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On the other hand the potential opponents of such programs—those that generally bear the cost-are the taxpayers at large, who are unlikely to be more upset by one unecessary federal program than another and who do not have the time and energy to be aware and vocal about all of them. Consequently, lobbying pressure against such bills is usually much less focused and intense and the risk of loss of significant political support as a result of a vote for the program is likely to be small.

In the absence of additional balancing factors, greater political advantage is usually perceived to lie in supporting a spending program than in opposing it.

Because of the availability of deficit spending and the automatic increases in tax revenue that occur as a result of individuals being pushed into higher tax brackets through inflation or real growth in income, politicians seldom need to take the politically disadvantageous step of actually voting for a tax increase. Thus the political advantage of voting for spending programs is generally not offset by the political disadvantage of voting for a tax increase to pay for them



Eliminating only one of these sources of bias-easy availability of deficit spending or automatic tax increases--would not be enough to restore a more desirable balance to our political process. We must take care of them both. Even if deficit spending were totally prohibited, spending could still increase because of automatic tax increases. No politically disadvantageous vote for a tax increase would be necessary. If automatic tax increases were eliminated, but deficit spending could be easily obtained through simple majority vote, then spending could increase without significantly greater obstacles than those that exist today.

Furthermore, we must correct these biases by constitutional amendment. We have seen how unsuccessful the statutory approach is. For example, Senator Harry F. Byrd, Jr.'s statutory balanced budget requirement has had no apparent effect.


HERENT IN OUR PRESENT POLITICAL PROCESS Senate Joint Resolution 126 makes it more difficult for politicians to support spending increases without the genuine support of the people as a whole. Under its terms, if a simple majority of Members of Congress wished to increase spending for one program, they would have to reduce or oppose other programs-placing interest groups in competition with each other for a fixed spending amount rather than with the taxpayer-or they would have to place themselves on record as voting for a tax increase.

Section 1 of the amendment requires that Congress adopt a budget every year, which would set forth the total receipts and expenditures of the Federal Government including expenditures now treated as “off budget.” Such budget could not be in deficit unless three-fifth's of each House of Congress have so approved. The amendment thus establishes a norm, which can be avoided only if a consensus greater than simple majority exists. As already indicated, if the requirement were merely for a simple majority, no more control would exist than at present. We believe that a three-fifth's majority would be a sufficient obstacle to deficit budgets without removing totally the flexibility which many persons desire to retain in case of economic difficulty such as serious recession. It should be noted here that the environment for such a vote would be quite different than that surrounding the vote on the debt limit. A vote on a deficit budget would occur at the planning stage when defeat of the proposal would still permit adjustments to be made so that the Government would still be able to function in the spending year, although not at as high a level than if the deficit budget had been accepted. In contrast a vote on increasing the debt limit is frequently taken in a crisis atmosphere when rejection would shut down the Government.

Section 1 also provides that the Congress shall not pass, and the President shall not sign, any appropriation bill which would cause total expenditures for any year to exceed the expenditures in the budget for such year. In practice this would require the use of estimates. If the expenditures authorized in a specific appropriation bill, when added to the sum of estimated expenditures under permanent appropriations and the expenditures in the appropriations bills already passed for the year, would cause the level of expenditures in the budget to be exceeded, then such bill could not be approved by Congress or the President. No waiver would be available. The bill could only be approved if an increase were adopted in the total budget, which would require a three-fifth's vote if a deficit would result, and a tax increase otherwise.

Since all spending from the Treasury must be authorized by appropriation, such a restriction on appropriation bills would restrict Federal spending to the level set forth in the budget.

Section 2 of the amendment prohibits increases in the share of national income going to the Government unless a simple majority of Congress plus the Presidentor two-thirds of Congress in the face of a Presidential veto-are willing to vote "on the record” for a specific increase in that share. If a majority of the people as a whole truly support an increase, a simple majority of their elected representatives, along with their President, should be able to accomplish such an increase. Unlike the norm of keeping expenditures no higher than receipts, which should require a super majority to violate, there is no norm with respect to the taxes and other receipts which should go to Government. Furthermore, increases in taxes and other types of Federal receipts are usually politically unpopular. The majority vote requirement by itself would offset the political advantages to increased spending.

Section 3 of the amendment would allow waiver of the balanced budget requirement during wartime since it would be anomalous to require a super majority to finance a war when only a majority is necessary to declare it.

Section 4 places in the Constitution the traditional rule of construction that terms are to be construed in accordance with the intention of those who drafted them. This is particularly important with respect to our amendment, since changes in the definition of terms such as "budget,” “receipts," "expenditures,” and "national income" could greatly weaken the amendment.

Since section 4 explicitly refers to the meaning of terms on the date on which the amendment is submitted to the States for ratification, the meaning of_all terms can be made clear in legislative history. It is our intention to do that. For example, it will be made clear that the budget which is required must include all expenditures, including what are now known as off-budget items, and that the meaning of the term "receipts” does not include the proceeds of Federal borrowing.



Mr. Chairman, I am certain that some of my colleagues will wonder why we did not simply limit Federal spending directly. Let me briefly explain. We do not believe it desirable to limit spending to any particular arbitrary fraction of the GNP or other similar measure, nor do we believe that requiring supermajorities for spending increases is justified.

First, it could be deemed "antidemocratic" to lock any particular economic theory or policy into the Constitution. If a majority of the people truly want increased spending, we are not aware of any principle which would justify our saying to them that they may not have it. We are simply attempting to correct a political process which allows increases to occur even when the people do not want them.

Second, such theories and policies may well be mistaken. Consequently, complex and detailed formulations are especially inappropriate.

Third, much of the concern which the public feels about Government spending exists because it is perceived as leading to increased taxes. The amendment which insures that politicians will be more accountable to the public for tax increases is a direct response to that major concern.

Finally--and this is related to our concern that democratic principles not be violated-such an explicit spending limit may not be as constitutionally appropriate. Provisions of the Constitution, including all amendments except the 18th amendment, either, first, establish the structure of Government and basic details of the political process used to establish the will of the national majority, or, second, restrict majority rule in order to protect individual rights or the rights of the States.

To prohibit a majority from spending more than some arbitrary amount does not seem to fall within either category.

We have attempted to draft an amendment that primarily accomplishes a procedural reform, that perfects our political process so that we may rely on it to accurately reflect the actual will of the majority.

Thus, the amendment is intended to make politicians accountable for their support of higher spending through its requirement-in the absence of threefifths support for deficit spending—that politically advantageous spending programs be balanced by politically disadvantageous tax increases, not automatic tax increases but tax increases resulting from recorded votes.

We have not sought to insure any particular level of spending, even though as individuals we have, of course, our owh preferences. We have attempted to eliminate the biases toward spending that exist in our political process without replacing them with new biases.

Given public opinion today, we believe that sections 1 and 2 of our amendment would together act as the effective spending limitation which many Senators seek. At the same time a different result is possible in the future if the will of the people reflects different concerns and different priorities.

Senator HEFLIN. Without making a statement, Mr. Chairman, I request my remarks be inserted in the record.

Senator BAYH. That is an eloquent statement.
Senator HEFLIN. I thought you would appreciate it.
Senator Bayh. So is the Senator's from Wyoming.
(The prepared statement follows:)

PREPARED STATEMENT OF SENATOR HOWELL HEFLIN Mr. Chairman, when I first joined the Senate in January of this year, the first piece of legislation I sponsored was a joint resolution calling for a constitutional anıendment which would mandate a balanced federal budget on an annual basis. In offering this legislation I was fulfilling a pledge I made to the people of Alabama who sent me to this body to represent them. The people of Alabama, like the people all over this country, realize that inflation is perhaps the number one problem facing this country today. No doubt there are other problems which we must face and overcome but, as these problems wax and wane the problem of inflation goes on and on and on. The people of this country are crying out for relief and it is the responsibility of this Congress to assume the leadership in trying to bring inflation under control and to provide the much needed relief for the average American worker and taxpayer.

In my first floor speech in this body, I urged the Senate and the House of Representatives to assume the leadership in this battle. I noted that a strong move was being made by the states to convene a constitutional convention in order to propose a balance the budget constitutional amendment. I felt then and I feel now that such a convention would be unwise and certainly would be unneeded if this body fulfills its own responsibilities for providing the leadership in this area.

I must admit, however, Mr. Chairman, that at the start of this sesssion the prospects for progress looked bleak indeed. There were many, many persons both in and out of the Congress who thought this movement would never get off the ground. Dozens of proposals for achieving a balanced budget were put forward and although each had its own constituency, no consensus could be seen for any particular approach to solving the problem.

Early in the year, however, a coalition of Senators who were interested in providing relief from inflation to the American taxpayers began to meet to seek ways of attacking this problem. This coalition of Senators and their staffs met frequently throughout the spring, summer and fall trying to arrive at a consensus measure which could be supported by all the various factions and constituencies who were seeking the same end, although by a variety of means.

By early fall it was clear that a majority of the Members of the Constitution Subcommittee were in agreement that some action should be taken this year, but again there was no consensus as to the particular approach which would he most appropriate. Several months of intensive work by the staffs of Senators De Concini, Hatch, Simpson, Thurmond and myself, always in coordination with and in conjunction with the efforts of the Ad Hoc Balance the Budget Committee made up of Members from the Senate at large, worked diligently on trying to form some kind of coalition. Various approaches were taken, scrutinized by the Subcommittee Members and the Ad Hoc Committee and revised or rejected.

Finally, a few weeks ago a measure was forged which, in my judgment, takes a fresh approach to the problem and which combines the best features of the various

competing approaches to the solution of the problem of balancing the budget and restraining federal spending and federal growth.

The proposed amendment has been scrutinized by many Senators and interest groups as well as the staffs of many in this body. It appears to be the consensus of those who examined this amendment that it is an amendment that we can live with, that the American public will rally behind and that has a realistic chance of being passed by this Congress and ratified by the several states. I think that we have obtained a major breakthough which will lead to the unsnarling of the impasse that was caused by so many competing pieces of legislation.

Today this amendment will be reported favorably by the Constitution Subcommittee of the Senate Judiciary Committee. I think this is an historic day because this is the first step in a long journey which will eventually see this amendment become a part of our organic law.

I think at this point it is important to note the characteristics of this amendment. It is not the intention of the drafters of that amendment to write economic policy in the Constitution. In our collective judgment, it is only incidentially an economic amendment; primarily it is an amendment of process. Section 1 of the amendment establishes a norm and that norm is that spending should not exceed revenues. If a government is going to spend money for whatever purpose, it should and must have the money in hand to pay for the goods or services required. This is a concept that is basic to sound fiscal policy both on an individual level and on the national level. It's a concept that all Americans understand. You cannot continue to spend more money than you take in year after year and be on sound economic footing. Section 1 can be waived by a majority vote in case of war or by a three-fifths vote of the Members of Congress.

Section 2 requires that revenues not grow at a rate which exceeds the growth of national income and thereby establishes a norm. This norm is that tax increases must be above board and affirmatively approved by a vote of the elected representatives. It does not try to control the level of government spending per se. What it does is provide that if the government is going to raise taxes, it must do it by majority vote in the open and not rely on hidden taxes such as inflation to drive up federal revenues and thus finance increased federal spending. The Congress can no longer hide behind inflation if this amendment is approved as I think it will be. It will then be put in the hard position of making decisions about whether to cut out spending or to raise taxes to cover the increased spending. Either decision will be difficult and this difficulty I think will inhibit the growth of a needless federal program. Thus, in effect, the provision will be both a limitation on spending and a limitation on taxation which are major goals for any such amendment.

As mentioned, the amendment is a unique combination of the approaches which were competing for attention. First and foremost it is a balance the budget amendment. But, as mentioned above, it also has the characteristics of a spending limitation and a tax limitation amendment. It expressly mandates a balanced budget which can be waived by Congress only by a three-fifths vote. It is a tax limitation because it prohibits hidden inflationary tax increases and a spending limitation in that if there is no vote to raise taxes, spending will be held down by the section mandating a balanced budget.

Mr. Chairman, I stated earlier that today is an historic day. I truly believe this and I think that the American people will rally behind this amendment once the details of the amendment are made known generally. I hope that all groups who have an interest in bringing fiscal restraint and economic sanity to this government will rally behind this amendment and give it their support. It is very likely that the amendment will be reported by the full Senate Judiciary Committee by the middle of March, 1980. It is thus very likely that this amendment can be debated on the floor of the Senate early next year. In my judgement, we have achieved a breakthrough in the war on inflation and now we must move boldly toexploit our successes. I call upon Americans all around this nation to get involved in this movement. The time is ripe and if we act decisively perhaps before the end of this session of Congress we can present the American people the opportunity to ratify this much needed and sensible amendment to our federal Constitution.

Again, I want to thank all of my colleagues on the Constitution Subcommittee and their staffs for the hard work that has gone in to putting us on the threshold of victory. I also want to thank each and every Member of the Balance Budget Caucus and especially Senators Armstrong, Boren, Exon, Lugar, Morgan, McClure and Harry Byrd who provided the bipartisan leadership in bringing the Balance the Budget Caucus together initially and providing the impetus which I think contributed much to the furthering of our common goal.

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Senator Bayh. I don't know about this tattoo business, but I am anxious to see those legislatures at the same time they pass those resolutions send accompanying statements to me and to all of us in this body saying they don't want those Federal funds we are sending back there to them. I find a great deal of inconsistency with the very people who are resolving we should balance the budget but don't cut out here and don't cut out there. That is something we have to weigh.

But the buck stops here; we are taking a big bite out of that buck, I think, passing out this resolution, holding these hearings.

I appreciate the effort everybody has made. I don't say that critically of anyone here because we are all trying to accomplish the same goal.

Senator HEFLIN. I move we vote.
Senator Bayh. Great idea. All in favor say aye.
[Chorus of ayes.)

Senator Bayh. Opposed. No. The Senator from Ohio asks I cast his proxy in opposition.

I appreciate the cooperation of the members of the committee and the staff has given to this very complicated subject.

If there is no further comment right now, let's adjourn until the next meeting

Senator Hatch. Could we let the record show the vote was 5 to 2.

(Whereupon, at 10:15 a.m., the subcommittee was recessed, to reconvene subject to the call of the Chair.)

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