insurance programs. As\nWith respect to the exclusion from receipts and outlays of those\nnoted, receipts into such programs do not create and the benefit\ntransactions involving \"proprietary sales to the public\", the consen-\npayments attendant thereto do not extinguish, a transferable obli- in-\nsus of the Committee is that such transactions represent voluntary\ngation-in contrast to Federal debt. Also, as noted, there is no from\nrelationships between the government and the people. As such,\ntention to exclude from outlays those disbursements arising\nthere is a presumption that these relationships reflect the individ-\naccounts payable unless the associated outlays already have been\nual's own determination that purchases of Federal goods and serv-\naccrued. To treat accounts payable otherwise would be to double-\nices offer to him a preferred alternative.\ncount the outlays attendant thereto.\nThe Committee is cognizant of the possibility that such an exclu-\nLoans for which the Federal Government guarantees in whole or\nsion is an invitation to the Congress to subvert the intentions of\nin part the repayment of principal and/or interest impose no fund-\nthe amendment through the establishment of exclusive franchise\ning obligation on the Treasury unless and until such loans come obli-\nentities under Federal charter. Operating without the discipline of\ninto default and the Treasury must discharge and guarantee\ncompetition, such entities would have implicit taxing powers with\ngation. Such a discharge is intended to be construed as an which outlay the in\nwhich to fund programs which, absent the amendment, would have\nthe fiscal year of discharge, not in the fiscal year during\nbeen organized within the Federal Government and would have\nloan was guaranteed. Such a discharge is not intended to be con-\nbeen subject to the normal budgetary procedures of the Congress.\nstrued as a repayment of debt principal; unlike the debt repay-\nIt is the clear intention of the Committee that such subterfuges be\nments to be excluded, such discharges do not involve a prior receipt\nconstrued as violations of the amendment.\nby the Treasury of borrowed funds.\nThe Committee also believes and intends that the creation of in-\nmation or total of all outlays, exclusive of debt repayment and cer-\ntotal outlays\nis intended to be construed as the sum-\ndependent entities with explicit taxing powers would be an uncon-\nstitutional delegation of current Congressional authority. It would\ntain other classes of outlays, for which the Congress reasonably can\nbe, as well, at variance with the intentions of the amendment.\nexpect payment to be made by the Treasury of the United States\nduring the fiscal year in question.\n55\n54\ngent constraints on errors in the budget process, and make adjust-\nXII. IMPLEMENTATION OF S.J. RES. 225\nments during the year more difficult. By doing this, it will make\nSince conventional approaches to the budget in recent years have\nthe Congress pay much closer attention to the accuracy of forecasts\nbeen unable to prevent a dangerous increase in the deficit, uncon-\nand think more carefully at the start of the year about its budget-\nventional approaches to the budget must be considered, and S.J.\nary choices.\nRes. 225 is the best of the available alternatives.\nTherefore, the amendment will force greater reliance on the ac-\nThe balanced budget amendment will create changes in the\ncuracy of forecasts of actual receipts and outlays under alternative\nbudget process, for which new solutions must be found. It is also\nbudgeted levels of taxing and obligational authority. Since reve-\nlikely that the problems we envision prior to the implementation of\nnues and outlays are closely tied to economic activity, and since\nthe amendment are just a few of the issues that will develop over\neconomic activity is the most difficult element to predict in the\ntime. Because the amendment is a new approach to a difficult prob-\nbudget process, most of the uncertainty arises in the issue of pre-\nlem, the solutions proposed here should certainly be seen, not as\ndicting economic activity.\ndefinitive statements, but as steps in an evolutionary process. Still,\nA number of organizations publish predictions on national eco-\nthe principles outlined here are certainly an expression of our in-\nnomic activity and the forecasts differ widely. Unfortunately, these\ntentions for what the amendment will achieve.\npredictions are frequently bent to fit a political agenda rather than\nfitted to a consistent economic pattern. The most consistently accu-\nOff-budget spending\nrate predictions from a public sector agency have been those of the\nOne concern is whether this amendment will create pressure to\nCongressional Budget Office. It would be wise, therefore, to rely on\ncircumvent the normal budget process, by creating \"off-budget\"\nCBO's proven and reliable forecasts for creating future budgets.\ncategories of expenditures.\nFurthermore, CBO's explicitly nonbiased nature, and the biparti-\nIf some categories of federal spending were not included in \"out-\nsan vigor of the advocacy process in its chief client, the Congress,\nlays\" as defined under this amendment, then the advocates of\nwill help to ensure the impartiality of future forecasts.\nevery category of spending would be tempted to have their pet pro-\ngrams excluded from the constraints of the amendment. Not only\nUnanticipated deficits\nwould this circumvent the intent of the amendment, it could de-\nA third concern is the possibility that during the course of the\nstroy the federal budget process as a comprehensive approach to\nfiscal year, outlays may exceed budgeted obligational authority or\ngovernment spending, receipts and borrowing. We would have re-\nactual receipts may be less than anticipated receipts.\nduced our fiscal controls, not increased them.\nIt is not possible to control either outlays or receipts very exact-\nFor that reason it is the intent of the committee that all federal\nly. Outlays are unpredictable because events triggering entitlement\nspending and taxing programs be included under the constraints of\npayments occur unpredictably. In addition, outlays are hard to con-\nthe amendment. The recourse of taking programs off the budget\ntrol because once authorized, obligations may be incurred which\nshould not be available as a way to avoid these constraints, and\ncannot be predicted and the payment rate on those obligations may\nusing a comprehensive measure of all governmental receipts and\nbe different than Congress anticipated during the budget process.\noutlays eliminates that recourse. What concerns the committee is\nReceipts are even harder to predict accurately. Federal revenues\nthe total amount of new federal debt, regardless of whether that\nare closely tied to the level of economic activity. If the economy be-\ndebt is generate by Treasury borrowing or by the borrowing of fed-\nhaves differently than anticipated, receipts will be different as\nwell.\neral agencies.\nOne possible way to control this problem is through Presidential\nUncertain economic predictions\naction. The Congress granted the President the powers of recission\nAnother concern is that outlays and receipts may be as hard to\nand deferral under the Budget and Impoundment Control Act of\npredict as they have been to control. Yet this amendment requires\n1974. Under this amendment, the President would be able to exer-\nthat we make extremely accurate predictions for these items each\ncise that authority to ensure that actual total outlays not exceed\nfiscal year. How can this be done?\nactual total receipts. There are several constitutional questions sur-\nFirst, it is important to recognize that we face this problem al-\nrounding the actual implementation of the 1974 Act and this is not\nready. Congress does not appropriate outlays; Congress appropri-\nthe place to resolve the many difficulties; however, this legislation\nates obligational authority. If the authority appropriated at the\nremains an important key to resolving many possible problems\nstart of the year turns out to be different than actual outlays, the\nwith implementing a balanced budget amendment.\nCongress must respond. That is no different in principle than the\nThus, while unforseen deficits will coincide with unpredictable\nproblems that will arise under the balanced budget amendment.\neconomic activity, the Congress has already created a fine remedy\nSecond, the intrinsic unpredictability of both receipts and outlays\nby granting a certain degree of fiscal control to the President. The\nmeans that actual budgetary totals are arrived at in two steps:\nChief Executive must become sensitive in using this new power,\nfirst, through a process of forecasting at the start of the fiscal year,\nbut this fiscal relief valve will be a welcome component in control-\nand second, through adjustments to those forecasts made over the\nling future deficits.\ncourse of the year. The amendment will, however, place more strin-\n57\n56\nCongressional enforcement\npower granted to it by the Constitution. See Marbury V. Madison, 1\nCranch 137 (1803).\nAlthough the Committee has deleted language contained in pre-\nThe Committee expects the Congress and the President to carry\nvious versions of the proposed amendment expressly imposing upon\nout their responsibilities under the proposed amendment through\nthe Congress the responsibility to \"enforce and implement this arti-\nboth (a) the authority presently available to Congress and the\ncle by appropriate legislation\", it has done SO only because it views\nPresident to affect and influence the fiscal process; and (b) any new\nsuch a responsibility as implicit in this article. Members of Con-\nauthority created by Congress under its Article I enforcement au-\ngress are required by Article VI generally to \"support this Consti-\nthority, and otherwise consistent with the Constitution by which\ntution\" while the President is required by Article II, section 1,\nthe Congress and the President can affect and influence the fiscal\nclause 7, to \"preserve, protect, and defend the Constitution\". It is\nprocess.\nfully expected by the Committee that the Congress and the Presi-\nIt is not the intent of this amendment, then, to establish any new\ndent will effect such legislative initiatives, and devise such proce-\nauthority in the President, absent Congressional action, or to imply\ndures, as will be necessary to ensure the effective implementation\nany reordering of the separation of powers balance between these\nof the proposed constitutional amendment.\nbranches of the national government. The amendment, for exam-\nConclusion\nple, does not invest in the President any new authority to impound\nappropriated funds. It is not mandated that Congress implement\nThe implementation of a balanced budget amendment will un-\nany particular enforcement provision; it is expected only that the\ndoubtedly bring changes in the budget process. We have anticipat-\nCongress ensure that there be some effective means by which the\ned the difficulties of off-budget spending and uncertain economic\nCongress and the President may each exercise authority to enforce\nforecasts. But there will be countless others that we have not envi-\nthe amendment.\nsioned and solutions must accompany each new problem. We sup-\nIn the absence of such legislation, it is still expected that the\nport this balanced budget amendment because a government that\nPresident will exercise his budget proposing authority, his veto au-\nconsistently spends more than it receives is neither serving the\nthority, and any other authority presently available to him to\nneeds of its people nor following a path of growth and success. Any\ncarry out the mandate of the proposed amendment. The same\nsolutions must therefore take into account the intentions of this\nwould be expected of Congress, of course.\namendment: to eliminate budget deficits and establish responsible\nWhile there may be no sanctions expressly contained in Senate\nfiscal planning.\nJoint Resolution 225 for the violation of any particular provision, it\nmust first be recognized that Congress and the President are ex-\nXIII. ENFORCEMENT\npected to act in accordance with the Constitution. Both Members of\nGenerally\nCongress and the President are obligated to take oaths of office\nthat require compliance with the Constitution. Thus, in summary,\nWhile earlier versions of proposed balanced budget amendments\nit is the Committee's view that: (1) the language and the intent of\ncontained language to the effect that, \"The Congress shall have the\nSenate Joint Resolution 225 are clear; (2) Congress and the Presi-\npower to enforce this article by appropriate legislation\", this was\ndent are to abide by this language and intent; and (3) where neces-\nnot included in the proposed amendment because it was believed to\nsary, Congress is to enact legislation that will better enable the\nbe unnecessary language. Unlike earlier amendments to the Con-\nCongress and the President to comply with the language and intent\nstitution that contained similar enforcement provisions, e.g., the\nof the amendment.\n19th, 23d, 24th, and 26th Amendments, Senate Joint Resolution 225\nIn addition, Senate Joint Resolution 225 is designed to promote\nimposes no limitation upon State actions; it limits only the author-\nits own enforcement through the political processes. By requiring a\nity of the national government. Thus, the Committee felt that the\nthree-fifths vote to approve deficit spending in any fiscal year,\nlanguage of the \"necessary and proper\" clause in Article I, section\nSenate Joint Resolution 225 is designed to enable the electorate to\n8, would clearly effect the same results as an independent enforce-\nbetter identify those members of Congress most responsible for\nment provision in the proposed amendment. Article I, section 8,\nhigher levels of spending, taxing, and deficits. To the extent that\nclause 17, reads as follows:\nthe amendment succeeds in creating a more useful flow of political\nThe Congress shall have the power\nTo make all\ninformation to the electorate, and this is a major objective of the\nlaws which shall be necessary and proper for carrying into\namendment, it will be enforced most effectively at the polls every\nexecution the foregoing powers and all other powers vested\nother November.\nby this Constitution in the government of the United\nRole of Federal courts\nStates or in any department or officer thereof.\nIt is anticipated by the Committee that Congress will enact legis-\nThe question arises, however, about the role of the Federal\nlation in a timely manner that will establish the process through\ncourts-particularly the Supreme Court-in enforcing the provi-\nwhich the proposed amendment will be implemented. Congress'\nsions of the amendment. While several witnesses have testified\npower in this regard will be as broad as its power under the \"neces-\nbefore the Committee to the effect that explicit provisions ought to\nsary and proper\" clause to carry into effect any other authority or\nbe incorporated into the amendment establishing judicial enforce-\n58\n59\nment, others have testified strongly in support of explicit prohibi-\nment would normally arise from a violation of aggregate statement\ntions upon such enforcement.\nlevels and no individual spending or revenue measure is likely to\nThe Committee has chosen to say nothing in the amendment\nbe solely responsible for that violation. In other words, even if Con-\nitself about this issue. By addressing it in this manner, the Com-\ngress exceeded the statement limits in some respect, it would still\nmittee believes that it has established the correct balance in refus-\nbe unlikely that the courts would or could look beyond the viola-\ning to establish constitutional sanction for the Federal courts to in-\ntion to examine which particular spending or revenue measures\nvolve themselves in fundamental macroeconomic questions, while\ncaused those results. This would normally preclude the showing of\nnot undermining their equally fundamental obligation to \"say\na differentiated injury to some party.\nwhat the law is\". Marbury V. Madison, 1 Cranch 137, 177 (1803).\nFederal courts increasingly have been facing the question of\nWhile there are a number of Members of this Committee who\nstanding in the context of suits brought by Members of Congress.\nare seriously concerned about the diminished practice of judicial\nWhile the Supreme Court has yet to consider the issue on its\nself-restraint in recent years, it is nevertheless the view of the\nmerits, the trend in lower court decisions has been to treat the leg-\nCommittee that traditional judicial and constitutional conceptions\nislator in a manner similar to any other citizen. As the District of\nof justiciability, and standing, as well as the idea of what consti-\nColumbia Circuit Court has observed, the legislator-litigant \"re-\ntutes a \"political question\" best reserved to non-judicial branches\nceives no special consideration in the standing inquiry\", Reuss V.\nof the government, suffice to ensure that the courts will not in-\nBalles, 584 F. 2d 461, 466 (1978). He is still obligated to demon-\nvolve themselves, as a normal matter, in reviewing the operations\nstrate a particularized injury before standing will attach.\nof the budget process. This, certainly, is the clear intent and expec-\nWhat constitutes such an injury still remains highly unclear.\ntation of this Committee.\nMost of the cases that have been considered by the courts have in-\nIt is the view of the Committee that the role of the Federal judi-\nvolved instances in which executive branch actions have resulted\nciary in reviewing compliance with the proposed amendment will\nin alleged injuries to the plaintiff. See, e.g., Kennedy V. Sampson,\nbe sharply limited-by both the Constitution and past judicial prac-\n364 F. Supp. 1075, 1078 (D.C.D.C. 1974); Mitchell V. Laird, 488 F. 2d\ntices-for the following reasons: (a) there would only rarely, if ever,\n611 (D.C. Cir. 1973). Recent district court decisions throw serious\nbe \"standing\" in any individual or group of individuals to chal-\ndoubt on the ability of Members of Congress to sue on the basis of\nlenge alleged breaches of the amendment; (b) even if such \"stand-\nallegedly wrongful actions taken by Congress itself. In McClure V.\ning\" were conferred, the courts would normally treat issues raised\nCarter, 513 F. Supp. 265 (Dist. Ct. Idaho 1981), aff'd by order, sub\nunder the amendment as \"political questions\" to be decided in the\nnom, McClure V. Reagan, 454 U.S. 1025 (1981), the Court held that\ndiscretion of other branches of government; and (3) it is question-\na Congressional plaintiff lacked standing to challenge the appoint-\nable that the courts would find most issues arising under the\nment of a Federal judge in violation of the ineligibility clause of\namendment to be \"justiciable\" in the sense of presenting the kind\nthe Constitution (Article I, section 6, clause 2). In explaining its de-\nof \"case\" to which the judicial power attaches under Article III of\ncision, the Court stated,\nthe Constitution.\nSenator McClure had the opportunity to persuade his\nThe doctrine of standing is generally regarded as constitutionally\ncolleagues to vote against the confirmation and, in the con-\nmandated by the \"cases and controversies\" clauses of Article III.\nscientious performance of his duties, did just that. That he\nThe \"gist of the question of standing\" is whether the party seeking\nand like-minded Senators did not prevail in the Senate\nrelief has,\ndoes not mean that the effectiveness of Senator McClure's\nalleged such a personal stake in the outcome of the contro-\nvote was impaired. It means merely that he was on the\nversy as to assure that concrete adverseness which sharp-\nlosing side. Under the Constitution, it was the duty of\nens the presentation of issues upon which the court SO\nCongress itself, in the first instance, to determine Judge\nlargely depends for illuminations of difficult constitutional\nMikva's qualifications both on the merits and on the issue\nquestions. Baker V. Carr, 369 U.S. 186, 204 (1962).\nof whether he was constitutionally eligible to serve as a\nThe personal stake or personal injury in fact must be direct and\njudge. Pg. 270.\nspecific, not a \"generalized grievance\" whose impact would be\nThis concept of Congressional standing was clouded somewhat by\n\"plainly undifferentiated and common to all members of the\nRiegle V. Federal Open Market Committee, 656 F.2d 873 (D.C. Cir.\npublic\". United States V. Richardson, 418 U.S. 166, 177, 179-80\n1981), which invented a two-step analysis for handling legislator\n(1974). \"A plaintiff must allege some particularized injury that sets\nsuits. The court held that separation of powers or political question\nhim apart from the man on the street\". Richardson, supra, at 194.\nconcerns should not enter into the determination of legislator-\nUnder the proposed amendment, a party would have to demon-\nplaintiff standing. But if, after standing had been properly alleged,\nstrate that he suffered a differentiated or uncommon injury as a\nthe court believed that the \"congressional plaintiff could obtain\nresult of Congressional violation of its constitutional duties to bal-\nsubstantial relief from his fellow legislators through the enact-\nance its budget, or limit spending or taxing to prescribed levels.\nment, repeal, or amendment of a statute, [the] court should exer-\nUnder most circumstances, this would be an extremely difficult\ncise its equitable discretion to dismiss the legislator's action.\" Id. at\ndemonstration, particularly since the actual breach of the amend-\n881. This standard, the court believed, \"would counsel the courts to\n60\n61\nrefrain from hearing cases which represent the most obvious intru-\nstill pose a formidable obstacle to a court taking cognizance of\nsion by the judiciary into the legislative arena: challenges concern-\nissues arising under the proposed amendment. An observer of the\ning congressional action or inaction regarding legislation.\" Id.\ndoctrine has described it in these terms:\nWhether or not this new test will stand the test of time-and Su-\nPolitical questions, are ones committed to other than ju-\npreme Court review-remains to be seen.\ndicial organs of government, not in terms excluding judi-\nSince most breaches of the proposed amendment would normally\ncial control, but with respect to issues so distinctly politi-\nresult not from the failure of the executive branch to take appro-\ncal in character that the courts regard it as improper to\npriate actions, but from the failure of a majority of Congress itself\nseek to exercise control, although in the exercise of the ju-\nto abide by the provisions of the amendment or to establish appro-\nrisdiction conferred upon it by the Constitution, the\nCongressional standing or the exercise of the more recently fash-\npriate compliance procedures, either the traditional approach to\nUnited States Supreme Court may feel called upon to de-\ntermine issues equally as delicate as those which it avoids.\nioned \"equitable discretion\" should work equally well in prevent-\nDodd, Judicially Non-Enforceable Provisions of Constitu-\ning individual or small groups of Members of Congress from obtain-\ntions, 79 University of Pennsylvania Law Review 54, 85\ning inappropriate judicial remedies.\n(1931).\nWhere the alleged violation occurs on the part of the executive\nbranch, the diminution in Congressional influence, i.e., influence\nA \"political question\" has been described as one in which the\non the part of Congress as a whole, must amount to a disenfran-\ncourts \"forego their unique and paramount function of judicial\nchisement, a complete nullification or withdrawal of a voting op-\nreview of constitutionality.\" Henkin, Is There a Political Question\nportunity, and the Congressional plaintiff must point to a clear\nDoctrine?, 85 Yale Law Journal 579, 599 (1976). The test formulated\nstandard in the Constitution or in statutes by which disenfran-\nby the Supreme Court in determining the existence of a \"political\nchisement can be shown. Goldwater V. Carter, 617 F. 2d. 697, 702\nquestion\" has been articulated as follows:\n(D.C. Cir. 1979). It is insufficient that an individual legislator's in-\nProminent on the surface of any case held to involve a\nfluence be merely diminished so long as recourse to the legislative\npolitical question is found to be textually demonstrable\nprocess remains.\nconstitutional commitment of the issue to a coordinate po-\nLike suits brought by citizens and congressmen, taxpayer suits\nlitical department; or a lack of judicially discoverable and\nwould find Article III's standing requirements to pose almost insur-\nmanageable standards for resolving it; or the impossibility\nmountable barriers. The recent Supreme Court case of Valley Forge\nof deciding without an initial policy determination of a\nChristian College V. Americans United, Inc., 454 U.S. 464 (1982),\nkind clearly for non-judicial discretion; or the impossibility\nclarifies the enormous obstacles to a taxpayer in attempting to en-\nof a court's undertaking independent resolution without\nforce the Amendment in court. The Court dismissed as injusticiable\nexpressing lack of respect due coordinate branches of gov-\nthis taxpayer's claim that a federal donation of property to a paro-\nernment; or an unusual need for unquestioning adherence\nchial school violated the First Amendment. The Court reasoned\nto a political decision already made; or the potentiality of\nthat the taxpayers had failed to satisfy the standing tests estab-\nembarrassment from multifarious departments on one\nlished by Flast V. Cohen, 392 U.S. 83 (1968). This result would be\nquestion. Baker V. Carr, 369 U.S. 186 (1962).\nlikely in any case brought by a taxpayer to enforce the Amend-\nment because, as stated earlier, the Court would rarely, if ever, be\nIt is the Committee's view that the clear constitutional commit-\nable to conclusively find, given the multitude of contributing enact-\nment to Congress to control Federal spending (Article I, sections 8\nments and economic factors whenever the Amendment's limits\nand 9) is sufficient to ensure that the courts will exercise maxi-\ncome to be exceeded, that any particular \"challenged enactment\nmum caution in interfering with Congressional determinations\nexceeds specific constitutional limitations.\" Id. at 102-103. Even if\nunder the proposed amendment. It is evident that the process of de-\nthis were possible, however, the taxpayer would have to prove, in\nveloping a budget involves precisely the kinds of determinations for\naddition to the Flast requirements, an actual personal injury suf-\nwhich legislatures are most capable and courts least capable. The\nfered by himself as a consequence of the alleged constitutional\nneed to respond to public sentiment, the need to negotiate the de-\nbreach. See Valley Forge, supra at 485. In Valley Forge, the Court\nmands of various and competing spending interests, and the need\ncould find no injury to the plaintiffs, \"economic or otherwise,\" in\nto make difficult policy determinations about public spending and\nthe taxpayer's assertion that the Constitution had been breached\nrevenue priorities are clearly factors that mitigate in behalf of leg-\nby the actions in question. Since it would be difficult, if not impos-\nislative-branch, rather than judical-branch, determinations. Fur-\nsible, to identify any specific congressional act as a breach of the\nther, it is questionable that there are adequate standards for \"judi-\nAmendment, it would be even more difficult to show that that par-\ncal manageability\" of the class of cases most likely to arise under\nticular act also caused a personal injury in fact to the plaintiff.\nthe proposed amendment. Any examination of aggregate spending,\nValley Forge has raised the already lofty standing barriers to likely\ntaxing, and deficit figures produced by Congress would run up\nsuits to judicially enforce this Amendment.\nagainst the problem of uncovering \"differentiated\" injury to some\nEven if these barriers were overcome, and standing were con-\nparty, while any deeper, more probing analysis, necessitating judi-\nferred upon some litigant, the \"political question\" doctrine would\ncial inquiry into the process by which such numbers were pro-\n63\n62\nduced, almost certainly would involve the courts in matters beyond\nbelief that the most serious and unambiguous violations of its pro-\ntheir expertise-matters the determination for which are placed\nvisions ought to be subject to external check-it nevertheless is ex-\npected that the amendment will be largely self-enforcing and self-\nclearly within a coordinate branch of government.\nThe Committee also doubts that much litigation arising under\nmonitoring. First, Congress and the President each are expected to\nthe proposed amendment would be \"justiciable\" in the sense that\nestablish appropriate procedures for complying with the amend-\nappropriate relief could be fashioned by the courts. In describing\nment and ensuring the existence of reviewable procedures to meet\nthe components of a \"case or controversy\", the Supreme Court has\nthe requirements of the amendment. Second, Congress and the\nPresident each are expected to monitor the actions of the other\nnoted that there must be,\nbranch and, to the limits of their authority, enforce the provisions\na real and substantial controversy admitting of specific\nof the amendment against that branch; and, finally, the public is\nrelief through a decree of a conclusive character. Aetna\nexpected, and will be in an enhanced position, to monitor the ac-\nLife Insurance Co. V. Haworth, 300 U.S. 227, 240 (1937).\ntions of both of these branches of government and, where they fall\nIn other words, the courts must inquire \"whether or not the\nshort of complying with the provisions of the amendment, to en-\nclaim presented and the relief sought are of the type which admit\nforce it through electoral means. Only as a final resort, and only\nof judicial resolution\". Powell V. McCormack, 395 U.S. 486 (1969).\nunder the most compelling circumstances (as, for example, when\nIt is difficult to conceive of workable and enforceable judicial de-\nthe practices of either the Congress or the Executive undermine\ncrees or orders being issued with respect to controversies under\nthe ability of the amendment to be self-enforcing), is there antici-\nSenate Joint Resolution 5 that would not involve the judicial\npated to be a significant role for the judicial branch. This judicial\nbranch in matters of budget policy that are clearly within the pri-\nbranch role would arise, if at all, to ensure that the reviewable pro-\nmary authority of either the legislative or executive branches of\ncedures implementing the amendment are not subverted beyond\nthe national government. It is doubtful that the courts would\nthe ability of the other branch or the people to redress.\nrelish, or that Congress would permit, the Federal Judiciary to\nissue the kinds of orders and decrees, and maintain the kind of\nXIV. STATE EXPERIENCE\ncontinuing oversight to ensure the effectiveness of such orders and\nIn contrast to past Federal fiscal policies, continued deficit spend-\ndecrees, that would be necessary in matters of budget policy in\ning by the State has been a rarity. Perennially, more States incur\norder to ensure compliance with the proposed amendment.\ngeneral surpluses than incur general deficits. The vast majority of\nBecause balanced budget requirements in State constitutions\nthe States are prohibited, by constitution, from spending more than\nvary widely, it is difficult to draw any final conclusion from the ex-\navailable revenues. A growing number of States, in addition, have\nperience of state courts with lawsuits requesting judicial enforce-\nimposed constitutional restrictions upon their own ability to spend\nment. The infrequent decisions indicate, however, the reluctance of\nor tax in excess of prescribed levels.\nthe state courts to become involved in decisions inappropriate for\nIn comparing Federal and State fiscal policies, there are widely\njudicial decisionmaking. In New York, for instance, the court of ap-\nvarying budgeting, accounting, and reporting practices. Also, by\npeals refused to review legislative enactments for conformity with\nvirtue of its access to the monetary printing press, there are differ-\nthe constitutional balanced budget mandate. Wein V. Carey, 362\nent fiscal options available to the Federal government than are\nN.E. 2d 587 (1977). In Maryland, the state's highest court declared\navailable to State governments. In addition, there are different\nmoot a case challenging legislative actions as inconsistent with the\nfunctions to be served by the fiscal policies of the Federal govern-\nbalanced budget requirement because the fiscal year had expired\nment than by those of the States. Despite an appreciation of these\nbefore the case reached final resolution. This court refused to\ndifferences, the Committee believes that the ability of the States to\ninvoke the state's exception to mootness for issues of public impor-\noperate within their constitutional constraints has been instruc-\ntance. Bishop V. Governor, 380 A. 2d 220 (1977). The New Jersey Su-\ntive. Such constraints have proven to be workable and have not in-\npreme Court admitted that it lacks power to order or enjoin the ap-\nhibited significantly the ability of State governments to perform\npropriation of funds to enforce the balanced budget rule, but did\ntheir most widely accepted functions. Because it has been required,\nretain the option of offering advisory opinions on legislative\nState legislatures have learned to operate effectively within the ex-\naction-an option barred in the federal courts by Article III.\nternal limitation of their constitutions, many of which are signifi-\nCamden V. Byrne, 411 A. 2d 462 (1980). These few cases are indica-\ncantly more restrictive than S.J. Res. 225.\ntive of the difficulties experienced by courts in attempting to ad-\nBy the end of 1984, 44 States had constitutional provisions limit-\nminister any remedy for a legislative function-allocation of\ning their ability to incur budget deficits. An additional eight States\nfunds-committed generally by state constitutions to other\nhad enacted statutory constraints to this effect. These limitations\nbranches of government. Thus, these cases reinforce the Commit-\nfall into a number of broad categories. Some would constrain the\ntee's understanding and intent that this Amendment will be self-\nGovernor by requiring the submission of a balanced budget. For ex-\nenforcing.\nample, California's Constitution reads in part as follows,\nIn summary then, while the Committee has chosen consciously\nnot to prohibit judicial review altogether of \"cases or controver-\nWithin the first 10 days of each calendar year, the Gov-\nsies\" arising in the context of the proposed amendment-in the\nernor shall submit to the legislature, with an explanatory\n64\n65\nmessage, a budget for the ensuing fiscal year containing\nitemized statements for recommended state expenditures\nTABLE 8.-BALANCED BUDGET REQUIREMENTS\nand estimated state revenues. If recommended expendi-\n(Is requirement for balanced budget statutory(S) or constitutional(C)?\ntures exceed estimated revenue, he shall recommend the\nWhat 10 the nature of requirement?)\nsources from which the additional revenues should be pro-\n(1)\n(2)\n(4)\n(6)\n(8)\nvided. (Article 4, section 12a.)\nMay Carry Over\nState\nState\nGovernor\nLegisla-\na Deficit\nCannot\nCannot\n(points) (1)\n(2)\nOnly has\nIn addition, the California Constitution requires that proposals to\nture Only\nbut Must\nCarry Over\nCarry Over\nto Submit\nhas to Pass\nbe Corrected\na Deficit\na Deficit\nConsti-\na Balanced\nDegree of\nBalanced\nincur state debt be submitted to the electorate for approval.\nin Next\nInto Next\nStates\nInto Next\nStatutory\ntutional\nStringency Scale\nBudget\nBudget\nFiscal Year\nBiennium\nFiscal Year\n(high=10; low-1)\nOther States would impose direct constitutional limitations upon\nNew England\nConnecticut\nX\nS*\nS\nthe State legislature. For example, Louisiana's Constitution reads\nS\nMaine\nX\n5\nMassachusetts\n$\n9\nX\nC\nas follows,\nNew Hampshire\nX\n3\nS\nRhode Island\n2\nX\nVermont\nC\n10\nTotal appropriations by the legislature for any fiscal\nNo Requirement*\nMideast\n0\nDelaware\nX\nyear shall not exceed anticipated state revenues for that\nMaryland\nC*\n10\nX\nc\nC\nC\nNew Jersey\n6\nX\nfiscal year. (Article VII, section 10(b).)\nNew York\nC\n10\nX\nC\nPennsylvania\nX\nX\n3\nS,C\nS\nS,C\nGreat Lakes\n6\nOther States would combine restrictions upon the Governor and\nIllinois\nX\nC\nC\nthe State legislature. For example, Maryland's Constitution reads\nIndiana\nX\n4\nMichigan\non\nX\n10\nC\nOhio\nas follows,\nX\nX\n6\nWisconsin\n5,0\nX\n10\nCA\nPlains\n6\nThe budget and the budget bill as submitted by the Gov-\nIowa\nX\nKansas\nx\nC\n10\nMinnesota\nc\n10\nernor to the General Assembly shall have a figure for the\nX\nX\nMissouri\nS.C\n#\nX\nNebraska\n0\n10\ntotal of all proposed appropriations and a figure for the\nX\nC\nNorth Dakota\n10\nX\nC\n#\ntotal of all estimated revenues available to pay the appro-\nSouth Dakota\nX\nX\nSoutheast\n5,0\n10\npriations, and the figure for total estimated revenues. Nei-\nAlabama\nX\nc\nArkansas\nX\n10\nFlorida\nS\nX\n9\nther the Governor in submitting an amendment or supple-\nX\nGeorgia\nS.C\n10\nX\nment to the budget bill nor the General Assembly in\nKentucky\nC\nX\n10\nX\nC*\nLouisiana\nS\n10\nX\nC\nMississippi\nX\n=\namending the budget bill shall thereby cause the figure for\nNorth Carolina\nS\nX\n9\nx\ntotal estimated revenues, including any revisions, and in\nSouth Carolina\nS,C\nX\n10\nX\nS,C\nC\nTennessee\n10\nX\nC\nC\nthe budget bill as enacted the figure for total estimated\nVirginia\nX\n10\nX\nS,C\nWest Virginia\n8\nX\nC*\nSouthwest\n10\nrevenues shall always equal or exceed the figure for total\nArizona\nX\nC\nappropriations. (Article III, section 52(5a).)\nNew Mexico\n10\nX\nC\nOklahoma\n10\nX\nTexas\nC\nX\n10\nC\nC\nFinally, some States would allow the contraction of extremely\nRocky Mountain\n8\nColorado\nX\nC\nsmall amounts of debt which, in practice, effectively prohibits the\nIdaho\n10\nX\nC\nMontana\n10\nX\nC\nC\nUtah\nC\nuse of such debt to finance significant expenditure items. For ex-\nX\n10\nX\nWyoming\nS.C\n10\nX\nC\nample, Iowa's Constitution reads,\nFar West\n8\nCalifornia\nX\nC\nC*\nNevada\nX\n6\nX\nS\nC\nThe State may contract debts to supply casual deficits or\nOregon\nX\n4\nX\n$\nC\nWashington\nX\n8\nX\nfailures in revenues or to meet expenses not otherwise pro-\nAlaska\nS.C\nX\n8\nX\n$\nC\nHawait\nX\nX\n6\nS,C\nvided; but the contingent\nshall never exceed the sum\nC\nC\n10\nof two hundred and fifty thousand dollars. (Article VII,\nSource: ACIR staff compilation based on 1984 surveys of executive and legislative fiscal directors, and Limitations on\nsection 2.)\nState Deficits, Council of State Governments, Lexington, Kentucky, May 1976.\n*See notes on next page.\nTable 8 summarizes existing constitutional and statutory restric-\ntions upon State deficits.\nU.S. Advisory Commission on Intergovernmental Relations\n66\n67\nIn addition, by mid-1985, 10 States had adopted constitutional\nTABLE 8.-BALANCED BUDGET REQUIREMENTS\nlimitations upon State expenditures and revenue. An additional 12\n(Continued)\nStates had adopted statutory restrictions to this effect. These limi-\ntations are summarized in table 9.\nOne recent study concluded that such limitations have had a\nNOTE: The following states have a balanced budget relating to constitutional debt limitations (debt limit\n\"constraining effect on the proclivity of public sector spending at\nin parenthesis): Alaska ($350,000), Arizona ($350,000), Colorado ($100,000), Iowa ($250,000), Kentucky\n($500,000), Missouri ($100,000), Nebraska ($100,000), New Jersey (1% of appropriations), New Mexico\nthe State and local level\". Uhimchuk, Constitutional Tax Limits at\n($200,000), Ohio ($150,000), Oklahoma ($500,000), South Dakota ($100,000), Texas ($200,000), and Utah\n(1.5% of takable property value).\nthe State Level (1981).\nCALIFORNIA: Article XVI, Sec. 1, requires that the legislature shall not, in any manner, create a debt in\nexcess of $300,000 without a vote of the people. This section has been interpreted to allow a carry-over defi-\ncit, as Long as the deficit is repaid within \"a short period of time.\"\nCONNECTICUT: If revenues are deficient by 5% due to Lower than projected revenue collections after the budget\nhas been passed, che General Assembly must approve expenditure cuts. (Statute 4-85; Subsection C)\nDELAWARE: \"No appropriation, supplemental approxiation or budget act shall cause the aggregate State General\nFund appropriations enacted for any given fiscal year to exceed 98 percent of the estimated State General Fund\nrevenue for such fiscal year from all sources, including estimated unencumbered Funds remaining at the end of\nthe previous fiscal year...\" (Const. Art. VIII, Sec. 6) The state provides for this 2 Percent Fund and a\n5 percent Budget Reserve Account to be used for an unanticipated deficit. There are no provisions in the Const-\ntution that call for specific action If a projected deficit exceeds 7 percent of general fund revenues.\nINDIANA: \"No law shall authorize any debt to be contracted, on behalf of the state, except in the following\ncases: To meet casual deficits in the revenue...\" (Const. Art. 10, Sec. 5)\nKENTUCKY: Agencies must set aside 2-1/22 of their budget each year in the event of a revenue shortfall\n(KRS 48.120).\nVERMONT: Governor to statutorily required to submit recommendation to alleviate deficits from previous years\nin his or her budget request. There 1s no requirement that the governor must submit & balanced budget.\nWEST VIRGINIA: \"No debt shall be contracted by this state except to meet casual deficits in the revenue...\"\n(Const. Art. X, Sec.4)\nWISCONSIN: Section $20.004 of Wisconsin statutes requires that no bill may be passed If the bill will cause the\nGeneral Fund balances at the end of the biennium to be Iess than one percent of total General Fund appropria-\ntion.\nU.S. Advisory Commision on Intergovernmental Relations\nTABLE 9.-DESCRIPTION OF STATE TAX AND EXPENDITURE LIMITS\nProvisions in the Case of\nState, Year of Adoption,\nProvisions\nTransfer of Responsibility\nTreatment of\nType of Limit, Method of\nfor Government Programs\nSurpluses:\nLimit Applies to:\nThe Limit is:\nfor Waiver:\nApproval\nALASKA*\nState appropriations\nAppropriations shall\nLimit may be exceeded for\nNone\nSNOILVIEW NO NOISSINNOO AMOUT sn\nnot exceed $2.5 bil-\ncapital projects or appro--\n1982\nlion by more than\npriations to the permanent\nConstitutional\nthe cumulative per-\nfund if the bill is (1)\nExpenditure\ncentage change in\napproved by the governor\nLegislative\nReferendum\npopulation and in-\nor 3/4 of the legislature\nflation since 7/1/81.\nand (2) approved by voters\n*Automatic vote for re-\nconsideration of limit\n1a set for 1986.\nNo provision\nAppropriations\nAppropriations of state\nRequires 2/3 approval of\nLegislature shall provide\nARIZONA\ntax revenues shall not\neach house of the legis-\nfor adjustments to limit if\n1978\nof state tax\nrevenues\nexceed 7% of state\nlature on specific addi-\ncourt order or legislative\nConstitutional\npersonal income.\ntional appropriation.\nenactment transfers respons-\nExpenditure\nibility between state and\nLegislative\nlocal governments or between\nReferendum\nfederal and state govts.\nYearly growth in appro-\nIn the event of an\n1) The appropriations\nSurplus revenues shall be\nCALIFORNIA\nAppropriations\npriations limit shall\nemergency the appropria-\nlimit shall be altered\nreturned by revision of tax\n1979\nof state tax\nnot exceed percentage\ntion limit may be ex-\nif program responsi-\nrates or fee schedules with-\nConstitutional\nrevenues\nincrease in population\nceeded provided increased\nbility is transferred\nin next two flacal years.\nExpenditure\nexpenditures are compen-\nfrom one government entity\n89\nand inflation.\nCitizen\nsated for by reduced ex-\nto another, from govt. to\nInitiative\npenditures over 3 follow-\nprivate entity or from\ning years. Alternatively,\nfunding through general\nthe limit may be changed\nrevenues to funding\nby voters but the change\nthrough special revenues.\nis operative for only\n2) The state shall provide\n4 years.\nthe funding when it requires\nlocal govt. to provide &\nprogram.\n3) Appropriations required\nfor purpose of complying\nwith federal requirements\nare not under limit.\nStatute may be amended at\nNone\nGeneral fund revenues in ex-\nState general fund\nYearly growth of state\nCOLORADO\ncess of limit and after re-\ngeneral fund appropria-\nany time by majority vote\n1977\nappropriations\ntention of unrestricted\ntions shall not exceed\nof legislature.\nStatutory\ngeneral fund year end balances\n7%.\nof 6% of revenues shall be\nExpenditure\nused for tax relief, capital\nLegislative\nVote\nconstruction, highway ex-\npenditures and water projects.\nState general fund\nRequires 2/3 approval of\nState shall share in\nIf state general fund balance\nRate of growth of\nHAWAII\ngeneral fund appropri-\ncost of any new program or\nin each of two succeeding\neach house of the legis-\n1978\nappropriations\nlature on specific addi-\nservice increase required\nyears exceeds 5% of general\nations shall not exceed\nConstitutional\naverage rate of growth\ntional appropriation.\nof local governments by the\nfund revenues, legislature\nExpenditure\nlegislature.\nshall provide for tax refund.\nConstitutional\nof state personal income\nfor 3 previous years.\nConvention\nReferendum\n(Continued on next page)\nState, Year of Adoption,\nProvisions in the Case of\nType of Limit, Method of\nProvisions\nTransfer of Responsibility\nTreatment of\nApproval\nLimit Applies to:\nThe Limit is:\nfor Waiver:\nfor Government Programs\nSurpluses:\nIDAHO\nState general fund\nAppropriations shall\nRequires 2/3 approval of\nAdjustments to limit\nNo provision\n1980\nappropriations\nnot exceed 5-1/3% of\neach house of the legis-\nshall be made If court\nStatutory\nstate personal income.\nlature on specific addi-\norder or legislative en-\nExpenditure\ntional appropriation\nactment transfere responsi-\nLegislative\nbility between state and\nVote\nlocal governments or be-\ntween federal and state\ngovernments.\nLOUISIANA\nState tax revenue\nTax revenue shall not\nStatute may be amended\nNone\nState tax revenue in excess\n1979\nexceed\nat any time by majority\nof limit shall be deposited\nStatutory\nof legislature.\nin the Tax Surplus Fund;\nRevenue\nFY 78-79 tax rev.\nappropriations from that fund\nLegislative\n1977 state pers. Inc.\nmay be made for paying tax re-\nVote\nfunds.\nmultiplied by last yr.'s\nstate personal income.\nMICHIGAN\nState revenue\nRevenue shall not exceed\nGovernment must first\n1) Limit may be adjusted\nRevenues exceeding limit by\n1978\nspecify an emergency, then\nif program responsibility\n1% or more shall be used for\nConstitutional\nFY 78-79 state rev.\nthe legislature must con-\nis transferred from one\ntax refunds set in propor-\nRevenue\n1977 state pers. inc.\ncur by 2/3 vote in each\nlevel of govt. to another.\ntion to income tax liability.\nCitizen Initiative\nhouse.\n2) State 18 prohibited\nExcess less than 1% may be\nmultiplied by the\nfrom reducing current pro-\ntransferred to the State\n69\ngreater of state per-\nportion of local services\nBudget Stabilization Fund.\nsonal income in prior\nfinanced through state aid.\ncalendar year or average\n3) No new program shall be\nstate personal income\nrequired of local govts. un-\nover previous 3 calender\nless cost is paid by state.\nyears.\n4) The proportion of total\nstate spending paid to all\nunits of local government as\nUS ADV ISORY COMMISSION ON RELATIONS\n& group shall not be reduced\nbelow proportion for FY 78-\n79.\nMISSOURI\nState revenue\nRevenue shall not exceed\nGovernor must first\n1) Limit may be adjusted\nRevenues exceeding limit by 12\n1980\nspecify an energency, then\nif program responsibility\nor more shall be refunded pro\nConstitutional\nFY 80-81 state rev.\nthe legislature must con-\nis transferred from one\nrata based on income tax lia-\nRevenue\n1979 state pers. inc.\ncur by 2/3 vote in each\nlevel of govt. to another.\nbility. Excess less than 12\nCitizen Initiative\nhouse.\n2) State is prohibited\nshall be transferred to the\nmultiplied by the\nfrom reducing current\ngeneral revenue fund.\ngreater of state person-\nproportion of local\nal income in prior cal-\nservices financed through\nendar year or average\nstate aid.\nstate personal income\n3) No DEW program shall\nover previous 3 calen-\nbe required of local\ndar years.\ngovernments unless cost\nis paid by state.\n(Continued on next page)\nTABLE 9.-DESCRIPTION OF STATE TAX AND EXPENDITURE LIMITS\n(Continued)\nState, Year of Adoption,\nProvisions in the Case of\nType of Limit, Method of\nProvisions\nTransfer of Responsibility\nTreatment of\nApproval\nLimit Applies to:\nThe Limit is:\nfor Waiver:\nfor Government Programs\nSurpluses:\nSNOILVING NO NOISSINHOO AMOSI on\nMONTANA\nState appropriations\nState biennial appro-\nGovernor must declare\nNone\nNo provision\n1981\npriations shall not ex-\nan emergency. Legislature\nStatutory\nceed state appropria-\nmust then approve specific\nExpenditure\ntions for the preceding\nadditional expenditures by\nLegislative Vote\nbiennium plus the pro-\n2/3 vote of each house.\nduct of preceding bien-\nnial appropriations and\nthe growth percentage.\nThe growth percentage is\nthe percentage differ-\nence between average\nstate personal income\nfor the 3 calender years\nimmediately praceding\nthe next biennium and\nthe average state per-\nsonal income for the 3\ncalendar years ime-\ndiately preceding the\ncurrent biennium.\nNEVADA\nGovernor's proposed\nProposed biennial ex-\nNot applicable because\nNone\nNo provision\n1979\ngeneral fund ex-\npenditures authorized\nnonbinding.\n70\nStatutory\npenditures\nfor the 1975-76 bi-\nExpenditure\nennium multiplied by\nNON-BINDING\n[1 + percentage popu-]\nLegislative Vote\nI\nlation change\n[\nsince 7/1/74\nmultiplied by\n[1 + percentage in-]\nI\nflation\nNEW JERSEY*\nState appropriations\nFiscal year appropria-\nMust be approved by majori-\nAdjustment to limit shall\nNo provision\n1976\ntions shall not exceed\nty of voters in state\nbe made 1f program responsi-\nStatutory\nreferendum at a general\nbility 18 transferred be-\nExpenditure\nFY state per cap. inc.\nelection prior to fiscal\ntween state and local\nLegislative Vote\nprior FY st. per cap.in.\nyear in which limit is to\ngovernments.\n*Expired 1983\nbe exceeded.\nmultiplied by appropria-\ntions in prior FY.\nOREGON\nState general fund\nThe rate of growth of\nStatute may be amended at\nAdjustment to Iimit shall be\nRevenue exceeding limit by\n1979\nappropriations\nappropriations in each\nany time by majority of\nmade if program funding is\n22 or more shall be used for\nStatutory\nbiennium shall not ex-\nlegislature.\ntransferred from general\ntax refunds proportional to\nExpenditure\nceed rate of growth of\nfund to non-general fund\nincome tax liability.\nLegislative Vote\nstate personal income in\nsources.\n2 preceding calendar\nyears.\nRHODE ISLAND\nGovernor's general\nYearly growth in Gov-\nNot applicable because\nNone\nNo provision\n1977\nfund appropriation\nernor's general fund\nnonbinding.\nStatutory\nrequest\nappropriation request\nExpenditure\nshall not exceed 6%.\nNON-BINDING\nLegislative Vote\nTABLE 9.-DESCRIPTION OF STATE TAX AND EXPENDITURE LIMITS\nState, Year of Adoption,\nType of Limit, Method of\nApproval\nLimit Applies to:\nProvisions\nProvisions in the Case of\nThe Limit is:\nfor Waiver:\nTransfer of Responsibility\nTreatment of\nfor Government Programs\nSOUTH CAROLINA\nSurpluses:\nState appropriations\n1980, 1984\nYearly growth in state\nLimit may be exceeded for\nappropriations shall not\nNone\nConstitutional\none year by & 2/3s vote of\nExcess revenues may be spent\nExpenditure\nexceed average growth\nthe legislature if it first\nto match federal programs, for\nLegislative Referendum\nof personal income over\ndeclares a financial emer-\ndebt purposes, tax relief, or\n3 preceding yrs. or 9.5%\ngency. Also, every 5 years\ntransferred to reserve fund.\nof total state personal\nthe legislature can review\nincome, whichever is\nthe composition of the\ngreater. Also the number\nlimit.\nof state employees is\ntied to state population\nTENNESSEE\nAppropriations of\n1978\nGrowth in state appro-\nstate tax revenues\nSpecific additional amount\npristions shall not\nState must share in cost 1f\nConstitutional\nmay be approved by majority\nNo provision\nexceed growth in state\nit increases expenditure\nExpenditure\nvote of the legislature.\npersonal income.\nrequirements of local\nConstitutional\ngovernments.\nConvention\nReferendum\nTEXAS\nAppropriations of\n1978\nGrowth of biennial\nstate tax revenues\nSpecific additional amount\nNone\nConstitutional\nappropriations shall\nmay be approved by majority\nNo provision\nExpenditure\nnot exceed rate of\nvote of the legislature\nLegislative\ngrowth of state personal\nif it first adopts a reso-\nincome.\nReferendum\nlution that an emergency\nexists,\n71\nUTAH\nState appropriations\n1979\nGrowth in appropria-\nLimit may be exceeded by\ntions may not exceed\n1) Limit shall be adjusted\nStatutory\n2/3 vote of legislature\nRevenue in excess of limit\n85% of the increase in\nif program responsibility\nif fiscal emergency is\nup to 2% of appropriations\nExpenditure\nNEVER IMPLEMENTED\nstate personal income.\nis transferred between\ndeclared by legislature\nmay be kept in unappropriated\nstate and local govts.\nLegislative Vote\nand legislature follows\nstate funds balance;\nor from the federal govt.\nrequired procedures for\nother excess revenue shall be\nto the state.\npublicizing its intent and\nrebated to taxpayers.\n2) Limit shall be decreased\nUS ADV ISORY COMMISSION ON RELATIONS\nholding public hearing.\nif funding source moved\nfrom sources covered under\nlimit to sources exempt\nfrom limit. Revenue from\nexempt sources that is\nmoved to non-exempt\naccounts shall come\nunder the limit.\nWASHINGTON\nState tax revenue\n1979\nGrowth in tax revenues\nEmergency must be declared\nStatutory\nshall not exceed average\nby 2/3 vote of legislature\n1) Limit shall be adjusted\nExcess revenue becomes part\nRevenue\nrate of growth of state\nthen legislature must\nif program responsibility\nof state tax revenue for next\npersonal income over\nis transferred between\nCitizen Initiative\napprove specific additional\nfiscal year.\npreceding 3 years.\nstate and local govts.\nappropriations by 2/3 vote,\nor between state and\nfederal govt.\n2) State must reimburse\nlocal govts. for increased\ncost if legislature in-\nposes program responsi-\nbility on local govts.\nSource: ACIR staff compilation from 1984 ACIR State Fiscal Survey of legislative and executive\nbudget officers and from state tax and expenditure limit legislation.\n73\n72\n2. Is there any spending or taxing limitation element contained\nXV. PUBLIC ATTITUDES ON A BALANCED BUDGET AMENDMENT\nwithin Senate Joint Resolution 225\nPublic opinion polls have consistently demonstrated strong\nThe only spending or taxing limitation element in Senate Joint\npublic support for the idea of a balanced budget constitutional\nResolution 225 is an implicit one. To the extent that Congress and\namendment. Polls dating back to the 1930's have persistently\nthe President are aware that increased levels of spending must be\nshown a public sympathetic to the idea of placing permanent limi-\naccompanied by increased levels of taxes, there may well be a de-\ntations upon the ability of Congress to spend in excess of available\nterrent effect upon increased levels of spending.\nrevenues. The following is a sampling of some polls taken on this\n3. Are the issues addressed by Senate Joint Resolution 225 suitable for\nissue:\nthe Constitution?\nTABLE 10-SUPPORT FOR CONSTITUTIONAL AMENDMENT\nYes. The proposed amendment seeks to reestablish constitutional\nlimitations upon Federal deficit practices that existed in earlier\n[In percent]\nyears through an array of formal and informal constitutional provi-\nNo\nFavor\nOppose\nopinion\nsions and which have been eroded over the course of recent years.\nSpecifically, Senate Joint Resolution 225 addresses a serious spend-\n\"A proposed amendment to the Constitution would require Congress to approve a balanced\ning bias in the present political process because Members of Con-\nfederal budget each year. Government spending would have to be limited to no more than\ngress do not have to cast votes in behalf of new taxes in order to\nexpected revenues, unless a three-fifths majority of Congress voted to spend more than\naccommodate new spending programs. Rather than having to cast\nexpected revenues. Would you favor or oppose this amendment to the Constitution?\" (Asked\nsuch politically disadvantageous votes, they may resort to in-\nonly of those persons in the samples who said they had \"heard or read about the proposal\nfor a constitutional amendment which would require the federal government to balance the\ncreased levels of deficit spending. This spending bias has created\nsevere economic and political difficulties that are fully deserving of\nnational budget each year.\"):\n71\n21\n8\nJune 1983\n63\n23\n14\nbeing addressed by the Constitution.\nAugust 1982\n74\n17\n9\n4. How does Senate Joint Resolution 225 address this spending bias?\nMay 1982\n73\n19\n8\nSeptember 1981\n70\n22\n8\nThe proposed amendment overcomes this bias by eliminating an\nApril 1981\n67\n13\n20\nimportant element in our political system responsible for the bias:\nMarch 1980\n\"Would you favor or oppose a constitutional amendment that would require Congress to balance\nunlimited access to deficit spending. Section 1 would reestablish\nthe federal budget each year-that is, keep taxes and expenditure in balance?\":\n78\n12\n10\nthe balanced budget as a fiscal norm. Senate Joint Resolution\nFebruary 1979\n81\n11\n8\n225-by doing this, would help restore the traditional linkage be-\nJune 1978\n78\n13\n9\ntween spending and taxing and ensure that votes to increase spend-\nMarch 1976\ning would be matched by votes to increase taxes.\nSource: Gallup Polls based upon personal interviews with national samples of around 1,500 adults, 18 years of age and older.\nFurther, as a recent New York Times-CBS Poll has concluded, \"a\n5. Shouldn't Senate Joint Resolution 225 be tried as a statute before\nbeing placed in the Constitution?\nlevel of support across the country and demographically.\" This\nproposed budget-balancing amendment had a remarkably uniform\nPrevious efforts to impose fiscal responsibility upon Congress\nseems to be true of each of these polls. Over 65 percent of those\nthrough statutes have not been successful because they do not ad-\nidentifying themselves as Democrats, and Republicans, from all\ndress the fundamental spending bias within our political system.\nsections of the country, favored such an amendment.\nCongress, for example, was required under the law to balance its\nbudget for fiscal year 1981. (P.L. 96-389, section 3) Not only can\nXVI. SOME QUESTIONS CONCERNING SENATE JOINT RESOLUTION 225\nstatutes always be repealed or ignored by a simple majority vote of\nCongress, but they do not address the underlying institutional\n1. What procedures does Senate Joint Resolution 225 require for\ndefect or bias that makes it difficult for Congress to pursue fiscally\nachieving a balanced budget?\nresponsible policies. To achieve this, some external constraint upon\nSenate Joint Resolution 225 does not establish any specific proce-\nCongress is necessary.\ndures by which Congress and the President are to achieve such a\n6. Will Senate Joint Resolution 225 preclude Congress from being re-\nbudget. The proposed amendment simply states that it is constitu-\nsponsive to economic conditions?\ntional policy that such a budget be achieved (in the absence of a\nthree-fifths vote by Congress) and leaves it to Congress and the\nNo. While the proposed amendment establishes a fiscal norm of\nPresident to establish whatever procedures are necessary and\nbalanced budgets, these norms can be overcome by qualified ma-\nproper for doing SO. The proposed amendment recognizes that there\njorities of Congress. If the slightly higher majorities for overcoming\nmay be various methods by which a balanced budget can be as-\nthese norms cannot be obtained, there is reason to question wheth-\ner or not a consensus exists on how best to respond to changing\nsured and does not seek to direct any specific procedures.\neconomic conditions.\n75\n74\n12. Can the Congress avoid the restraints of Senate Joint Resolution\n7. Haven't economists criticized the notion of a balanced budgt\n225 by spending \"off-budget\"?\namendment?\nNo. The proposed amendment makes no distinction between on-\nSome have. However, their criticism has been directed largely\nbudget and off-budget spending. The term \"outlay\" is defined in\ntoward amendments which mandate balanced budgets whatever\nthis report to include both sorts of expenditures.\nthe current economic conditions. Senate Joint Resolution 225\navoids this criticism in two ways. The Congress can adopt a deficit\n13. Can the Congress avoid the restraints of Senate Joint Resolution\nbudget if a qualified majority of each House of Congress deems that\n225 by guaranteeing loans?\nconditions warrant a deficit.\nTemporarily. Since loan guarantees do not represent outlays in\n8. Why doesn't Senate Joint Resolution 225 provide for the retire-\nthe year in which the loans are guaranteed, the proposed amend-\nment of the accumulated Federal debt?\nment does not preclude the Congress from authorizing such agree-\nments. However, to the extent that a guaranteed loan is defaulted\nBy establishing the norm of a balanced budget and thereby limit-\nby the borrower, the outlays will come under the terms of the\ning future increases in the size of the national debt, the proposed\namendment in the year of the default.\namendment will lead to an increasingly less burdensome debt as\nthe economy continues to grow. Beyond that, nothing in Senate\n14. Can the Congress avoid the restraints of Senate Joint Resolution\nJoint Resolution 225 prohibits Congress from paying off its present\n225 by imposing increased costs upon the private sector through\ndebt as it chooses. The Committee did not choose, however, to man-\nincreased rules and regulations?\ndate a surplus budget which would have been necessary in order to\nYes. Congressional use of regulation has always been an option\nprovide for the regular repayment of debt.\nto explicit taxing and spending, and will remain one under Senate\nJoint Resolution 225. As Professor James Buchanan has said about\n9. Will Senate Joint Resolution 225 affect the ability of Congress to\nthis point however, \"to fix the fence in one spot does not ensure\nfinance war expenditures through deficit spending?\nthat the cattle will not get out of the pasture at some other place.\nNo. (1) section 4 authorizes Congress to deficit spend in the event\nBut it does mean that the cattle are less likely to get out than\nof a declaration of war; (2) Congress by a three-fifths vote can\nbefore the fence in the one spot was fixed.\"\nchoose to deficit spend for military purposes; and (3) Congress can\nalways choose to rearrange priorities within its budget limits to\n15. With economic conditions so uncertain, how can Congress esti-\nbetter accommodate military spending. If none of these situations\nmate its maximum available receipts?\nobtain, it might be difficult to describe a particular situation as in-\nUnder the current law, the budgetary process is a continuing one\nvolving a national \"emergency\".\nup until the beginning of each fiscal year. When Congress receives\nthe annual Presidential budget message in January, it will have\n10. Won't Senate Joint Resolution 225 prevent a prompt response to\navailable the first national income growth estimates of the Com-\nan emergency arising when the Congress is out of session?\nmerce Department. By February and March, the second and third\nNo, at least no more so than under the present Constitution. No\npreliminary estimates will be available. In July, well before the Oc-\nadministration can expend moneys that the Congress has not ap-\ntober beginning of the fiscal year, the Commerce Department pub-\npropriated. If, prior to its recess or adjournment, the Congress has\nlishes its first formal estimates of national income growth. Typical-\nnot provided for emergency funding, only a recall of Congress into\nly, these are extremely close to the final growth data available two\nsession could deal with this situation. This is neither more nor less\nyears later. It should be noted that the absolute levels of national\ntrue under the amendment.\nincome are not an issue in the proposed amendment, only the rate\nof growth in the indicator.\n11. Will Senate Joint Resolution 225 preclude Congress from meet-\ning the genuine needs of the American people?\n16. How is Senate Joint Resolution 225 to be enforced?\nNo. The vast majority of the voters have expressed strong inter-\nThe proposed amendment is designed to be enforced primarily\nthrough the political processes. As one witness has observed of the\nest in reduced levels of overall spending and deficits. In any event,\namendment, \"it would increase the flow of economic information in\nif the fiscal norm established in section 1 is inadequate to meet\nthe political marketplace.\" Rather than voters having to wade\nthese genuine needs, a majority of the membership of each House\nthrough hundreds of votes cast by their Senators and Representa-\nof Congress may vote at any time to set higher spending levels-so\ntives each year in order to determine their views on spending and\nlong as it is also prepared to vote for higher taxes to finance such\ntaxing, they would be able to analyze only a small number of key\nspending, or to allow deficit spending by a three-fifths vote.\nvotes. Further, Members of Congress would be more directly ac-\ncountable for their decisions since they would neither be able to\ndefer the costs of new spending programs-through deficit financ-\ning-nor totally avoid responsibility for imposing these costs—\n76\n77\nthrough automatic tax increases. In addition, Senate Joint Resolu-\ntwo. Under the policies of the First Concurrent Resolution on the\ntion 225 attempts to draw a balance SO that federal courts will be\nBudget-Fiscal Year 1986, CBO projects that the deficit in fiscal\nin a position to review the most serious and unambiguous viola-\nyear 1988 will be about 3 percent of the Gross National Product\ntions of the amendment, but not in a position to review basic day\n(GNP). If the amendment takes effect and the Congress chooses to\nto day fiscal decisions better left to Congress and the Executive. Fi-\nbalance the budget by reducing outlays, total federal outlays in\nnally, it is expected that Members of Congress themselves and the\n1988 would have to be reduced by 13 percent from the policies of\nExecutive branch will seek to abide by the text and the spirit of\nthe Congressional budget resolution so as not to exceed revenues.\nthe supreme law of the land.\nSuch a reduction would result in total outlays (including off-budget\nitems) of about 19.5 percent of GNP. If, on the other hand, the Con-\nXVII. REGULATORY IMPACT STATEMENT\ngress were to choose to maintain spending levels assumed in the\nIn compliance with paragraph 11(b), rule XXVI of the Standing\nbudget resolution and to eliminate the deficit by raising revenues,\nRules of the Senate, the Committee has concluded that Senate\na revenue increase of about 15 percent would be required in 1988.\nJoint Resolution 225 will have no regulatory impact.\nThe Congress could choose any one of many combinations encom-\npassing both revenue increases and outlay reductions totaling 3\nXVIII. CHANGES IN EXISTING LAW\npercent of GNP.\nIn compliance with paragraph 12, rule XXVI of the Standing\nIf you wish further details on this estimate, we will be pleased to\nRules of the Senate, Senate Joint Resolution 225 does not change\nprovide them.\nexisting United States Code but instead adds a new amendment to\nWith best wishes,\nthe United States Constitution.\nSincerely,\nERIC HANUSHEK\nXIX. COST OF THE LEGISLATION\n(For Rudolph G. Penner, Director).\nIn accordance with paragraph 11(a), Rule XXVI, Standing Rules\nXX. CONCLUSION\nof the Senate, the Committee offers the following report of the Con-\ngressional Budget Office:\nFor the foregoing reasons, the Committee on the Judiciary rec-\nommends the enactment of the subject resolution proposing an\nU.S. CONGRESS,\namendment to the United States Constitution.\nCONGRESSIONAL BUDGET OFFICE,\nWashington, DC, September 24, 1985.\nHon. STROM THURMOND,\nChairman, Committee on the Judiciary,\nU.S. Senate, Washington, DC.\nDEAR MR. CHAIRMAN: The Congressional Budget Office has re-\nviewed a joint resolution proposing an amendment to the Constitu-\ntion relating to federal budget procedures, as ordered reported by\nthe Senate Committee on the Judiciary, July 11, 1985.\nThis resolution proposes an amendment to the Constitution that\nwould not allow outlays for any fiscal year to exceed receipts for\nthat year unless three-fifths of the total membership of both\nHouses of the Congress vote in favor of a specific excess of outlays\nover receipts. The amendment states that these provisions may be\nwaived for any fiscal year in which a declaration of war is in effect,\nand that the amendment shall take effect for the second fiscal year\nbeginning after the article is ratified.\nThe budgetary impact of this amendment is very uncertain, be-\ncause it depends on when it takes effect and the extent to which\nthe Congress would exercise the discretion provided by the amend-\nment to approve larger revenue increases and/or budget deficits.\nThe earliest the amendment could take effect would be for fiscal\nyear 1988, if it were approved by the 99th Congress and ratified by\nthe requisite number of states by September 30, 1986.\nThe Congress could choose to eliminate the deficit by reducing\nspending, by increasing revenues, or by some combination of the\n79\ndent overestimated revenues by $33 billion, while underestimating\nspending by $33 billion also. Thus both the Congress and the Presi-\ndent, who worked together in developing fiscal policy, made serious\nerrors in estimating. This is a problem which requires further con-\nsideration.\nSUPPLEMENTAL VIEWS OF MR. BIDEN\nDespite my misgivings, it is time to move the process on by re-\nporting this amendment. But I will want to consider changes to\nI voted to report to the Senate this constitutional amendment to\nthis amendment, or receive assurances about my concerns that I\nrequire a balanced budget.\nhave not received to date before it comes up for consideration on\nI did SO because I believe the principle it expresses is right. Its\nthe floor.\ngoal is right. There should not be deficit followed by deficit, year\nJOSEPH R. BIDEN, JR.\nafter year, as we have experienced them recently. We cannot afford\nto double our national debt again as we have done in the last 5\nyears. I believe that a constitutional amendment calling for an end\nto deficit spending will have a marked effect upon Congress. Con-\ngress ought to act to end deficits without a constitutional mandate\nsuch as this. However, I now believe that such a mandate may be\nrequired to obtain action.\nAt the same time, I have reservations about the language of this\namendment and the way in which its mandate can be carried out.\nThe amendment imposes its control on \"outlays\" which may not\nexceed receipts. But Congress does not directly control outlays.\nCongress provides spending authority, but the executive branch\ncreates the outlays as it uses the spending authority. Sometimes it\nis years before a specific piece of spending authority translates into\noutlays. Although the timing of the creating of outlays is largely\nan executive responsiblity, I would not want the adoption of an\namendment like this to be interpreted as granting impoundment\npowers to the President as a means of enforcing this amendment.\nCongress must still retain its primary responsibility for Federal\nfiscal affairs. I want to work with other members of the Commit-\ntee, and other interested Senators, to see whether we cannot im-\nprove the language of this amendment before it comes up for\nSenate action. It must be made clear that this amendment is not\nintended to change the basic powers of either Branch.\nI am also concerned that Senator Helfin's amendent to broaden\nthe power of Congress to appropriate all necessary funds to meet\nthreats to the national security was not adopted by the Committee.\nAs I have indicated in earlier debate, I consider the language in\nSection 2, which limits waivers to times when a Declaration of War\nis in effect, as too restrictive and unrealistic in today's perilous\ntimes.\nYet a third concern I have with this amendment in its present\nform is the practical means that can be found to control the levels\nof spending and outlays to assure that the nation will not end the\nfiscal year in the red. Our budget will be over $1 trillion before this\namendment to the constitution can be ratified. In estimating, a 1%\nerror is usually considered minimal. Yet a mere 1% error in budg-\neting would give us a $10 billion deficit, in violation of this amend-\nment. Take 1982, a most difficult economic year, as an example of\nwhat can happen. On the revenue side of the ledger, Congress actu-\nally overestimated revenues by $40 billion. At the same time it un-\nderestimated spending by $33 billion. In that same year, the Presi-\n(78)\n81\nBritain and Japan began building in excess of all prior treaty limi-\ntation. H.R. 9218 was introduced to authorize sufficient build-up of\nour naval strength to reach the 5-5-3 ratio.\nThe report of the House Committee on Naval Affairs on H.R.\n9218 stated: \"It is essential to have, for our proper national de-\nADDITIONAL VIEWS OF MR. DENTON\nfense, the increase provided in this bill, or else the security of our\nNation is jeopardized.\nThe increase authorized in this bill will\nI believe that we face a crisis of confidence among the American\nfurnish the minimum national defense necessary to attain our na-\npublic. Most taxpayers simply do not believe that Congress has the\ntional security and preserve our Republic.\" Senator Walsh stated\nwillpower to cut spending and balance the federal budget. This mis-\nin support of the bill: \"The question which the bill presents, and\ntrust appears well founded when one reviews the history of statuto-\nthe only question, is the question of national security and safety,\nry efforts to reform the budget process and restrain spending.\nand, to that end, the maintenance of an adequate navy.\" The bill\nThe prudent and responsible management of public funds is a\npassed the Senate on May 3, 1938, by a vote of 56 to 28, two votes\nfundamental requirement of government. I am afraid that statuto-\nshort of a three-fifths majority.\nry approaches to reasserting that important principle will continue\nAfter the outbreak of World War II, Congress passed the Neu-\nto fail. Only the enactment of a constitutional amendment will ex-\ntrality Act of 1939, the \"Cash and Carry\" Act, permitting belliger-\nplicity mandate fiscal responsibility and be enforceable by and on\nent nations to purchase war materials in the United States and\nfuture Congresses.\ntransport them abroad in their own vessels with payment only in\nIn drafting this constitutional amendment, we must not lose\ncash. This made American industrial power available to our allies.\nsight of the fundamental responsibility of the federal government,\nBy the end of 1940 Great Britain could not hope to acquire the nec-\nas stated in the preamble of the Constitution, to \"provide for the\nessary dollars to keep on buying the weapons they needed. By the\ncommon defence.' This is not an option but the transcendental re-\nmiddle of December, British contracting for United States goods in\nquirement of the government, and we do no service for our country\nthis country had virtually ceased. President Roosevelt urged Con-\nor in fulfillment of our obligations as Senators when we ignore that\ngress to pass a bill allowing the manufacture and provision of\nfact.\nweapons to nations at war with axis powers so that the flow of nec-\nWe in the Congress have too often fallen into the dangerous trap\nessary weapons to Britain would not be stopped.\nof viewing \"providing for the common defence\" as if that require-\nIn response to the President's request, Congress passed H.R.\nment were only one of several competing requirements of equal pri-\n1776, the Lend-Lease Act, which empowered the President to au-\nority. Clearly the common defense is more important than, for ex-\nthorize the various heads of government departments and agencies\nample, welfare or education assistance or even the size of the na-\nto manufacture and procure \"defense articles\" for the government\ntional debt. If our country is not secure, then those other require-\nof any country whose defense the President deemed vital to the de-\nments are meaningless.\nfense of the United States and to exchange, lease, lend, or other-\nMany of my colleagues prefer to pass a balanced budget constitu-\nwise dispose of defense articles to such countries.\ntional amendment without a specific national security waiver pro-\nAccording to then Secretary of War Stimson, the Lend-Lease Act\nvision because such a provision, they believe, is too broad and open\nwas one of the most important legislative achievements of the\nto too much interpretation. They say that if our country faces a\nentire war. The House of Representatives Committee on Foreign\ngenuine, imminent threat to the national security, they are confi-\nAffairs concluded in their report on H.R. 1776: \"It is the firm opin-\ndent that at least three-fifths of both Houses of Congress would be\nion of your committee, that taking into consideration existing\nwilling to authorize a deficit in order to finance the military prepa-\nworld conditions, prompt enactment of H.R. 1776 into law is of the\nration necessary to meet that threat.\nhighest importance to the vital interests of our country-and even\nI sincerely hope that they are correct in their judgment. I too am\nof our civilization.\"\nfairly confident that at least three-fifths of this body would respond\nThe Senate vote on H.R. 1776 was 60 to 31, only 2 votes over a\nthrough whatever means necessary, and without hesitation, to\nthree-fifths majority. The House vote was 260 to 165, 1 vote short of\nmeet any imminent national security threat. I am also reasonably\na three-fifths majority.\nconfident that that will be the case 5, 10, and 100 years from now.\nThese are examples of how the perception of a threat to our na-\nBut I am not absolutely sure.\ntional security can be very controversial before we are actually en-\nThere are several examples in history which demonstrate that\ngaged in a military conflict. It underscores the need to preserve as\nsome votes on issues crucial to our national security have been\nmuch flexibility as possible for Congress to act in the face of a na-\nquite controversial and would not have passed had a three-fifths\ntional security threat. When we are debating whether a constitu-\nmajority requirement been in effect. For example, prior to 1936 the\ntional amendment might diminish in any way our ability or flexi-\nWashington Treaty limited the authorized naval strength of the\nbility to protect the national security, we must make every effort\nUnited States, Great Britain, and Japan to a 5-5-3 ratio, respec-\nto ensure that it will not! We cannot gamble with the ability of our\ntively. When the naval limitation treaty expired in 1936, Great\nchildren and of their children to protect the security of this nation.\n(80)\nIn the dynamic geopolitical situation of today, how can we attempt\n82\nto predict what types of threat to our national security we may\nface many years hence?\nFurthermore, a future threat to our national security may not\nnecessarily be a military threat to our country. It may be a threat\nto another country which is vital to our national security, or it\nADDITIONAL VIEWS OF MR. HEFLIN\nmay even be a terrorist threat mounted on such a scale that our\nnational security is genuinely threatened. We must be careful to\nSenate Joint Resolution 225, the constitutional amendment to\ntake these possibilities into account when we fashion a balanced\nbalance the federal budget, reported favorably by the Committee\nbudget amendment.\non the Judiciary, is indeed a positive stop toward fiscal responsibil-\nFinally, let us dispense with any suggestion that it is defense\nity. Congress must take the initiative to enact and send to the\nspending that has caused our current budgetary problems and that\npeople a resolution to balance the federal budget. I have supported\nirresponsible defense spending might undermine the proposed\nsuch a concept since coming to the United States Senate, and I am\namendment. I point out to my colleagues that the proportion of the\ncommitted to reducing the federal deficit which is crippling this na-\nfederal budget that is spent on defense has declined by nearly half\ntion's financial security. I will support passage of this resolution,\nduring the past 25 years. When John F. Kennedy was President,\nbut I believe it can be made stronger and more effective.\nwe spent nearly one-half of the Federal budget on defense and\nSenate Joint Resolution 225 requires Congress to adopt a state-\nabout one-quarter of it on social programs. Now the proportions are\nment prior to the fiscal year in which outlays are not greater than\nreversed, and we spend more than half of the Federal budget on\nreceipts. Congress may provide for a specific excess of outlays over\nsocial programs and only slightly more than one-quarter on de-\nreceipts by a three-fifths vote of each House of Congress. This lan-\nfense.\nguage ensures a balanced statement at the beginning of a fiscal\nAs important as a balanced budget is to the well-being of our\nyear. It does not ensure a balanced budget at the end of a fiscal\nnation, we cannot force a balanced budget at the expense of our\nyear.\nability to protect the national security.\nIn order to make Congress more accountable for the end product\nJEREMIAH DENTON.\nof the budgetary process, there must be some self-enforcing provi-\nsion that adds substance to the balanced budget amendment. In the\n97th Congress, Senator William Armstrong (R-CO), and Senator\nDavid Boren (D-OK.), proposed an enforcement mechanism, which\nwas adopted by the Senate. The amendment requires a three-fifths\nvote to raise the debt limit of the United States after the balanced\nbudget amendment becomes effective.\nIf the purpose of the balanced budget amendment is to allow for\na planned deficit only by a three-fifths vote, then requiring a three-\nfifths vote to raise the debt limit after a deficit has actually oc-\ncurred is perfectly consistent.\nUnder S.J. Res. 225, the initial statement of receipts and outlays\nis only a projection. It is an estimate of receipts and outlays for the\nfiscal year. While S.J. Res. 13 requires actual outlays not to exceed\nplanned outlays, there is no guarantee that actual receipts will not\nfall below planned receipts. Therefore, even with the most careful\nprojections, deficits may occur. S.J. Res. 225 exacts no price for an\nunplanned deficit.\nIf we are truly committed to living within the confines of a bal-\nanced budget, then Congress must be responsible for unplanned\ndeficits as well as planned deficits. This amendment makes Con-\ngress just as accountable at the end of the fiscal year as it is at the\nbeginning. Congress may also be more prudent in its initial projec-\ntions if it must answer for its results.\nI offered this amendment in Committee, but withdrew it based\non the assurances of my colleagues that such a provision was being\nconsidered. I believe it is crucial to any workable and effective con-\nstitutional amendment to balance the budget.\n(83)\n84\nThe success of any constitutional amendment to balance the\nbudget will require responsible legislating by each individual\nMember of Congress, participation of the Executive Branch and pa-\ntience and sacrifice on the part of the American public. But Con-\ngress has a responsibility to enact not just a balanced budget\namendment, but an amendment with vision-and one that can ac-\nADDITIONAL VIEWS OF MR. SIMON\ncomplish what is should accomplish-a budget we can live with,\nI am pleased to join my colleagues on this committee in support-\nand live within.\ning a balanced budget amendment. Since my first days in Congress,\nHOWELL HEFLIN.\nI have urged my fellow members of Congress to support such a pro-\nposal.\nDuring my years in government I have reached the unfortunate\nconclusion that while we have the ability to balance budgets, we do\nnot have the discipline to make the difficult choices that must be\nmade.\nYet we cannot continue to run these staggering deficits year\nafter year. Already interest payments on our national debt consti-\ntute the third largest budget expenditure behind defense spending\nand social security benefits. Most estimates predict that by the end\nof this decade, interest will be the single greatest government ex-\npense.\nThis year we are spending $181 billion on interest payments.\nEvery day the government throws away $500 million. Not one of\nthose dollars goes to feeding the hungry, or sheltering the home-\nless, or educating our children. Instead it is wasted on useless in-\nterest payments. Whatever side of the aisle you are on, you have to\nagree that this is not good public policy.\nThe size of our current deficits is also having another effect on\nour economy. The high interest rates brought about by these defi-\ncits is unfairly punishing low and middle income families. While\nthe rich can reap the benefits of high-yield bonds, those without\nthe money to play this high stakes game cannot afford to finance a\nmortgage, or make the payments on a new car, or put a son or\ndaughter through college. The present deficits are causing a huge\nwelfare-for-the-rich program, the greatest redistribution of wealth\nin our nation's history.\nBeyond this our deficit spending is causing our worst trade defi-\ncit in history. The budget deficits have created a much too strong\ndollar, causing an increase in imports and a drastic decline in ex-\nports. American manufacturers too often cannot compete in inter-\nnational markets and less expensive foreign goods fllod our domes-\ntic economy. We have already lost an estimated three million jobs\nbecause of this trade deficit and countless more are sure to follow.\nNeither the current trade legislation, nor a dozen bills like them,\nwill have much effect on our balance of trade until we bring the\nprimary problem of the deficit under control.\nIf we do nothing we will eventually have to monetize our imbal-\nances. The Treasury will succumb to intense pressures and we will\nsimply print enough money to satisfy the terrible demand for dol-\nlars. This will cause runaway inflation. At that point deficits will\nhave choked the life out of the strongest economy in history.\nBeyond these economic arguments lies a constitutional one.\nThirty-two state legislatures have passed resolutions calling for a\n(85)\n86\n87\nconstitutional convention to address this issue if Congress does not\nmust decide the best course to follow. We must balance the budget\npass an amendment calling for a balanced budget. Only two more\nin order to ensure our children an effective federal government\nstates are needed to meet the three-fifths requirement for such a\nand the freedom to find a job, buy a home for their family and\npursue the American dream.\nconvention. We have never held such a meeting and no one here\ncan imagine what effect this unprecedented convention would have\nA properly worded balanced budget amendment would be a first\non our democracy.\nstep back to responsible fiscal planning and toward protecting our\nClearly there is a need for a balanced budget amendment. In the\nfreedom for the generations that follow.\nSenate we are faced with two such choices. This present option and\nS.J. Res. 13. This amendment is a decidedly better approach to the\nproblem.\nThis amendment contains the flexibility that an amendment to\nthe Constitution must have. It does not prescribe a single mecha-\nnism for achieving a balanced budget. Instead it understands that\npolitical decisions must be left to the political system. This is an\nexample that earlier amendments to the Constitution followed. We\ndid not instruct the states on how to enforce Prohibition, nor did\nwe make a progressive income tax part of the 16th amendment.\nI want an amendment that will balance the budget, but I also\nwant an amendment that our children and grandchildren can live\nwith.\nThis amendment I have cosponsored along with Senators Thur-\nmond, Hatch and DeConcini is a simple, clearly-worded, and bi-par-\ntisan approach to this complex problem. It is an amendment that is\nfair both to our constituents and to future generations.\nI disagree with my cosponsors on the role of the courts in enforc-\ning this amendment. Some of my colleagues have argued that the\nquestion of resolving an unbalanced budget is a political question\nand must be solved by the political system. I do not want to saddle\nthe Supreme Court with responsibility for creating a federal budget\nnor do I want to bring the judicial branch into the debate on fiscal\npolicy. But we cannot ignore the role of the courts-particularly\nthe Supreme Court-when we create an amendment to the Consti-\ntution to demanding a balanced budget. This, by definition, makes\nthe budget a constitutional matter. If Congress and the President\npass a budget that clearly makes no attempt to abide by this new\nconstitutional mandate, the federal courts would have no choice\nbut to intervene.\nIt is my sincere hope that this will never happen. But we must\nunderstand the consequences of this decision. A constitutional\namendment will force us to balance the budget and preserve our\nsystem of government for the generations that follow. The possibili-\nty of stern review of our actions by the federal courts will help pro-\nvide the resolve we have lacked in recent budgets.\nOur Constitution has been successful for over two hundred\nyears because it was thoughtfully worded enough to allow each\ngeneration of lawmakers the opportunity to decide the best course\nfor the American people. Today our freedom is threatened in an un-\nprecedented way by the specter of these terrible deficits and we\n89\nable. It, therefore, will not achieve its goal of a balanced federal\nbudget. This failure could erode respect for other provisions of the\nConstitution. The passage of an unenforceable constitutional\namendment is an exercise in public relations, not constitutional\nlaw.\nMINORITY VIEWS OF MR. MATHIAS\nIf the majority is incorrect about standing to enforce the amend-\nment, federal judges could become intimately involved in every\nThe Senate Judiciary Committee has once again reported to the\nfacet of spending and taxing decisions. The judiciary could be\nSenate a proposed constitutional amendment to provide for a bal-\ncalled on to determine the constitutionality of virtually every tax\nanced budget. This year, the Committee was unable to agree on a\nand spending bill passed by Congress and signed by the President.\nsingle formulation for this proposed amendment and has therefore\nreported two distinct proposals to the Senate for consideration.\nBALANCED BUDGETS TODAY\nWhile both proposed amendments purport to achieve the same\nWhy is the Judiciary Committee SO eager to embark on a path\nresult-balanced federal budgets, they take different approaches.\nthat presents these and many other pitfalls? In my view, the sup-\nS.J. Res. 13 is substantially similar to S.J. Res. 5 which was report-\nport for a constitutional amendment on balanced budgets is based\ned by this Committee in the 98th Congress. This proposed amend-\non a false premise-that the Constitution is somehow flawed, and\nment requires anticipated revenues to equal anticipated receipts in\nthat but for this error in the original drafting of the document, our\neach fiscal year. S.J. Res. 13 also restricts the ability of Congress to\nfiscal house would be in order. I cannot agree with this assumption.\nincrease receipts by requiring that any increase in Federal reve-\nThe Constitution, without further amendment, grants ample power\nnues above the rate of growth in national income must be specifi-\nto the Congress and the President to adopt a balanced budget now.\ncally authorized by an act of Congress, passed by a majority of the\nThe deficit problem is not the fault of inadequacies in the Consti-\nmembership of each house, \"directed solely to approving specific\ntution. It is the fault of Presidents of both parties who have pro-\nadditional receipts.\"\nposed spending measures in excess of federal revenues without pro-\nThe other proposed constitutional amendment reported by the\nposing equal taxes to finance those spending priorities. It is the\nCommittee, S.J. Res. 225, is terser in language, although I fear it will\nfault of Congress which, although it has consistently reduced\nprove no less complex in application. This proposal simply provides\nspending demands by all Presidents, has just as consistently been\nthat outlays for any fiscal year may not exceed revenues for that\nunwilling to deny any President's wishes to increase spending with-\nfiscal year. The difficulty that could arise from the fact that many\nout increasing taxes.\nmonths and many uncertainties separate the estimate of outlays\nCongress and the President share responsibility to propose and\nand the collection of revenues is ignored.\nadopt balanced budgets. In the past five years alone, Congress has\ncut the deficit in budgets proposed by the President by over $167\nSHORTCOMINGS OF THE PROPOSED AMENDMENTS\nbillion. Yet both of the proposed amendments to the Constitution\nIn my view, neither of these proposed amendments is adequate to\naddress only the legislative branch. Neither requires the executive\nthe task of assuring balanced budgets. At best, either amendment\nto play any role in restricting federal spending or in proposing bal-\nwill raise false expectations; at worst, either amendment could lead\nanced budgets. In the 98th Congress, S.J. Res. 5, as reported by this\nto concerted efforts to circumvent its provisions. This latter result\nCommittee, included a requirement that the President propose a\nwould adversely affect enforcement of and respect for constitution-\nbalanced budget. This year, however, this committee rejected the\nal provisions generally.\nopportunity to include that requirement. Rather than recognizing\nThe Committee's inability to propound a single formulation for\nthe role of the President in the budget process, the Committee has\nthe proposed amendment should warn us that the particular word-\nacted as if Congress legislated in a vacuum. Our retreat from im-\ning of a balanced budget amendment may be outdated before its\nposing executive as well as legislative responsibility further erodes\npassage, expecially since ratification is a lengthy process which\nconfidence in these proposed amendments and cannot give the\nmay take several years to complete.\nAmerican people confidence that this Committee takes the problem\nIn addition, both of these proposed amendments open the door to\nof budget deficits seriously.\nunprecedented judicial involvement in the budget process. Neither\nSTATUTORY APPROACH\namendment includes a specific enforcement mechanism. The com-\nmittee rejected an amendment which would have granted explicit\nThe best way to assure the American people that we are serious\nstanding for citizens' suits to enforce both the balanced budget and\nabout the deficit is to vote for legislation that will bring the budget\ntax limitation sections of the proposed amendments. The majority\ninto balance. Throughout my career in Congress I have supported\nbelieves that judicial involvement would be rare because citizens\nfiscally sound policies that require the federal government to limit\nwould lack standing to complain of violations. But if this belief is\nspending to essential programs and to finance those programs\ncorrect, the amendment, in either form, is essentially unenforce-\nthrough appropriate taxes. But if a majority of the Senate is not\n(88)\nwilling to vote for budget resolutions that will lead to a balanced\n90\nbudget, another alternative, short of a constitutional amendment,\nshould be considered.\nI have consistently favored a statutory approach to the balanced\nbudget question. It is often said that \"Congress should not legislate\nin the dark.\" It is even more essential that Congress not amend the\nConstitution in the dark. A statutory approach could achieve im-\nMINORITY VIEWS OF MR. METZENBAUM\nmediate results, since, unlike a constitutional amendment, the stat-\nThe Judiciary Committee has voted to report two versions of a\nute could be effective immediately. Balanced budgets could be man-\nbalanced budget amendment to the Senate. Both versions are fun-\ndated immediately, not at the end of a lengthy ratification process.\ndamentally flawed proposals to tamper with the Constitution. Not\nIn addition, the statutory approach could ameliorate some of the\nonly is the balanced budget amendment unworkable, it is highly\nproblems caused by our ignorance of the effects of mandating a bal-\ndeceptive. Proponents point to it as a cure for the Nation's fiscal\nanced budget. We know very little about the impact of this pro-\ncrisis. In fact, it is just the opposite. It is a way to divert attention\nposed amendment on the economy, on federal finance, or on the\nfrom the difficult task of taking responsible action.\nseparation of powers, particularly the relationship between the and leg-\nThe public has been led to believe the balanced budget amend-\nislative and judicial branches. These questions should be fully\nment will painlessly eliminate massive deficits that plague our Na-\ncompletely answered before we change the Constitution. A statuto-\ntion's economic stability. This conception is a dangerous illusion.\napproach would provide that opportunity. The Congress could\nOur current fiscal disaster is the result of a foolishly drastic tax\nry discern the effect of particular language, ascertain the proper roles\ncut in 1981, which many of us now regret, a reckless military build-\nfor the executive and judicial branches in the process of mandatory\nbalanced budgets and revise any statute by the action of a simple\nup that has not made us more secure, and a failure to close tax\nloopholes that allow corporations and the wealthy to avoid their\nmajority of the Congress and Presidential concurrence.\nfair share of taxes. Only if we attack the cause of the deficits will\nA constitutional amendment has none of these virtues. Not only\nwill it be ineffective today, during the period of greatest need, but\nwe ever make a start on balancing the budget. This amendment, on\nthe other hand, will be exploited for political gamesmanship when\nany flaws discovered after ratification will have to be corrected by\nstatemanship is particulary necessary for responsible action.\nthe time-consuming process of reamending the Constitution.\nBROAD-BASED OPPOSITION\nCONCLUSION\nThe public should be highly suspicious of this amendment if for\nThese proposed amendments raise more questions than they\nTheir benefits will not be felt for years, if at all. In the\nno other reason than SO many serious analysts and political observ-\nanswer. interim, they provide a poor substitute for real action to control\ners, of all political philosophies, have spoken out against it.\nThe National Council of Senior Citizens justifiably fears that it\nthe Federal budget process. For these reasons, I oppose sending\nmeans \"renewed attacks on social security, medicare and medic-\neither of these proposed constitutional amendments to the Senate.\naid.\"\nCHARLES McC. MATHIAS, JR.\nPaul Volcker, the Chairman of the Federal Reserve Board, testi-\nfied that it isn't workable and can be used as a substitute for actu-\nally solving the deficit problem.\nFormer President Ford said it would raise false hopes.\nThe Committee for Constitutional Integrity, a distinguished\ngroup of lawyers and law professors, says it would undermine the\nflexibility and diminish the integrity of the Constitution.\nColumnist George Will says it is a \"hoax,\" and a \"trivialization\nof the Constitution.\"\nColumnist James J. Kilpatrick says it is an \"unenforceable, unin-\ntelligible amendment to the Constitution that will get us nowhere.\"\nRudolph Penner, the Director of the Congressional Budget Office,\ntestified that the balanced budget amendment \"can be easily\nevaded\" and that \"it invites political stalemate.\"\nRoy Ash, former Director of the Office of Management and\nBudget for Presidents Nixon and Ford, testified that the amend-\nment would lead to a loss of fiscal control and accomplish the oppo-\nsite of what its proponents claim.\n(91)\n92\n93\nThe staff of President Reagan's own Office of Management and\nBudget prepared an internal report listing major flaws in the\npasses a tax cut that is still ineffective in reducing revenues suffi-\namendment and arguing strongly against it.\nciently, the Constitution is violated and taxpayer suits may result.\nDespite informed, broad-based opposition, and a host of intracta-\nIn addition, the revenue limitation provision can make a budget\nble substantive and procedural problems, rhetorical support for the\ndeficit more likely by placing a stringent limitation on the Nation's\namendment remains high and rises as the deficit situation worsens.\nability to collect revenue. For example, the provision may force\nIt is no accident that, as the budget deficits soar, and the actual\nCongress to enact a tax cut even if it is apparent that revenues al-\nsolution becomes more difficult, a misleading, oversimplified\nready will fall short of expenditures. This bias toward limiting rev-\nremedy becomes more attractive.\nenues, regardless of the Nation's needs, conflicts with the professed\nmajor purpose of the amendment-balancing the budget.\nMISUSE OF THE CONSITITUTION\nThis provision also builds in a clear bias toward forced tax reduc-\ntions. During a recession, national income falls and tax revenues\nThe amendment would misuse the Constitution to address prob-\nfall as a result. However, there is a strong tendency for tax reve-\nlems that must be dealt with through legislative means. Annual\nnues to decline faster than national income because of the progres-\neconomic and fiscal policies cannot and should not be imposed by\nsivity of the Tax Code. Consequently, during a recession, tax reve-\nthe Constitution. There are too many contingencies, too many un-\nnues will generally fall as a percentage of national income.\ncertainties that arise in the Nation's economic life to deal with\nSince section 2 limits the increase in tax revenues to the rate of\nthem through the inflexible mechanism of a constitutional amend-\ngrowth of national income in the prior year, the provision will\nment.\nlimit the natural tendency of tax revenues to increase faster than\nThe amendment is almost certainly unworkable in times of re-\nthe rate of increase in national income as the Nation recovers from\ncession when social spending automatically increases as tax reve-\na recession. The result is to build in a bias toward a long-term re-\nnues fall. It provides for no national emergencies other than a\nformal declaration of war. During times of rapid social and eco-\noutput. duction in tax revenues as a percentage of the Nation's total\nnomic change, Congress has historically been able to implement\nThis type of forced tax reduction threatens to undercut the coun-\nnecessary taxing and spending decisions through regular legislative\ntry's ability to pay for essential programs such as defense, Social\nprocedures. A constitutional amendment introduces the ominous\nSecurity, Medicare, education and other services. It is one thing for\nelement of an inflexible impediment that can only be modified with\nthe Congress to reduce taxes in particular circumstances after in-\nextreme difficulty-a protracted process of ratifying another consti-\nformed debate. It is unwise, even reckless, to force long-term tax\ntutional amendment.\nreductions through the Constitution.\nIn short, this section threatens to undercut revenues necessary to\nTHE REVENUE LIMITATION PROVISION\nsupport essential Federal responsibilities for defense and social pro-\nBelow I comment on the provisions of both versions of the\ngrams. It is inconceivable Congress could comply with it on a con-\namendment dealing with the relationship of outlays and expendi-\nsistent basis, and it is likely to result in deficits by forcing Congress\ntures. First, I turn to the specific provision in the \"revenue limita-\nto cut taxes when more revenue is needed to balance the budget.\ntion\" form of the amendment that limits the growth in tax reve-\nnues. Section 2 prohibits Federal revenues from growing faster\nTHE BALANCED BUDGET REQUIREMENT-FAILURE TO ACCOMMODATE\nECONOMIC CYCLES\nthan the rate of growth in national income unless legislation, limit-\ned solely to increasing taxes, has been enacted.\nAttempting to balance the budget during a time of economic re-\nThis provision attempts to prevent any automatic increase in tax\ncession is a policy guaranteed to plunge the Nation into a deeper\nrevenues beyond those resulting from growth in the economy. Any\nrecession. As the economy spirals downward, tax revenues will de-\nadditional growth in revenues would presumably require a tax cut\ncline and social spending-income and health care assistance and\nor a refund unless a specific tax increase bill was enacted. Conse-\nunemployment compensation-will automatically rise. These addi-\nquently, payroll taxes for Social Security and Medicare or other\ntional expenditures not only cushion the blow in economic hard\ntaxes would have to be cut to accommodate revenue increases\ntimes for those hardest hit by the recession, they also help restore\nwhich exceed the limitation. Such a limitation would also apply\noverall economic activity and stability. Yet the amendment re-\neven if revenues were far short of expenditures.\nquires the exact opposite-major new taxes or cuts in spending-\nIt is very difficult to understand how this provision would be en-\nthat will inevitably promote further deterioration of the economy.\nforced. For example, it may become apparent that tax revenues\nAs President Reagan's own OMB staff wrote:\nwill exceed the limitation only when there is little time left in the\nSince business cycle contractions are inherent in a free\nfiscal year for Congress to act. In theory, Congress would have to\nenact a tax cut to avoid violating the Constitution and the tax cut\neconomy, the proposed policy rule would create artificial\nwould have to become effective immediately. These assumptions\npolicy choices and political conflicts on a recurring basis,\nare highly unrealistic in most cases. If Congress fails to act, or\ni.e., whether in the face of a contracting economy to: raise\ntaxes, radically reduce spending until recovery raises re-\n94\n95\nceipts, or achieve super-majorities to validate recession\ndeficits.\nan additional $191.5 billion in fiscal year 1982 and $206.9 billion in\nBoth versions reported by the committee purport to require that\nfiscal year 1983. By fiscal year 1983, Congress would have been\noutlays not exceed receipts, although there are two different ap-\nforced to slash by more than half unemployment compensation, all\nproaches to implementing this limitation. The first version, re-\neducation and social service programs, the SSI and AFDC income\nferred to in this statement as the \"revenue limitation\" version, re-\nassistance progams, veteran's programs, medicare, medicaid, and\nquires that Congress adopt a statement of receipts and outlays\ninterest on the national debt.\nevery other Federal program besides defense, social security, and\nbefore a fiscal year begins. Further, Congress may amend this\nstatement through the normal legislative process only in a way\nthat keeps outlays less than revenues. As discussed further below,\nwhose econometric model is widely used in Government and indus-\nA similar analysis conducted by Data Resources, Inc., a firm\nthis version does not prohibit a deficit at all, even one of hundreds\ntry, showed the same results. DRI made projections based on alter-\nof billions of dollars, from a reduction of tax revenues below the\nperiod of economic growth, and alternatively, after a period of eco- a\nnative assumptions, first that the amendment took effect during\nlevel adopted in the statement. The second version, referred to here\nas the \"revenue permissive\" version, flatly requires that outlays\nnomic decline. The results of both economic simulations were deep\nfor the year not exceed receipts.\nrecessions with record high unemployment.\nThe \"revenue limitation\" version requires Congress to adopt a\nDISTORTING POLICY DECISIONS\nstatement at the beginning of the year that reflects a balanced\nbudget. If we are in the midst of a recession at that time, the fiscal\nBecause the amendment would create major roadblocks to Con-\npolicies Congress would have to adopt would be the precise opposite\ngress' ability to deal with changes in economic conditions, it will\nof those needed to pull the Nation back to economic recovery.\nThe \"revenue permissive\" version of the amendment has an even\nbias in favor of a tax increase to correct deficits that become\nforced to abide by the amendment's limitations. There is a clear\nundoubtedly introduce distortions in policy decisions as Congress is\nworse result in a time of economic downturn. Under the \"revenue\nlimitation\" version, the requirement to balance the budget occurs\npoints out:\nent in the latter part of the fiscal year. As the OMB staff appar- report\nonly at the beginning of the fiscal year. A shortfall from revenue\nloss would be allowed without triggering the amendment as long as\nAn annual balanced budget rule is inherently biased\noutlays did not exceed the level in the statement. However, the\ntoward higher taxes rather than lower spending because:\nrevenue permissive version prohibits any deficit at all, including\nCash flow changes owing to tax policy can be enacted, im-\none that results from a falloff in revenues. Consequently, the\nplemented, and realized in three months\namendment would tend to force a tax increase or major cuts in\nchanges owing to spending policy require three months to\ncash flow\nsocial spending-unemployment compensation, health care, and\nthree years to enact, implement and realize in most\nSocial Security benefits-at the time when economic suffering is\ncases-or even longer.\ngreatest.\nThis perverse effect inherent in both versions has led many of\nDefense outlays for major weapon systems, as well as certain\nthe Nation's most prominent economists-including six American\nother outlays, are the result of spending decisions often made\nNobel laureates in economic science, four former Chairmen of the\nearlier. It is absurd to believe that Congress could, on short notice years\nPresident's Council of Economic Advisers, and 11 past presidents of\nthe American Economic Association-To Oppose a Balanced\nspending cuts would be particularly difficult because correcting a\nwith a major effect on current-year outlays. Moreover, relying on\nas a fiscal year draws to a close, make changes in budgetary policy\nBudget Amendment.\nIt is true that Congress could always waive the provisions of the\nbudget imbalance would require a proportionally greater cut in\namendment with a three-fifths vote. However, the whole point of\nprogram spending the later it is made in the fiscal year.\nthis \"super-majority\" requirement is to make it difficult to achieve.\nSecond, there will be an irresistible temptation to convert\nSince it would be difficult for Congress to vote a waiver, there will\nspending to misleading \"off budget\" status in order to avoid the more ef-\nbe substantial opportunities for legislative stalemate while a reces-\nfects of the amendment. \"Off budget\" spending has grown steadily\nsion deepens and suffering by those hardest hit by the recession\nworsens.\nActual econometric simulations of the effect of the amendment\nfied that the amendment will encourage subterfuges to load spend-\nformer Director of the Office and Management and Budget, testi-\nover recent decades and is now about $16 billion. Roy L. Ash,\nbear out the seriousness of this problem. A Wharton Econometric\nspending. However, as he put it:\ning on to the private sector SO it will not appear as Government\nanalysis estimated the impact of a hypothetical balanced budget re-\nquirement in effect in July 1981.\nThe analysis showed that the deep and painful recession the\nofficial budget but show up in prices instead.\nThe costs don't disappear; they're just not a part of the\ncountry endured would have turned into a major depression. Be-\nThere are other \"escape hatches\" for a Congress forced to deal\ncause Federal revenues declined so sharply, in order to balance the\nwith the realities of fiscal policy but hamstrung by the amend-\nbudget Federal spending would have had to have been reduced by\nment, incuding transferring responsibility to the private sector\nthrough the gimmicks of tax credits and loan guarantees. These ef-\n96\n97\nfects are not simply loopholes, but serious distortions in economic\npolicy-making, leading to misleading information about actual\nbetween would the projections at the beginning of the year, Congress\nSince it is inevitable that there will often be a wide divergence\nbudget policy and less accountability to the public.\nTHE DECLARATION OF WAR PROVISION\nBoth versions of the amendment reported by the committee\ndent year. Consequently, under this version Congress and the Presi-\nthe outlays do not exceed the outlays projected at the beginning of\nthat balance. However, the \"revenue limitation\" version only requires\nhave to revise the budget throughout the year to keep it in\nallow Congress to waive the amendment when a declaration of war\ncan ignore the effect of tax revenues on the deficit. An\nis in effect. During an actual declared war, the Nation would un-\ndoubtedly incur large deficits and Congress would quickly enact a\ntax revenue without triggering the amendment.\nmous deficit can occur because of a tax giveaway or other loss enor- of\nwaiver resolution. However, the history of the Nation shows very\nfew examples of a declared war. There has been no declaration of\nWhite House consistently assured the country that the deficits\nFor example, during the beginning of the administration, the\nwar in effect since World War II even though the United States\nPresident assured us that the budget could be balanced in few\nwould be far smaller than those we actually experienced. The\nhas been involved in Major military conflicts in Korea and Viet-\nnam as well as more limited conflicts elsewhere. The amendment's\nsults of these reckless policies are now painfully clear. In January re-\nyears, even with his massive tax cut and military buildup. The a\nlimitations would greatly hamper the ability of the Congress to ap-\npropriate funds for emergency military action.\nbillion 1981, OMB estimated the deficit for fiscal year 1982 would be $27.5\nA three-fifths vote in both Houses of Congress will not be easily\nachieved, particularly if there is dispute about the involvement of\nthe of revenue shortfalls. The \"revenue limitation\" version of\nresult $57.9 billion and $110.6 billion. These huge deficits were largely were the\nand for fiscal year 1983, $8.0 billion. The actual deficits\nthe United States in the conflict. The result is to place a dangerous\nlimitation on the flexibility of the Nation to respond in military\neither amendment would permit huge deficits from revenue losses,\nemergencies.\nfrom a recession or irresponsible tax cuts.\nThe \"revenue permissive\" version of the amendment is\nENFORCEABILITY PROBLEMS\nand only will this version lead Congress to try to increase taxes\nNot exceed receipts at the end of the year without a three-fifths vote.\nmore unrealistic by attempting to require flatly that outlays even not\nThe amendment has a host of enforceability problems that make\nit almost impossible to implement in the way its proponents argue.\nFirst, every key term in the amendment-\"outlays,\" \"national\ncut spending during a recession, it will lead to consistent\nincome,\" and \"statement of receipts\"-is undefined. None of these\ncompliance because of the inability of the Government to plan non- ac-\nterms has a precise, universally accepted meaning and each is sub-\ncurately for fluctuations in revenues and expenditures.\nject to manipulation and lengthy disputes. \"Outlays\"-actual Gov-\ndecisions by Congress for funds to be expended. Outlays, in fact,\nare often based on appropriation decisions that occurred years ear-\nbillion a $700 billion annual outlay limitation, an overrun report, of $50\nobtaining under complete information. According to the staff\nknown until the final days of the fiscal year because of delays in\nThe OMB staff report admits that actual outlays would not be\nernment expenditures-are clearly different from appropriations-\nlier. The amendment is also unclear in the treatment of Govern-\nfiscal would not be realized until 24 days before the end of the\nment loan guarantees and other off-budget expenditures.\n$50 year. There is no realistic way Congress could decide\nBoth versions of the amendment reported by the committee\nmake totally unrealistic assumptions about the ability of Congress\naction OMB report states: \"Under almost all circumstances, no remedial\nbillion adjustment that could take effect in 3 weeks. As upon the a\nto estimate accurately expenditures and revenues. The \"revenue\nlimitation\" version requires Congress to make an estimate of out-\nlays and revenues prior to the beginning of the fiscal year. In reali-\ncould not be known until after the fiscal year is over and Congress\nwill according to the report, the final total of the fiscal year's outlays\ncould be taken to reduce outlays in the last month.\" In fact,\nty, recent administration projections of tax revenues and outlays\nnot make effective adjustments.\nhave been widely out of line with actual events. For example,\nfiscal lead to deficits that are impossible to eliminate in the last days of\nEven small errors in estimating revenues and expenditures will\nOMB, in submitting the President's budgets, assumed deficits of\n$45 billion, $91.5 billion, and $189 billion for fiscal years 1982-84.\nBased on the same policy assumptions, the Congressional Budget\n\"revenue $20 billion. The balanced budget amendment, particularly the\nis are by 2 percent, the deficit resulting from a $1 trillion budget\noff year. For example, if congressional estimates of the budget a\nOffice projected deficits of $67 billion, $120.6 billion, and $176 bil-\nlion. The actual deficits for those years turned out to be $110.6 bil-\nbe permissive\" version, can only pretend that Congress will\nlion, $195.4 billion, and $185.3 billion.\nEven if an administration does not systematically underestimate\nyear, to have an effect on the budget during the year.\nable to make adjustments of this size in the final days of a fiscal\nthe likely deficits of its budget proposals, there is a high degree of\ninherent uncertainty in spending and revenue projections. It is im-\npossible to guarantee congressional budget decisions at the begin-\n'cases \"chosen consciously not to prohibit judicial review altogether of\nforced. The committee's report states that the committee has en-\nThe amendment is extremely unclear on how it would be\nning of a fiscal year will lead to a balanced budget at the end of\namendment or controversies' arising in the context of the proposed\nthe year.\nlitical question\" doctrine of Baker V. Carr, 369 U.S. 186 (1962), and\n(p. 67). The majority report assumes that the \"po-\n98\n99\nthe requirement of a justiciable case or controversy (see, e.g., Aetna\nLife Insurance Co. V. Haworth, 300 U.S. 227 (1937)) mean that pri-\nple, even if Congress, by a super-majority vote, enacts a resolution\nvate litigation over compliance with the amendment would be\nallowing a particular deficit level, the actual deficit may turn out\nminimized.\nto be higher. In fact, in times of economic instability it is extremely\nIn fact, however, some have argued there will be massive litiga-\nlikely that a congressional super-majority resolution will not ade-\ntion by organizations and individuals challenging spending and\nquately foresee the final outlays and receipts for the year. If the\ntaxing decisions. The Committee on Federal Legislation of the New\nyear ends and Congress has failed to enact an additional revised\nYork City Bar Association commented in regard to the amendment\nresolution, litigation challenging the validity of spending and tax\ncollection is certain to ensue.\nreported in the 97th Congress:\nSimilarly, if Congress underestimates tax receipts because of eco-\nThe amendment\nwill involve the judiciary in the\nnomic growth and fails to pass a specific resolution called for in\nbudgetary process extensively in that it seems likely that\nsection 2 of the \"revenue limitation\" form of the amendment, the\nthere will be a host of lawsuits-annually recurring-chal-\nlimitation of section 2 could easily be violated. If unexpected tax\nlenging particular expenditures and appropriations and\nreceipts even marginally exceed the year's increase in national\nevery attempt to raise or lower taxes.\nincome-itself impossible to estimate precisely-the Federal courts\nJudge Bork of the District of Columbia Court of Appeals wrote:\nmay be faced with taxpayer suits demanding court-ordered refunds\nThe result of such an amendment would likely be hun-\nor cancellation of spending programs.\ndreds, if not thousands, of lawsuits around the country,\nABSENCE OF PRESIDENTIAL INVOLVEMENT\nmany of them on inconsistent theories and providing in-\nconsistent results. By the time the Supreme Court\nOne of the greatest ironies in the debate over the balanced\nstraightened the whole matter out the budget in question\nbudget amendment is that the greatest proponent of the balanced\nwould be at least four years out of date and lawsuits in-\nbudget amendment, President Reagan, is the person most responsi-\nvolving the next three fiscal year would be climbing\nble for huge deficits. This administration has proposed budgets\ntoward the Supreme Court.\nwith massive deficits from its first days in office. It has never come\nProponents of the amendment argue that there will be little liti-\nclose to proposing a balanced budget and it has never recommend-\ngation concerning the amendment because the standing require-\ned changes to spending or tax policies that would result in one in\nmens are difficult to meet. But, if no one has standing, who will\nthe foreseeable future.\nenforce the amendment at all? During committee consideration, I\nThe table below shows the deficits estimated by CBO under the\nproposed allowing individual citizens to bring suit to enforce the\nPresident's own budget submissions.\namendment, but it was clear that the majority of the committee\ndid not favor allowing ordinary citizens to enforce it. However, the\nAdministration proposal-CBO estimate of deficit\nabsence of any way to enforce the amendment means that Con-\n[Billions]\nFiscal year:\ngress could ignore it and the public could do nothing. The public\n1982\nwill soon grow cynical about an amendment passed with a great\n1983\n$67\nfanfare of promises that proves to be unworkable and unenforce-\n1984\n137\n1985\n176\nable.\n1986\n180\nFinally, the amendment does not require a balanced budget. It\n186\nallows a 60-percent vote by both Houses of Congress to avoid its\nDespite the absolutely essential role that the President plays in\nharmful and restrictive effects. In fact, the answer of many of the\nkeeping the budget in balance, neither version of the amendment\namendment's proponents to the host of problems it presents is that\nrequires any role whatsoever by the Chief Executive. The original\nCongress is not bound by it if it achieves these supermajority\nversion of S.J. Res. 13 provided that the President should submit a\nvotes. This argument is the equivalent of saying: \"Don't worry\nstatement \"consistent with\" the provision of the amendment. This\nabout the amendment. It will be easy to get around it.\" This is not\ncryptic and vague phrase did not obligate the President to submit a\nonly the weakest type of argument for tampering with the Consti-\nbalanced budget, as indicated by the debate over a similar provi-\ntution in such a fundamental way, it is wrong. It will not be easy\nsion in the committee during the 98th Congress. However, even\nto get around the amendment.\nA minority of either House can insist on compliance with the\nthis minimal involvement by the President was eliminated by the\namendment, or insist that particular spending or taxing decisions\nCommittee. Consequently, the present pattern of the President pro-\nbe made as the price to be paid for the unacceptable risks of a con-\nCongress for them-is allowed to continue.\nposing reckless budget deficits-followed by the President blaming\nstitutional crisis. Furthermore, the uncertainties of when super-\nmajority resolutions are necessary and the likely need for periodic\nDuring committee consideration, I offered an amendment to re-\nadditional resolutions will inevitably raise a host of questions about\nquire that the President submit a balanced budget to the Congress.\nthe constitutional validity of spending and tax decisions. For exam-\nNothing would have precluded the President from submitting other\nbudget analyses or recommendations, but at the very least, the\n100\nPresident would have been required to propose how the budget\ncould be balanced. This amendment was defeated.\nDIVERTING ATTENTION FROM OUR FISCAL CRISIS\nProbably the worst aspect of this amendment is that it diverts\ncongressional and public attention from the urgent and real prob-\nlem that faces us-massive deficits looming indefinitely on the ho-\nrizon. The amendment is a political free lunch, holding out the\nfalse promise that a simply worded constitutional amendment can\nsolve painlessly our impending fiscal crisis.\nThe idea that this amendment serves as a substitute for responsi-\nble fiscal policy now is an illusion. The amendment would almost\ncertainly not take effect for three years, even under the most ex-\ntreme assumptions. The average time for ratification of amend-\nments to the Constitution is one year and eight months. Further,\nthe amendment would not take effect until the second fiscal year\nbeginning after its ratification. Consequently, in the unlikely event\nthat this amendment is approved by both Houses of Congress by\nOctober 1, 1986, and ratified before the end of October 1, 1988, it\nwould not take effect until fiscal year 1990. Our fiscal House must\nbe put in order long before this amendment is likely to become ef-\nfective.\nThere is no possible way to correct the mistakes of the past with-\nout imposing revisions to the Tax Code, to make it fair and to close\nloopholes, cutting the President's massive defense buildup and\nclosely reviewing domestic spending. Yet this President, who holds\nout the balanced budget amendment as our solution to the deficits,\nhas never come close to proposing a balanced budget.\nThe hard reality is that the component of the budget that is\npointed to as the place to cut-controllable, non-entitlement, non-\ndefense spending-is about 15 percent of expenditures. This portion\nof the budget could be eliminated entirely and the deficit would not\nbe eliminated. Pretending that a balanced budget amendment, if it\nwere in effect now, would make this problem go away is the worst\nform of self-deception.\nCONCLUSION\nIn short, the balanced budget amendment is a charade. Its princi-\npal effect is to mislead the public into believing there is a simple\nand painless solution to massive deficits. It is a blatant misuse of\nthe constitutional amendment process. The solution is for the\nPresident to be responsible and propose a balanced budget and for\nCongress to stop talking out of both sides of its mouth and vote for\none.\nHOWARD M. METZENBAUM.\n@"
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