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of two-thirds of all the members of each house of Congress. Likewise, S. J. Res. 11 (Senators Talmadge and Nunn) would mandate a balanced budget in each fiscal year, except during a state of war or a “national economic emergency" declared by only a simple majority of both houses of Congress, which are admonished to “take into consideration the extent and rate of industrial activity, unemployment, and inflation, and such other factors as they deem appropriate.” S. J. Res. 36 (Senator Heflin) would provide that "Congress shall make no appropriation for any fiscal year if the resulting total of appropriations ... would exceed the total estimated receipts” for that fiscal year. In case of “a national emergency,” including a formally declared war, Congress, with the concurrence of the President, would be able to override this provision by a roll-call vote of 55% of all the members of each house. 10 Congressional action would have to be completed within sixty days of a "special message" by the President or the introduction of a resolution sponsored by twenty-five percent of the members of either house. This amendment, unlike the others, would go into effect in the second fiscal year beginning after ratification.

S. J. Res. 2 (introduced by Senators DeConcini and Goldwater) and S. J. Res. 6 (Senator Stennis) are virtually identical and contain an elaborate enforcement mechanism to ensure a balanced budget. Section 1 of both proposals would provide that "In exercising its power under article 1 ... and, in particular, its powers to lay and collect taxes ... and to enact laws making appropriations, the Congress shall seek to assure that the government's] total outlays ... do not exceed the total receipts" during a given fiscal year. In case the budget does not balance, sections 2 and 3 would require the Presi

3 dent, within twenty days after the close of each fiscal year, to ascertain” the "total receipts" and "total outlays" and "determine the percentage rate of income tax surcharge" necessary to make up any deficit. The surcharge would automatically go into effect, without further congressional action, for the calendar year following the close of the pertinent fiscal year. Congress, however, could suspend the income tax surcharge for all or part of the year in "a grave national emergency,” including a formally-declared state of war. S. J. Res. 2 would require a vote of two-thirds of all the members of such house for such a suspension, while S. J. Res. 6 would require three-fourths.

Several proposed amendments would require, in addition to a balanced budget, that the national debt be retired. S. J. Res. 7 (introduced by Senator Armstrong) would mandate, in addition to a balanced budget, that the national debt not be increased and that it be repaid within one hundred years following ratification, at the rate of 1/10 of the debt during each 10-year period. Likewise, S. J. Res. 16 (sponsored by Senators Wallop, Morgan and Thurmond) would require both a balanced budget in each fiscal year “and that the federal indebtedness is eliminated.” This amendment, however, would take effect gradually: For the first fiscal year after ratification, receipts could not be less than 95% of outlays. In the cond year, receipts must total at least 98% of outlays. The budget would have to be balanced in the third fiscal year and, starting in the fourth year and for the next nineteen years, receipts would have to exceed outlays by five percent, the excess to be used


to retire the federal debt. Congress would have only limited power to override these requirements in case of a “national emergency,” declared by twothirds vote of all the members of each house: during such an emergency, expenditures could never exceed receipts by more than 10 percent and any indebtedness thereby created would have to be "extinguished" within three

fiscal years.

S. J. Res. 46 (Senator H. Byrd) would require, in addition to an annual balanced budget, the retirement of the federal debt at the rate of 4% a year, beginning with the fifth fiscal year following ratification. Congress could, by two-thirds vote, incur new debt in a “national emergency,” but such debt would have to be paid off within five years.

S. J. Res. 18 (sponsored by Senators Thurmond, Goldwater and Wallop) would involve the President in the constitutionally mandated budgeting process. Section i would require the President to transmit to Congress a proposed balanced budget by the fifteenth day after the start of each regular session. The budget would contain the President's estimate of receipts "under the laws then existing" and outlays (excluding trust funds) and proposals for additional taxes as necessary. Congress could not "authorize outlays to be made ... in excess of the estimated receipts. ..." Section 2 would provide that, beginning with the fifth fiscal year after ratification and continuing for the next twenty years, 5% of the government's receipts "shall be available only to reduce the public debt.” Congress, by three-fourths vote of all the members of each house, could suspend the provisions of Sections 1 and 2 "for periods, either successive or otherwise, not exceeding one year each" in case of “war or other grave national emergency."

As previously noted, several of the proposed amendments would set a fixed limit on federal spending, not necessarily combined with a requirement that the budget be balanced. The simplest such proposal is S. J. Res. 9 (introduced by Senator McClure). It would require that total outlays during any fiscal year (except for repayment of debt) not exceed 3343% of the "average national income for the three prior calendar years." During a "national emergency or war” the limit could be exceeded, but “all expenditures" in excess of the limit would have to be approved by a roll call vote of three-fourths of all the members of each house, taken in the fiscal year during which the limit is exceeded. S. J. Res. 5 (proposed by Senator Dole) combines a balanced budget with a ceiling on federal spending. Under this proposal, Congress, by two-thirds vote of all the members of each house, could vote for a deficit budget in any year, but only if the budget was balanced in at least five of the preceding eight fiscal years. Any deficit generated in one fiscal year would have to be paid off in the next four years. This amendment further provides that, starting with the third fiscal year after ratification, both revenues and expenditures set forth in any budget resolution for a fiscal year could not exceed 18% of the "Gross National Product at the close of such fiscal year, as projected by the Director of the Congressional Budget Office." Congress could override this limitation by roll-call vote of two-thirds of the members of each house “present and voting.”

Finally, there is S. J. Res. 56 (introduced by Senators Heinz and Stone),


an elaborate proposal for limiting federal spending developed by economist Milton Friedman and others. 11 Section i would provide that "[t]otal outlays ... during any federal year shall not increase by a percentage greater than the percentage increase in the nominal gross national product" during the last calendar year. If the inflation rate exceeds three percent, the “permissible percentage increase" in expenditures would be reduced by “one-fourth of the percentage by which the inflation rate exceeds three percent." "Inflation rate" would be defined as the difference between percentage increases in the “nominal gross national product" over the “real gross national product" for a given year. “Total outlays” would include “both budget and off-budget outlays," but exclude redemption of the debt or emergency expenditures.

Section 2 would require that any surplus of revenues over outlays be used to retire the national debt. Under section 3, emergency outlays in excess of the limit for the current fiscal year would be authorized by a "declaration of an emergency by the President" and a two-thirds vote of both houses of Congress. Section 4 would allow the spending limit imposed by section 1 to be changed "by a specified amount” by a three-fourths vote of both houses of Congress. 12

Sections 5 and 6 would seek to prevent the spending limitation from adversely affecting state and local governments. Section 5 would require that, for the first six years following ratification, “total grants to states and local governments shall not be a smaller fraction of total outlays than in the last three fiscal years” prior to ratification. Thereafter, any reduction in the proportion of such grants to total federal spending would decrease the limit on total spending by an equivalent amount. Lastly, under section 6, the federal government could not require "directly or indirectly, that state or local governments engage in additional or expanded activities without compensation equal to the necessary additional costs.”


A CONSTITUTIONAL AMENDMENT The proponents of a constitutional amendment limiting federal spending or requiring a balanced budget have put forth several arguments in support of their proposals:13

1. Deficit spending is detrimental to the economy. The heart of the proponents' economic argument is that excessive federal spending is the major cause of inflation, which, in turn, leads to unemployment, sluggish economic growth and decline of the dollar abroad. The ever-increasing national debt which is needed to finance governmental spending, it is argued, compounds the problem by “crowding out" private capital from the money market, thus siphoning off funds that would otherwise be available to business for capital improvement, a necessary component of economic growth.

2. The need for a flexible economic policy is overstated. Proponents reject Keynesian economic theory. They argue that the policy of “counter-cyclical" federal intervention in the economy (increasing expenditures and deficits in times of recession and decreasing them during periods of growth) simply does not work effectively any longer. Monetary policy and other devices, it is claimed, provide sufficient tools for "fine-tuning” of the economy at most times.14 They point out that the amendments have "escape clauses" which would permit the additional spending or allow a deficit if necessary to deal with true emergencies.

3. The growth of government should be checked. The proponents argue that ever-increasing federal spending means the “steady, irresistible encroachment of the public upon the private sector.” 15 In words that echo the Jeffersonian dictum, “government which governs best governs least,” the proponents assert that an amendment is necessary to “control government, control its power, control its interference, and control it by controlling its purse strings.” 16 Advocates of the spending limitation proposals particularly argue that such an amendment will curb the future size and power of the federal government.17

4. Congress, if let alone, will not act. The political pressures on Congress, say the supporters of these amendments, are too great and the incentives too few for Congress itself to exercise fiscal restraint. Congressmen, in their natural desire to be re-elected, will resort to deficit spending to provide immediate benefits to their constituents, organized and vocal "special interest groups," and entrenched federal bureaucracies. Rather than face up to the need for restraint, they argue, Congress will keep "disguising the costs (of spending) in the form of borrowing and inflation which are diffused over large numbers of the rest of society. Under such conditions, the incentives of the politicians clearly point toward ever-increasing spending with continued inflationary deficits.” 18 In the past twenty years the federal budget has been balanced only twice (in fiscal years 1960 and 1969), yet despite the current high rate of inflation, Congress has been unable to curb spending 19 Only the constraints imposed by a constitutional prohibition will halt this process.


CONSTITUTIONAL AMENDMENT The opponents of a constitutional limitation on the federal budget have argued that an amendment, however drafted, is not desirable for the following reasons:

1. A constitutional amendment will not eliminate inflation but may exacerbate economic ills.20 Opponents challenge the assertion that deficits are the major cause of inflation and argue that a mandatory balanced budget policy is much inferior to a flexible fiscal policy in controlling the economy. They point, for example, to a 1976 congressional staff study which concluded that if the federal budget had been balanced between 1965 and 1974-a period of economic growth followed by a recession and then by renewed growth accompanied by high inflation-the result would have been "substantial losses in output, and increases in unemployment, with very little, if any, improvement in inflation.” 21 Opponents stress that in times of recession, the government must be free to spend money to stimulate the economy to prevent recessions from worsening into depressions.

2. A constitutional amendment is unenforceable. The definition of the federal budget, opponents point out, is by no means clear. Many governmental expenditures for programs such as the Federal Financing Bank (which is expected to spend $11 billion in fiscal 1980), for government-sponsored corporations, such as the Federal National Mortgage Association or the Student Loan Marketing Association, or for federal loan guarantee programs, are now generally considered “off-budget" and, by law and tradition, not included in congressional and popular discussions of expenditures and deficits.22 Similarly, tax subsidies and incentives, considered by many to be a form of “negative" governmental expenditure, are not included in budgetary decisionmaking 23 The definitional problems, opponents argue, demonstrate that an imaginative and creative Congress could shift or hide expenditures in "offbudget" items so as to create the illusion of a balanced budget without the reality. As one study recently observed, it would be possible, for example, to create a $100 billion national health insurance system without adding a single dollar to the budget.24 On the other hand, to include these items in the budget only magnifies the problem of how to balance it.

g. A mandatory balanced budget could cause great economic and social dislocations. To achieve the amendment's purposes, opponents argue, federal spending would have to be cut dramatically or taxes increased sharply. To raise taxes significantly may not be politically or economically feasible. The expenditures most vulnerable to a cost-conscious Congress are likely to be those for many social service programs, including assistance to state and local governments. To reduce such spending, opponents argue, will only shift the economic and social burden now shouldered by the federal government to other levels of government.26 Moreover, the end result may not be a significant reduction in the total public debt. Recently, say opponents of a constitutional amendment, the states have had combined surpluses that closely match the federal deficit.26 To cut federal spending by reducing aid to states thus would not reduce the total amount of public debt, but only transfer it from Washington to the state capitals.

4. Constitutional budget constraints will impede the government's ability to respond to economic and other crises. Opponents of a constitutional amendment dispute the proponents' argument that a flexible fiscal policy is unnecessary and that existing monetary policy instruments are sufficient to “fine-tune" the economy.27 Opponents also assert that the “national emergency" exemption contained in most proposed amendments may be illusory. Only a simple majority of Congress is necessary to declare war, but under the proposed amendments, two-thirds or three-fourths of Congress would have to approve paying for it. The difficulty of mustering such a large majority, even in times of crisis, could pose a significant barrier to effective government action when it is most needed. A high constitutional threshold, it is argued, would magnify the bargaining position of a small minority of Congressmen who could demand a high (and indeed, unrelated) price for their votes. On the other hand, government intervention in the economy, or any new governmental program which required additional spending, would be impossible, say the opponents, until a problem reached crisis proportions.28

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