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The Amendment does not seek to prescribe the set of policies which would generate stability. The appropriate mix of policies well may vary from generation to generation. Any such prescription therefore is inappropriate to a Constitution.

The two sentences of section 1(a), taken together, imply a Limit of the following form:

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(a) Inflation less than or equal to 3%

TO(Y) • NGNP(-2)=

(b) Inflation greater than 3%

TO(Y)% - NGNP (Y-2)% - (0.25) [IR(Y-2)% - 3]

Given the definition of inflation, the maximum permissible dollar spending in the (Y)th year, TO(Y), would be equal to:

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where RGNP (Y) is the real gross national product of the Yth year.

If, for example, total outlays in 1979 were $505.4 billion, maximum total outlays for. 1980 would be $558 billion under the limit. This may be contrasted with the $543.5 billion now being proposed.

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3558 = (505.4)(0.75(1.116) + 0.25(1.038) + .0075)

- (T079) (0.75 (NGNP 78%) + 0.25(RGNP 78%) + .0075) where % - % divided by 100 to shift the decimal.

Presumably, such changes would be accomplished by statute. Should the Congress fail to act, or should serious questions develop as to

whether the Congress has acted in a manner consistent with the Amendment,

the issues may be resolved by the Courts. At least on matters of "language", the Courts have a long and generally honored tradition of resolution. Such matters may be left to the Congress for implementation and to the Courts for resolution of conflicting interpretations.

Section 1.

(a), Ist Sentence.
Total outlays of the Government of the United States during
any fiscal year shall not increase by a percentage greater
than the percentage increase in nominal gross national
product during the last calendar year ending prior to the
beginning of such fiscal year.

The current Constitution uses the phrase "Government of the United States" only once [Art. 1, Sec. 9(7)]. The appropriate phrase should be

one consistent with the intention to include within the Limit both budget

and off-budget outlays. In view of Art. 1, Sec. 9(7), "Treasury" or "Treasury of the United States" may be the more precise phrase, provided off-budget entities can make off-budget outlays only after a Treasury outlay which transfers funds from the Treasury to the entity or if offbudget entities satisfy commitments by Treasury checks.

"Fiscal year" is a term defined by statute. As such it has no

constitutional standing apart from its statuatory definition. The current

Federal fiscal year begins on 1 October of one calendar year and ends on 30 September of the following calendar year. Similarly, "calendar year" is a term conventional in nature, quite apart from any statutory definition For the purposes of the proposed Amendment, both terms may continue to be subject to implementing statutory legislation. Under current practice, estimates of nominal and real gross national product for the calendar year just ended are subject to modest error during the period Congress is acting upon the Federal budget for the coming fiscal year. Further budgetary revisions due to continuing refinement of the estimates of gross national product should cause little if any disruption of Federal programs.

extant.

In conjunction with current practice, the twenty-one month lag between calendar year gross national product and fiscal year total outlays incorporated into the Amendment has the additional advantage of producing changes in total outlays of a counter-cyclical nature. As real growth of the economy is slowing, increases in total outlays are responding to increases in the gross national product twenty-one months earlier. Total outlays, thus, tend to be stimulative at a time when stimulation is indicated. As growth of the economy is accelerating, increases in total outlays are responding to the modest changes in gross national product

twenty-one months earlier. Total outlays, thus, tend to exercise a

restraining influence at a time when restraint is indicated.

Maximum statutory variation in the relationship between fiscal and

calendar year is limited to beginning the fiscal year on 1 January (minimum

lag) and beginning the fiscal year on 31 December (maximum lag). In consequence, the Drafting Committee saw no reason to restrict Congressional

latitude to alter the Federal budgeting period beyond that inherent in the

language of Section 1. That is, it is the intention of the drafters that

the estimates of gross national product be for a previous calendar year, not for the concurrent or any future calendar or fiscal year.

In final draft, the phrase "years may be substituted for "fiscal year" and "calendar year" such that Section 1 (a) would read "... in the last year.", or "... in the last year ending prior to the beginning of the year." in the preceding year." ... in the immediately preceding

year."

In this context, "increase" is to be interpreted in its technical sense of having the capacity to be positive, zero, or negative. A "negative increase", which normally would be called a "decrease", would arise if nominal gross national product declined from year to year.

"Percentage increase in nominal gross national product" may be expressed

symbolically as:

NGNP (1) % =

([NGNP (1) - NGNP (0)]/NGNP (0)) (100)

or as

([NGNP (1)/NGNP (0)] - 1) (100) where NGNP (Y) refers to nominal gross national product in the Yth year. The percentage increase will be positive, zero, or negative as NGNP (1)

is greater than, equal to, or less than NGNP (0).

Percentage increase in the total outlays similarly may be expressed

symbolically as:

TO(1)% = ([TO(1) - TOCO)] - 12 (100) where TO(V) refers to the total outlays the Yth year.

The Limit states that the TO(Y)% must be less than or equal to the NGNP (Y-2)% since, by current convention, TO(Y) refers to outlays for the fiscal year began in the (Y-1)th year, for which "the last calendar year ending prior to the beginning of said fiscal year" would be the (Y-2)th calendar year. Thus, for example, the percentage increase in nominal GNP during the calendar year 1980.

The Limit incorporated into the proposed Amendment may be called a "linked limit", in contrast with a "base-year limit". Under a baseyear limit approach, the maximum outlay in any year is independent of the level of outlays actually recorded in any year after the initial or base year. Such an approach has the potential for generating a limit at variance with experience such that the maximum permissible increase is significantly above the current normal outlay total. Under a linked limit, the maximum outlays in one year are related directly to the actual outlays of the prior year. Should a series of Congresses fail to provide maximum appropriations over time, the outlay limit automatically is adjusted downward.

This difference may be illustrated by Table III where, by Year 5, the maximum permissable percentage increase in total outlays under a baseyear limit is three times that of a linked limit.

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