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But even if a balanced budget would stop inflation, our committee does no believe that “freedom from inflation” is the type of freedom that should be elevated to constitutional status. In our view, it is not of the same fundamental nature as the individual rights protected by the Constitution, such as the right to vote, freedom of speech, freedom of religion, right to due process and the like.
Also, Senator, some people prefer inflation to restrictive monetary policies which, in the opinion of some economists, "steal” jobs and wages. Our committee does not advocate any of the competing economic positions. We do say, however, that the choices should be made by the Congress and the President without the constraint of a fixed constitutional provision which prefers one economic theory to another.
PREPARED STATEMENT OF MARSHALL BEIL Chairman Bayh, members of the subcommittee: My name is Marshall Beil. I am a lawyer in private practice in New York City and have the honor today of representing the Committee on Federal Legislation of the Association of the Bar of the City of New York. On behalf of the association, I would like to thank Senator Bayh and the members of the subcommittee for giving us this opportunity to participate in these Hearings.
Centered in New York City, the 109-year old association has over 11,000 members—both lawyers and judges-in 42 States and the District of Columbia. The association's committee on Federal legislation reviews and publishes reports on various legislative and constitutional matters of interest to our members.
Earlier this year, the committee undertook a comprehensive analysis of the proposed amendments to the Constitution which would require a balanced federal budget or place strict limits on Federal spending. Our complete study was published in May of this year, and I request, Mr. Chairman, that it be made part of the record of this hearing. I would like to spend the next few minutes summarizing our findings and recommendation.
As we are lawyers and not economists, we have taken no position on the economic policy question of whether the federal budget should be balanced or Federal spending limited.
We do, however, strongly believe that, assuming a balanced budget is desirable, a constitutional amendment requiring that result is not. To elevate a balancedbudget economic policy to permanent constitutional status is unwise and historically unsound and would fundamentally alter the principle of majority rule and the existing allocation of powers among the three branches of government.
In our judgment, the economic policy issues raised by the proposed amendments are best left to the political process where they can be resolved over time, unhampered by fixed or arbitrary constitutional strictures.
Balance-the-budget amendments are not new. As early as 1939, states began petitioning Congress to call a constitutional convention to propose an amendment limiting the Federal taxing power, State petitions for a balance-the-budget constitutional convention first passed in 1957.
This movement has ebbed and flowed over the years and is once again approach. ing a climax, as 30 States have recently passed petitions for a constitutional convention on the federal budget.
As this subcommittee knows, many different proposed amendments have been introduced in this session of Congress. As of early May, we counted sixteen proposed joint resolutions which had been referred to this subcommittee.
Although there are significant variations among the proposals, they can be divided into two major categories. Most would require that Federal revenues equal or exceed expenditures in each fiscal year. Others would limit federal spend. ing to a fixed percentage of national income or gross national product.
The proposals generally provide a mechanism whereby Congress, usually by a two-thirds or three-fourths vote, and sometimes with the concurrence of the President, may override the budgetary limitations in times of war or "national emergency.” Several proposals additionally require that the national debt be retired over a specified period of time.
The proponents of a constitutionally required balanced budget or spending limit have put forth several reasons in support of their proposed amendments.
They argue that deficit spending is detrimental to the economy. Excessive Federal spending, it is urged, is the major cause of inflation, which in turn, leads to unemployment, sluggish economic growth and decline of the dollar abroad.
Proponents also argue that the need for a flexible economic policy is overstated. Keynesian "counter-cyclical” federal intervention in the economy no longer works, it is asserted. Monetary policy and other devices are enough to "fine-tune"
the economy and the "escape clause” of the proposals are adequate to deal with true emergencies.
Some proponents, particularly those supporting spending limitations, argue that an amendment is necessary to check the growth of the Federal Government, to prevent the "steady, irresistible encroachment of the public upon the private sector."
Finally, the proponents assert that these goals cannot be achieved by legislation. The political pressures on Congress are too great and the incentives too few for Congress itself to exercise fiscal restraint.
Even if these arguments are accepted in full, however, we are not persuaded that the constitutional amendment route is the proper method to achieve the goals sought by the amendment's proponents. Indeed, after careful study, we have found that the problems created by a balanced-budget amendment would be far greater than any benefit to be derived from such an amendment.
The economic impact of the proposed amendments is by no means certain. The potential economic effects are hotly disputed by economists and politicians; there is no clear consensus, no common interpretation, no uniform view.
While the proponents argue that the proposed amendment would eliminate inflation and its attendant ills and curb the growth of Federal spending and power, the opponents disagree. They argue that such an amendment would have little effect on inflation, but could exacerbate economic problems, cause great economic and social dislocation, lead to increased taxes and shift the public debt from Washington to the state capitals.
We do not take sides in this economic debate. This is an area where reasonable people can and do disagree.
But as Justice Holmes cautioned nearly 75 years ago, dissenting in Lochner v. New York, 194 U.S. 45, 75 (1905), the “Constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez faire." Economic policies are not proper subjects for a constitutional amendment. They are best left to the legislative and political process created by the Constitution itself, where the majority is enabled and expected to enact its consensus into law and to alter the law when the majority view changes.
More significantly, adoption of any of the proposed amendments would effect a fundamental-and in our view unwarranted-change in the character of the Constitution.
The proposed amendments are unlike any other existing amendments both in form and in substance. Of the 26 amendments ratified since 1789, 12 protect the rights of individuals; 5 extend the right to vote; and 7 deal with the structure of government.
This history shows that the amendment process has been sparingly used, almost always in order to correct what James Madison called “discovered faults in the governmental structure, or to protect against governmental infringement of fundamental rights. The existing amendments, like the original Constitution, have carefully avoided endorsing specific economic or social programs, or imposing restraints upon the government's freedom to act beyond the minimum necessary to protect individual liberty and preserve a Federal system.
The only exceptions to this rule are the 18th and 21st amendments, imposing and then repealing prohibition. The proposed budget amendments are more like the prohibition amendments than any other. They are alike in that they do not state fundamental principles—the "broad and enduring ideals”—to which we firmly and irrevocably commit ourselves as a nation; nor do they correct errors in the constitutional structure of government or safeguard individual rights. Like the prohibition amendment, the proposed budget-balancing amendments reflect less basic and more transitory concerns which, however popular they may now be, do not warrant elevation to permanent constitutional status.
In our committee's view, the practical and policy issues raised by the amendments are best left to the political arena. The most appropriate constitutional remedy for curbing a spendthrift Congress is not a constitutional amendment, but the election of more frugal Congressmen.
The proposed amendments also present difficult problems of drafting. The proposed drafts are either so broad as to pose significant problems of implementation, interpretation and enforcement, or so lengthy and full of technical jargon as to be wholly inconsistent with the rest of the Constitution.
In addition to changing the character of the Constitution, the proposed amendments, however drafted, would also effect fundamental—and, we believe, unwarranted-changes in the allocation of powers among the three branches of government and in the principle of majority rule.
The proposed constitutional amendments will inevitably shift ultimate budgetmaking authority from the legislative and executive branches to the judiciary. Any such amendment is likely to result annually in a host of recurring lawsuits challenging particular federal expenditures or appropriations on constitutional grounds. The judiciary, which now plays little or no role in raising taxes and allocating revenues- --and is not equipped to do either—will invariably be thrust deeply into the budgetary process if required to enforce an amendment in the face of congressional or presidential inability or unwillingness to do so.
Judicial involvement in such controversies—the only apparent means of enforcing such an amendment-would radically alter the present division of responsibility and power among the three branches of government and inevitably weaked both the courts and the Congress.
Even if the prospect of disastrous confrontations between the Supreme Court and Congress or the President can be avoided, the very exercise of judicial authority in the budgetary process will gravely undermine the congressionai law-making functions and cause the erosion of respect for the judicial process.
The override or exception provisions of the proposed amendments are themselves unique and pose difficult constitutional problems. At present, no provision of the Constitution requires a three-quarters vote of Congress. A constitutional requirement of two-thirds of either House of Congress is rare and applies generally to votes affecting the basic separation of powers among the three branches of government. In all other matters, a simple majority suffices.
The proposed amendments would effectively undo this principle of majority rule. Only a simple majority of Congress is necessary to declare war, but under the proposed amendment, two-thirds or three-fourths of Congress would have to approve paying for it. The difficulty of mustering such a large majority, even in time of crisis, could pose a significant barrier to effective government action when it is most needed.
Under most of the proposals, if the government were already spending to the constitutional limit, war, military or other emergencies of any sort,-indeed, any new government activity needing major additional expenditures-would require a two-thirds or even a three-fourths vote of the Congress. The potential for government chaos or for a tyranny of the minority defeating any controversial or new project would be immense.
In sum, the “blunt weapon” of a consitutional amendment is a wholly inappropriate means of solving the complex, uncertain and ever-changing economic problems which confront our nation. Today's panacea, if elevated to constitutional status, is likely to become tomorrow's problem.
As Alexander Hamilton cautioned nearly 200 years ago, in The Federalist Papers (No.34):
"Constitutions of civil government are not to be framed upon a calculation of existing exigencies, but upon a combination of these with the probably exigencies of ages . . . Nothing, therefore, 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, so it is impossible safely to limit that capacity.”
The Constitution has retained its effectiveness as our national charter because we have generally followed Hamilton's advice. The proposed budget-balancing amendments do just the opposite: they would attempt to limit the illimitable and restrict the Federal Government's capacity to devise new solutions to as yet unforeseen problems.
For these reasons, our Committee opposes a constitutional amendment as an appropriate means of balancing the federal budget or limiting federal spending.
Thank you again for this opportunity to present our views to the subcommittee. If any of you have any questions, I would be pleased to try and answer them.
THE ASSOCIATION OF THE BAR
OF THE CITY OF NEW YORK
42 West 44th Street, New York, N.Y. 10036
By THE COMMITTEE ON FEDERAL LEGISLATION
Congress and state legislatures throughout the country are debating whether the United States Constitution should be amended to require the federal government to balance its budget. As this Report is written (May 1979), as many as 30 states have passed resolutions calling for a constitutional convention to propose a balanced-budget amendment. Several committees of both houses of Congress have scheduled hearings on which, if any, of scores of proposed amendments should be adopted.
The issue has important political as well as economic consequences. Both parties are internally divided over whether constitutionally-mandated fiscal restraint is appropriate or desirable; the issue threatens to loom large in the 1980 presidential primaries and election.2 Lurking scarcely concealed beneath the budget question is the larger and more complex question of which economic theories and policies will best control inflation and unemployment, and the more fundamental debate over the proper size and function of the federal government and what role it should play in the economy.
This Committee has carefully considered these and other questions and has studied the various proposals for constitutional amendments. We take no position on the economic policy issue of whether the federal budget should be balanced or federal spending limited. We do, however, strongly believe that, assuming a balanced budget is desirable, a constitutional amendment requiring that result is not. To elevate such a policy to permanent constitutional status is unwise and historically unsound and would fundamentally alter the principle of majority rule and the existing allocation of powers among the three branches of government. In our judgment, the economic policy issues raised in the current debate are best left to the political process where they can be resolved over time, unhampered by fixed or arbitrary constitutional strictures.
Editor's Note: This report, preprinted from THE RECORD of the Association for May/ June 1979, is being distributed to members of Congress and interested executive departments and agencies.
I. THE PROPOSED AMENDMENTS
Balance-the-budget amendments are not new. As early as 1939, states began petitioning Congress to call a constitutional convention to propose an amend. ment limiting the federal taxing power.3 The movement ebbed and flowed over two and one-half decades until, in 1963, proponents claimed that the requisite number of 34 states had passed calls for a constitutional convention. Since some of the resolutions were fifteen to twenty years old, twelve states had rescinded their applications and there were significant variations in the substance of the resolutions, the convention was never called.4
In 1957, the first state petition for a balance-the-budget constitutional convention was passed in Indiana. Several other states passed calls for budget limitation amendments in the 1960's.5 The current movement began earlier in this decade and has received great impetus from the well-publicized success last year of California's Proposition 13 "tax revolt” initiative. 6
Literally dozens of proposed constitutional amendments requiring a balanced or restricted budget are currently pending in Congress. As of midFebruary 1979, Time counted 65 separate versions.? Although there are sig. nificant variations among the proposals, they fall into two major categories. Most would require that federal expenditures equal or exceed revenues in each fiscal year. Others would limit federal spending to a fixed percentage of national income or gross national product. The proposals generally provide a mechanism whereby Congress, usually by a two-thirds or three-fourths vote, and sometimes with the concurrence of the President, may override the budgetary limitations in times of war or “national emergency.” Several proposals additionally require that the national debt be retired over a specified period of time. The sixteen proposed amendments which are currently the subject of hearings before the Subcommittee on the Constitution of the Senate Judiciary Committee are representative of the breadth and scope of the various proposals.
The simplest and shortest proposals-one paragraph-are S. J. Res. 10 (introduced by Senator McClure) and S. J. Res. 13 (Senator Helms). S. J. Res 10 would provide that "Congress shall assure” that the "total outlays” of the federal government in any fiscal year “do not exceed the total receipts." Although Congress could suspend this requirement "for a period not to exceed one year” by a two-thirds vote of both houses, no standard is given to govern exercise of that power. S. J. Res. 13 is identical, except that the congressional override provision would be limited to “a grave national emergency" which must be declared by a three-fourths vote of both houses of Congress. S. J. Res. 4 (Senator Lugar) would require a two-thirds vote of both houses of Congress to pass any annual budget resolution in which the “appropriate level of total budget outlays" exceeds the "recommended level of Federal revenues."
Other pending resolutions are more elaborate. S. J. Res. 38 (Senators H. Byrd and Helms) and S. J. Res. 45 (Senator H. Byrd), drafted in four paragraphs, are similar to S. J. Res. 10 and 13 except that their override provisions would require a “national emergency," to be determined by a roll-call vote