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If spending needs to be done, well then good, but put the taxes on to pay it. Do not put this debt on your children and future generations. Do not keep on spending to the point where we could become insolvent. We can't keep on like we are doing.

Thank you very much for your appearance here, Mr. Kirkland, and I wish you good luck in your work.

Senator BAYy. Thank you, Mr. Kirkland. Gentlemen, we appreciate your being here. Senator Thurmond, we appreciate your interest. We have had discussions with Senator Hatch and he had no objection

Is Lieutenant Governor O'Neill still here? Do you have time to give us your thoughts very quickly before your appointment with the Secretary? Why don't you do that and we will ask Mr. Davidson if he will be patient because you only have a short period of time before your appointment with the Secretary.

Then we will get the National Taxpayers Union who I know will have a comprehensive statement.

We have the distinguished Lieutenant Governor of the State of Massachusetts, Mr. Thomas P. O'Neill, representing an organization called Citizens for the Constitution. We appreciate your being here.

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TESTIMONY OF THOMAS P. O'NEILL III, CHAIRMAN, CITIZENS FOR

THE CONSTITUTION, WASHINGTON, D.C.

Mr. O'Neill. Mr. Chairman, it is good to be here. I appreciate the opportunity that both you and your committee have afforded me. I want to tell you that I come here as the representative for a group calling itself, as you stated, Citizens for the Constitution. Our intention is to preserve the integrity of the Constitution of the United States.

We are as a group, a broad-based, nonpartisan coalition of organizations as well as individuals who are opposed to a constitutional amenilment or convention to balance the budget of the United States. We are workers, we are lawyers, we are business people, economists, consumers, older Americans, black Americans, educators, religious leaders, Democrats as well as Republicans. We are Americans, men and women often on differing sides political issues but we are united on this issue. We unanimously oppose the constitutional amendment to balance the Federal budget.

I would like to make it clear at the outset the issues which we are discussing here are not merely issues of economic policy, nor are they simply statistics and numbers-no, the real issue before us today is the integrity of the Constitution. What you are considering is not a simple piece of legislation but rather an amendment to the fundamental law of our land. This basic law has served us for almost 200 years demonstrating an ability to meet dramatically changing social as well as economic conditions.

The uniqueness of this document is not merely its continued existence but also in the fact that in the past two centuries, only 26 changes have been made within it.

In the past 110 years, only nine amendments have been ratified, and one of those, prohibition, was later repealed.

Why then so few amendments? Because our Constitution was meant to embody only fundamental law, the basic structures by which we

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govern ourselves, and the basic human rights we require the Govern-ment to respect. To make the Constitution a receptacle for specific solutions to economic problems of a particular time would cheapen its value.

As one Chief Justice has put it. Our Constitution is not a rubber ball to be tossed about and played with by each succeeding child, it embodies the essence of our system. There is not any room in it for yesterday's whim or tomorrow's fancy.

I don't believe this is time to attempt to enshrine forever into the fundamental law of our land, a particular economic policy which may happen to fit particular economic needs of the moment. I believe that history can show us equivalent cases, times of economic searching and problems, issues such as the free coinage of silver, the charter of the first National bank or the National Recovery Act that surely were as pressing in their times as our current economic problems are today. Yet I am as thankful that our Constitution was not cluttered up with bars and graphs and particular economic policies appropriate only for one era.

But we would not be here today even considering this issue unless the economic problems we face were so severe as to push us into the consideration of a constitutional amendment to balance the budget.

Let's then examine these proposals and see where they are about to lead us and what the effect of them might well be.

You are currently considering some 20 different proposals to amend the Constitution for the purpose of balancing the Federal budget, each with its own formula, each with its own cures and each with a different perspective on today's economic needs. I think there is one point upon which we can all agree, double-digit inflation, rising taxes, swollen mortgage rates, trebled fuel costs, and shrunken dollars has crashed down on all of us, radically affecting our lifestyles as well as our expectations.

Our constituents want action and quick solutions to very complex problems.

So, as in earlier economic crises, the budget balancers have come up with a cure-all for our economic ills. Sponsors of this legislation assert that by simply inserting a few bars and graphs into our Nation's most fundamental law and we can stop inflation, reduce taxes and cut Government waste, it is felt, in one fell swoop.

I am not an economist. I do not pretend to be any kind of an expert on economic theory, but I have studied these problems and realized that both the problems and the solutions are extremely complex. And the constitutional amendment approach to these serious economic problems seems to be very overly simplistic. I would liken this situation to a saying of H. L. Mencken when he said, “to every complex problem there is a simple solution and it is usually wrong."

In this case I think the balanced budget solution is both simplistic and totally incomplete.

Fifty years ago this week an event took place that plummeted our Nation into the most severe economic crisis that we have ever had. In October of 1929, the stock market crashed, bringing us into a great depression, but like today there was a simplistic answer to the economic ills. If you look back over the Gallup polls of the early 1930's you will find that 70 percent of the American public favored a balanced budget as a cure-all for the economic ills of that time.

Before we rewrite our Constitution and lock into it the resurrected depression era economic policies of Herbert Hoover, perhaps we should take a look at some of the historical aspects of the balanced-budget debate.

Looking back over this century, it is noteworthy that one of the most dramatic and rapid inflationary periods in our history occurred in 1919-20. But during this high inflationary period there was no budget deficit at all, rather we had a large surplus at that time. Looking back at the Great Depression, we can see some of the pitfalls of a mandated balanced budget. Herbert Hoover proved that in 1931 when he turned a recession into a full scale depression.

The stock market crash of 1929 had set off a recession. With the economy failing and unemployment rising, the Federal Government began running a deficit. Like today, the cry arose that deficit spending was the cause of the economic problems. Hoover heard tħat cry and he balanced the budget quite easily, he simply raised taxes. And by 1932 along with a balanced budget, purchasing power decreased even more and unemployment rose to a staggering 25 percent.

President Roosevelt, on looking back over the recovery of the depths of depression during his tenure of office, told the American people, and I quote, “In 1933, 1934, or 1935, a balanced budget would have been a crime against the American public.”

Had Roosevelt not been able to pump money into the economy by incurring a deficit in those bleak years, we might never have recovered from the depression at all.

In more recent times, deficits persisted in the 1959 through 1965 period, yt inflation rose by only 1 percent annually. In 1960, President Kennedy remarked that, “We should seek a balanced budget over the course of the business cycle, with surpluses during the good times more than offsetting the deficits which may be incurred during the slumps. I submit,” he said, "that this is not a radical fiscal policy; it is a conservative policy.”

If we look at more recent economic history we find in 1969 we had a $3.2 billion surplus, yet inflation was at 6 percent, which in 1969 was very high. In 1974, the Federal budget was almost in balance, the deficit was only $4.5 to $5.5 billion when the recession set in. By 1975 8.5 percent of our work force was unemployed. Because of loss of tas revenues and increased unemployment payments our budget deficit had swelled to $66 billion by 1976.

Had the Government been constitutionally required to balance the budget through tax increases or spending cuts, our Nation would have slid down a vicious spiral into a depression. Econometric models using the 1974-76 statistics show us that had we balanced the budget, unemployment would have reached 10 percent. That means 11 million people would have been jobless and the Gross National Product would have declined by some 12 percent in the years 1973 through 1975.

Most Members of Congress would agree there is a link between deficits and inflation. The key point here is that whether or not that link is forged depends on the level of employment. I think, Mr. Chairman, the basic national debate is: whether we truly are at national full employment or whether we aren't.

To put the matter more simply, had a constitutional amendment for a balanced budget been in effect during the years 1974 and 1975,

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during that recession, the American economy would have suffered its first depression since 1930.

The use of the Federal budget to moderate recessions has played a major role since the end of World War II. The proposed amendment would destroy our most important guarantee against a reputation of the depressions that plague the prewar era.

I am sure that the proponents of the various measures before you will argue that there are escape clauses in the proposals that you have. That in times of crises, the Congress by a two-thirds vote can get around the amendment. I urge you to keep in mind that this is a fundamental law of our land that we are tinkering with. As a part of an enduring Constitution, the amendment would have to define the meanings of expenditures as well as revenues. It would become routine for the constitutionality of various budgetary changes to be challenged in the courts. Many important aspects of budgetary and economic policymaking would be transferred from the Congress and the executive branch of government to the courts. I don't think that the Founding Fathers meant for the courts to have that kind of power.

A constitutional amendment must be as meaningful 50 years from now as it is today. Various statistical measures, such as the gross national product or Consumer Price Index may not even be in use 50 years from now. I agree with economist Paul Samuelson that "Economics is so inexact a science and the future is so unpredictable that it is an act of arrogant folly to try to specify constitutional formulas for the infinite future."

I understand your concerns, as an elected official, I share those very similar concerns. My constituents as well as yours are demanding relief from the economic problems that they are being faced with. I think the Congress is coming to grips with a budgetary problem.

Let me for the record submit the rest of this testimony and just answer another question that was posed. I think it was Senator Thurmond who asked, "What would you have us do?'' What I would have everybody do, including the next speaker is refer to the second budget resolution, to let him see firsthand a broad-brushed conclusion brought about by the Congress of these United States to say we are going to take it upon ourselves to make sure we cut back on spending and indeed they have.

The current fiscal year looks a lot brighter financially than the last fiscal year and if they can afford to wait just one or two more, they will indeed have a balanced budget anyway.

Senator Bays. Thank you very much, Mr. O'Neill. I know you have 4 minutes to get downtown. So I will resist the temptation to ask questions. If you don't mind, members of the subcommittee would like to submit questions to you in writing that you might answer and we will put them in the record as if that dialog had transpired here.

I know how busy you are and I appreciate your making this special effort to let us have the thoughts of your organization and you personally.

Mr. O'Neill. Thank you, Mr. Chairman. I do it out of professional need as well as friendship to you and I appreciate the fact you have

Senator Bays. Thank you very much.

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asked me here.

[Mr. O'Neill's prepared statement and responses to additional questions submitted by Senator Thurmond follow:]

PREPARED STATEMENT OF Lt. Gov. THOMAS P. O'NEILL Mr. Chairman, Members of the Committee: I appreciate the opportunity to appear before you today as the Chairman of the Citizens for the Constitution. We are a broad based non-partisan coalition of organizations and individuals who are opposed to a constitutional amendment or convention to balance the budget. We are workers, lawyers, businessmen, economists, consumers, older Americans, black Americans, educators, religious leaders, financiers, democrats and republicans, hispanic Americans. We are men and women who are often on different sides of political issues. But we are united on this one issue -we are citizens for the Constitution, and for this reason are unanimously opposed to a constitutional amendment to balance the federal budget.

I would like to make it clear at the outset that the issues we are discussing here are not merely economic policy. They are not simply statistics and numbers. The real issue before us today is the sanctity of the constitution of the United States.

What you are considering is no simple piece of legislation, but rather an amendment to the fundamental law of our land.

This basic law of our nation has served us for more than 190 years, demonstrating an ability to meet dramatically changing social and economic conditions. The uniqueness of this document is in the fact not only of it's continued existence, but also in the fact that in the past two centuries only 26 changes have been made in it. In the past 110 years only nine amendments have been ratified and one of those, prohibition, was later repealed.

Why so few amendments? Because of our Constitution was meant to embody only fundamental law, the basic structures by which we govern ourselves and the basic human rights we require the government to respect. To make it receptable for specific solutions to the economic problems of a particular time would cheapen its value.

Perhaps a look back at the federalists papers will give us a clearer perspective. Alexander Hamilton in Federalists Papers No. XXIV made the following argument:

"Constitutions of civil government are not to be framed upon a calculation of existing exigencies, but upon a combination of these with the probable exigencies of ages, according to the natural and tried course of human affairs. Nothing there. fore can be more fallacious than to infer the extent of any power, proper to be lodged in the national government, from an estimate of its immediate necessities. There ought to be a capacity to provide for future contingencies as they may happen and as these are illimitable in their nature, it is impossible safety to limit that capacity.”

Another great jurist put it this way, according to Justice Oliver Wendell Holmes:

“The Constitution is not intended to embody a particular economic theory, ... Constitutions are intended to intended to preserve practical and substantial rights.”

And yet another Supreme Court Justice added,

"Our Constitution is not a rubber ball to be tossed about and played with by each succeeding child. It emodies the essence of our system. There is no room in it for yesterday's whim or tomorrow's fancy."

Make no mistake, there have been and will be times when constitutional amendments are necessary but this is not the time or the issue. I would tend to agree with Lincoln who said, “As a general rule I think we would much better let it alone. No slight occasion should tempt us to touch it. Better not to take the first step which may lead to a habit of altering it.”

I do not believe that this is the time to attempt to enshrine forever into the fundamental law of our land a particular economic policy that my happen to fit particular economic needs of the moment. I believe that history can show us equivalent cases, times of economic searching and problems, issues such as the free coinage of silver, the charter of the first National bank or the National Recovery Act that surely were as pressing in their times as our current economic problems are today, yet I am thankful that our Constitution was not cluttered up with bars and graphs and particular economic policies appropriate only to one era.

But we would not be here today even considering this issue unless the economic problems we face were so severe as to push us into the consideration of a Constitu

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