Category Archives: Debt and deficits

Can states fix what Congress messed up?

Debt and deficits, Legislature, Politics, State government, U.S. Congress

By Steve Brawner
© 2015 by Steve Brawner Communications, Inc.

Can the usual processes that created the $18 trillion national debt – now more than $57,000 for every American man, woman and child – also be used to pay it down?

If your answer is yes, then I encourage you to check the history books. Almost ever year since the nation was founded, the federal government has added to the national debt, and under current projections, the debt will grow bigger each year, year after year, as far as the eye can see.

It should be clear by now that our nation’s capital will not suddenly see the light of fiscal responsibility, so can anything be done to reverse the slide? Apparently not by Congress, so two separate national movements are attempting to amend the Constitution by employing a never-before-used process led by the states. Under Article 5 of the Constitution, 34 states can call a convention, which would then propose amendments that must be ratified by 38 of them.

One of those efforts, the Convention of the States, proposes an open-ended convention tasked with limiting the powers of the federal government, with suggested amendments that would require a balanced budget, enact term limits, redefine the Constitution’s Commerce Clause, etc. In Arkansas, supporters are considering two versions, according to one of its supporters, Rep. Bob Ballinger, R-Hindsville. He believes at least one will pass.

Nationwide, the effort faces a much steeper climb. The Convention of the States’ goals and its rhetoric are so conservative that it will have a tough time reaching 34 states, let alone 38. Also, the delegates would be free to propose whatever amendments they want, leading to fears of a “runaway convention.” Those fears are unfounded, because any proposed amendments still would require approval by 38 states. But the fear that something crazy might happen has cost the movement some allies.

The other effort, the Compact for a Balanced Budget, also is a long shot but would seem to have a better chance. Unlike the Convention of the States, the Compact proposes a single amendment. The amendment states that the government cannot spend more than it collects unless it borrows under a debt limit that can be increased only with approval by a majority of state legislatures. Also, all future tax increases would have to be passed by a two-thirds vote of Congress, though a majority vote could close loopholes or replace the income tax with a national sales tax.

With the Compact for a Balanced Budget, we know what we’re getting. The states that sign up agree to the wording upfront. The delegates would assemble, vote yes and go home.

Alaska and Georgia have already signed on as members of the Compact. Organizers see Arkansas as one of 30 other states they must have. Then they would have to sway six other states where passage would be harder.

In Arkansas, Rep. Nate Bell, R-Mena, pre-filed a Compact for a Balanced Budget bill before the legislative session began. He was one of the early supporters of the Convention of the States, and although he still favors it, he thinks this is a better way.

I like it, too, and not just because it has a better chance of passing. It creates a mechanism that helps Congress be more fiscally responsible. It gives states the ability to rein in Washington. It makes it hard for Congress to raise taxes, but not impossible, particularly not by closing some of the loopholes that riddle the tax code.

Bell, who is on the Compact for a Balanced Budget’s national board, plans to push his bill, HB1006, later in the session. Will it pass? It depends on a lot of factors. Legislators, including Bell and Ballinger, have a lot on their plates as they consider thousands of bills in three months’ time.

One of those is the Revenue Stabilization Act, passed each session since 1945. Because of that act, Arkansas has a mechanism in place to produce a balanced budget – which is one of the main reasons the state, unlike the federal government, always has one.

Congress: Better, sort of

Debt and deficits, Politics, U.S. Congress

By Steve Brawner
© 2014 by Steve Brawner Communications, Inc.

You could say that what Congress accomplished this month was a vast improvement. You also could say it wasn’t nearly good enough.

On Tuesday, President Obama signed a 1,600-page, $1.1 trillion “cromnibus” bill passed by Congress. The “cr” is an abbreviation for “continuing resolution,” which is a short-term funding mechanism that will be used for the Department of Homeland Security. “Omnibus” is the mechanism funding the rest of the discretionary budget – in other words, not entitlement programs such as Social Security and Medicare, which are on autopilot. Homeland Security is funded only until February so Republicans can try to undo Obama’s immigration order.

This is a step forward because Congress finished this task without a government shutdown, though the deadline for one came pretty close again. Next year will be a circus like always, but at least Congress won’t be playing Russian roulette with the economy for a while.

Unfortunately, important provisions were slipped into this spending bill that weren’t related to the budget. One, written by the big bank Citigroup, amends the Dodd-Frank law passed after the bank bailout and will let banks engage in riskier behavior backed by your tax dollars. If they make money, they’ll keep it. If they lose money, you’ll bail them out. Another provision increases the amounts that big donors can give to the Democratic and Republican National Committees tenfold, from $32,400 to $324,000.

Moreover, Congress relied on a few gimmicks to make the numbers work. The Committee for a Responsible Federal Budget, in fact, has found $30 billion it says violate the spirit of the sequester and the 2013 Murray-Ryan agreement. Without going into too much history, the sequester is a series of automatic spending cuts affecting non-entitlement programs. Murray-Ryan set spending caps for two years and raised spending levels above the sequester.

Google it if you need more. It’s hard to write about this stuff.

Thirty billion dollars is less than 3 percent of $1.1 trillion, so again, it’s not too bad. Still, it’s not great. One provision shifted $7 billion from regular defense spending, which is capped under the sequester and Murray-Ryan, to war spending in Iraq and Afghanistan, which is not.

This is one of many reasons why we should be reluctant to fight all these wars.

In addition to the cromnibus, Congress also passed a one-year bill extending 55 tax breaks retroactive to the beginning of 2014. These were deductions for wind energy production, big business foreign profits, schoolteacher supplies, college tuition, etc.

Some of those may be worthy policies, but there are several problems with doing it this way. First, the tax extenders bill reduces revenues to the federal government by $41.6 billion over 10 years – money future taxpayers will have to cover because Congress didn’t also cut $41.6 billon in spending. Next year, the tax breaks probably will be extended again, further adding to the debt. Also, by extending the tax breaks year after year instead of just cutting taxes permanently, Congress can hide how much these actions actually increase the national debt over time.

“It really is no more complicated than me going home and saying to my kids, ‘I’m going to ask you to pay for this $42 billion because we didn’t want to,’” Maya MacGuineas, CRFB president, said in an interview.

Finally, the whole point of a deduction is to encourage behavior. All of these tax breaks expired at the end of 2013. Waiting until the end of the year and then re-enacting them retroactively created uncertainty and made it harder for businesses to make the investments Congress is trying to encourage. If the credits are a win for the economy, then Congress should have extended them through 2015 so beneficiaries could include them in their plans moving forward. Congress did not do that.

Being a member of Congress often means choosing between two options that are less than ideal. For the record, here’s how Arkansas’ members voted on the two bills. On cromnibus, the yeses were Sen. John Boozman, Sen. Mark Pryor, Rep. Tim Griffin, and Rep. Steve Womack. The no votes were Rep. Rick Crawford and Rep. Tom Cotton. On tax extenders, everybody voted yes except Cotton.

The United States, or these United States?

Debt and deficits, Politics, State government, U.S. Congress

By Steve Brawner
© 2014 by Steve Brawner Communications, Inc.

The federal government will not reform itself. We’re past the point of electing different politicians or enacting different policies. Instead, the government’s underlying structure must be changed through a constitutional amendment process never before used in American history.

That was the message of Michael Farris, head of the Convention of States Project, during testimony before the House and Senate State Agencies and Governmental Affairs Committees Wednesday.

The Constitution has been amended 27 times using one process – Congress proposes a change, and three-fourths of the states ratify it. But Article V of the Constitution also includes another provision where two-thirds of state legislatures, or 34, would call for a convention. Delegates would consider constitutional amendments, each state having one vote. Proposed amendments would have to be ratified by three-fourths of the states – 38, in other words.

That method has never been used successfully, but Farris says it’s the only hope to fix a broken system. His group is asking states to pass resolutions for a convention that would consider how to impose fiscal restraints on the federal government, limit its powers and jurisdiction, and impose term limits on members of Congress and Supreme Court justices.

So far, Alaska, Georgia and Florida have passed nearly identical resolutions to that effect, and Farris’ group plans a hard push in about 20 states, including Arkansas, this upcoming year. Rep. Bob Ballinger, R-Hindville, said he or someone else will introduce the resolution in 2015 if it has enough support.

Farris assured legislators that Article V’s high standards for ratification – 34 states to call a convention and 38 states to ratify – mean only amendments with broad popular support would have a chance of being ratified.

That being the case, the movement must expand beyond its current base and way of thinking. Its leaders and supporters appear to be almost exclusively very conservative individuals. During a presentation to a home-schooling group Wednesday, Farris suggested one change would involve clarifying the Constitution’s “general welfare” clause so that, “If the states can spend money on it, the federal government can’t.”

That would give a lot more power and responsibility to the states, but it also would mean ending Medicare and Social Security as we know it at the federal level. Such a change would be impossible to sell politically in a lot more than 13 states.

Legislators had varying reactions to Farris’ testimony. Rep. John Walker, D-Little Rock, a well-known civil rights advocate, said the same states’ rights argument was made on behalf of slaveholders and segregationists. Farris said that wouldn’t happen again and that legislators could instruct their delegates not to repeal the Constitution’s civil rights amendments. Later in the session, Rep. Douglas House, R-North Little Rock, and Rep. Jim Nickels, D-North Little Rock, said delegates could ignore whatever instructions legislators gave them. To that, Farris replied, “We’re really dealing in international law here is what this is is because it’s a meeting of sovereign states, and there are recognized principles of international law that govern, and there are no … exceptions in international law or in American law.”

Sovereign states being governed by international law? Such thinking would be a huge leap for a lot of people. Prior to the Civil War, the United States was a plural entity, as in “these United States.” Afterwards, it became a singular: “The United States.” The emerging national identity enabled the country to become the world’s greatest economic and military power. But it’s also led to a bloated, irresponsible, and unresponsive federal government. No state manages its business as badly as the federal government does, and many, including Arkansas, do it much, much better.

A rebalancing of power is needed, though not to the extent that Farris supports. An Article V convention may the best hope of doing that because, as he argued, the government will not reform itself. And with only 13 states required to kill any measure, what’s the worst that’s likely to happen? A bunch of people gather in one place and argue forever without accomplishing anything?

We already have that. It’s called Congress. So if this just turns out to be a big waste of time, we can live with that. What we can’t live with is not trying. Thanks to Article V’s parameters, a convention probably can’t hurt, and it might do some good. I’m for it – a convention, at least, and then let’s see what amendments are proposed.

Remembering history on the eve of war

Debt and deficits, Politics

By Steve Brawner
© 2014 by Steve Brawner Communications, Inc.

“Those who cannot remember the past are condemned to repeat it,” the philosopher and poet George Santayana wrote. They also forget the good stuff, too.

Prior to Dec. 7, 1941, Americans were divided on how to respond to the escalating global conflict. That division ended with the attack on Pearl Harbor. Congress declared war on Japan with one dissenting vote. Germany and Italy declared war on America. America declared war on Germany and Italy.

In the months that followed, Americans volunteered for service or registered for the draft. During the war years, civilians across the country participated in scrap metal drives, bought war bonds, and accepted the rationing of certain foods and household items. They could hardly buy a tire because the rubber was needed by the boys overseas. Taxes, which already were high, rose even higher to a top rate of 94 percent. No one, and I mean no one, could go about their lives pretending a war wasn’t happening.

On Wednesday night, President Obama announced that the United States is expanding its efforts against its newest enemy. As with Japan in World War II, the Islamic State, or ISIS, has been committing atrocities for a while now in Syria and Iraq, but American opinion was not galvanized until Americans were killed, visibly. In 1941, it was the bombing of Pearl Harbor. Now, it’s the beheading of two journalists.

Obama announced that the United States will, among other actions, lead a broad coalition against ISIS, conduct airstrikes in Iraq and Syria, and will deploy 475 additional military advisors in Iraq. He asked Congress for “additional authority and resources” to train and arm Syrian rebels. “America, our endless blessings bestow an enduring burden” of leadership, he said.

This effort will be a fraction of the federal budget, but it will not be free. There is no question the resources will be provided. The question is, from whom? Like much of what the United States has done since 1980 – including a bunch of military actions, particularly in Iraq and Afghanistan – the money likely will be borrowed. Because our blessings are not actually endless, we’ve made a habit of asking for our children and grandchildren to pay for our current needs.

Whether it involves foreign policies like the wars in Iraq, or domestic crises such as relief after Hurricane Sandy, America’s response has been consistent for decades: There’s a need, often a legitimate one, and so we meet it. Unfortunately, we tend not to count the costs, and if we do, we tend to pass them on.

I am not opposed to what the president is proposing – and unlike many, I expect he’ll do a decent enough job of carrying out his plans. But the costs of this exercise should be budgeted, and they should be offset by spending cuts elsewhere or by revenue increases. No more wars that we ask our kids to pay for.

There’s a tendency to glorify World War II. That’s a mistake, because we need to learn from actual history, not an idealized one. They had a draft back then because they couldn’t get enough volunteers. They raised taxes because they couldn’t just pass the offering plate and collect enough to pay for the war. At the end of the war, the national debt had increased to 109 percent of the gross domestic product – higher than it is now.

But Americans back then at least tried to pay their own way. They did this at a time when the entire world was in flames, when much of the available workforce was overseas, when many were grieving lost loved ones, and when the Great Depression was still a fresh memory. Everyone sacrificed – not just those who wore a uniform.

Now, like so many times in recent years, the United States is about to kill some bad people in a far-off land. Let’s hope it makes the world a safer, freer place.

If it does, it would be our world that benefits – the one we’re living in now. That means we should be the ones to pay for it, not our children and grandchildren. They already will be looking back through history at us, and, hopefully, learning from our mistakes so they don’t repeat them.