John Hood: Budget Reform Requires Belt and Suspenders
By JOHN HOOD
RALEIGH — Key members of North Carolina’s congressional delegation have it right: unless we do something meaningful about the federal government’s chronic budget deficits, America’s future is in peril.
“Reckless spending has led our country into a dire economic situation threatened by inflation and mountains of debt,” says Rep. Richard Hudson (R-9th District), chairman of the National Republican Congressional Committee.
Democrat Don Davis — whose reelection in the 1st Congressional District will be contested by the committee Hudson chairs — has pledged to continue “the much-needed conversation about tackling our $31 trillion-plus national debt for the sake of future generations.”
As much as I like both congressmen, and take them at their word, no combination of strong statements and good intentions can solve this problem. In fact, Congress simply cannot made significant headway as currently organized.
No, I’m not talking about its partisan makeup. If Republicans win congressional majorities and the White House next year, are they likely to adopt a realistic plan to bring federal spending and revenue speedily into balance? No — because the last time they had such power, in 2017-18, they did no such thing. The Democrats didn’t, either, when they enjoyed their own Washington trifecta in 2009-10.
In North Carolina and virtually all other states, governors and legislatures routinely balance their operating budgets. But that doesn’t necessarily prove state officials are wiser or more responsible than federal officials. North Carolina’s constitution requires that the state’s operating budget be balanced. It also limits the ability of local governments and the state to issue debt for capital needs.
I’ve long argued for adding comparable budgetary constraints to the federal constitution. Kurt Couchman, a former Capitol Hill staffer and senior fellow at Americans for Prosperity, has written a new paper outlining two different models for such a balanced-budget amendment (BBA).
One of them, a Business Cycle BBA, would require that annual federal expenditures not exceed the average annual revenue collected in the three prior years, adjusted in proportion to changes in population and inflation. This model would keep federal budgets stable and predictable, Couchman argues, allowing for “modest fiscal expansion during recessions and contraction after recovery.”
The second model, a Principles-Based BBA, would stipulate that expenditures and receipts be balanced, but not necessarily on an annual basis. That would give lawmakers more flexibility. Both models would also allow a two-thirds majority of Congress to override the requirement during wars or other national emergencies.
Regardless of how a balanced-budget amendment is designed, I see it as necessary but insufficient. It’ll take years to enact, and its effectiveness date would probably be set even farther into the future. Congress still needs to act in the meantime. The only practical means of doing so, I believe, is some kind of fiscal commission.
Romina Boccia, a budget expert at the Cato Institute, is one of my go-to sources on the best way to set up such a commission. She suggests it be composed of outside members appointed by leaders of both major parties. Its charge would be to construct a package of spending and revenue measures to cap federal debt at 100% of gross domestic product. Once adopted by the commission, the plan would go to the president for signature unless Congress objects within 45 days.
Actually, Boccia recommends two commissions. She calls this one the “fail-safe.” The other would be composed of sitting members of Congress. If they can do the job themselves — working out a package of reforms that can secure explicit bipartisan approval — all the better. “It would be a relief to see Congress responsibly and sensibly address the growing US fiscal crisis,” she wrote.
If the congressional panel fails, however, the independent commission’s work would still continue. Its final product would probably contain some budget cuts and entitlements reforms I’d enthusiastically endorse. It would also probably contain some measures I’d dislike.
Inaction is, however, no longer an option. We need both an amendment and a commission. Call it the belt-and-suspenders plan.
John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).
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