A Balanced Budget Amendment That Would Actually Work

The “Do Your Job” Amendment.

Regarding the deficit problem, Warren Buffett once joked:

I could end the deficit in five minutes. You just pass a law that says that any time there is a deficit of more than three percent of GDP, all sitting members of Congress are ineligible for reelection.

Darned if he ain’t right. The prospect of unemployment concentrates the mind wonderfully. Especially the mind of an incumbent politician, which seems to respond to no other incentive.

Inspired, I sat down recently to translate Buffett’s brilliant insight into legal language.

I quickly realized that, to be airtight, it needs to be framed not as a law but as a constitutional amendment, and to frustrate potential gaming of the rules it should focus, not on deficits but rather on debt, and further that its debt cap should be framed not in terms of a share of the economy (GDP) but on a specific number of dollars. Finally, I decided to define these terms in the text of the amendment, just to be safe.

The final result is wordier than I’d like. Brevity is the soul of constitutional wit. But then, isn’t specificity a small price to pay for peace of mind?

Section 1. Whenever the total outstanding debt of the United States exceeds the authorized debt of the United States, any person then serving as a Senator, Representative, President, or Vice President of the United States shall at that moment become ineligible for reelection and shall also be ineligible, for a period of eight years following the expiration of his or her term, to serve in any of the aforesaid positions or to hold any other office or public trust under the United States.

Section 2. The authorized debt of the United States shall be equal to 105 percent of the total outstanding debt of the United States on the date of the ratification of this article but may be altered from time to time with the approval of the Congress and of a majority of the legislatures of the several States. The president shall from time to time publish the respective amounts of the authorized and the outstanding debt of the United States as measured in constitutional dollars.

Section 3. In this article “debt” means any obligation backed by the full faith and credit of the United States, “outstanding debt” means all debt held in any account and by any entity at a given point in time, “authorized debt” means the maximum total amount of debt that may be lawfully issued and outstanding at any single point in time, and “constitutional dollar” means a coin or note worth 371.25 grains of pure or 416 grains of standard silver.

I call it the “Do Your Job Amendment.” Unlike the majority of BBA proposals I’ve seen, I know it would work.

How can I be so sure? Because it has no loopholes, no ambiguities, no gaming opportunities. It creates no new powers subject to interpretation. It merely creates a new qualification for holding federal office, one that is sure to incentivize incumbents to do their job. It declares a clear rule—”Hit your numbers, or hit the road”—to a small, well-defined population, with a simple enforcement mechanism, in language that is easy to understand and execute. And it defines its own key terms, in language too plain to be misunderstood. It thus harnesses, as with chains of iron, fiscal discipline to that most potent of all engines, political self-interest. Thus it aligns the interest of the representative with that of his constituents. Henceforward, the two rise and fall together. And yet it also retains enough flexibility to ensure that Congress can borrow as necessary to meet a genuine emergency. So the amendment is unlikely to be violated and therefore, with time, likely to become politically sacrosanct.

A traditional balanced budget amendment tries to shame lawmakers into doing their job. This one punishes them for not doing it. A traditional BBA commands balance. This one ensures it. This BBA would actually work.

Questions

Q. Why merely cap the debt? Why not eliminate it?

A. Denying the government any power to borrow is too rigid. Governments need to borrow, just as businesses, households, and individuals do. For example, if a defensive war becomes necessary, borrowing may make the difference between survival and destruction. But a large debt should certainly be a rare exception, not the rule. In my view, the goal shouldn’t be to avoid debt altogether, but rather to keep the total amount of debt manageable. To be manageable, the debt should be growing less fast than our ability to repay it. In good times the debt should be getting steadily smaller as a share of national income (due to a combination of economic growth and the running of routine budget surpluses); in a time of crisis, the debt should be allowed to spike up temporarily, but only to the level necessary to meet the crisis and not so high as to be unmanageable once the crisis has passed. The debt itself should not be a source of crisis. Rather, debt should be an occasional tool for handling the unexpected.

Q. Why cap the debt in terms of a specific number of dollars? Why not as a percentage of GDP?

A. Because incumbents would find ways to game the definition of “GDP.” Plus, we shouldn’t want the national debt to be perpetually growing with GDP. We should want it to shrink continuously as a share of national income. The truly golden policy is: 1) discourage deficits, 2) encourage surpluses, 3) allow limited borrowing, up to a reasonable maximum, and 4) have an additional line of credit available for national emergencies, accessible with the approval of a co-signer (the states).

Q. Why include the President and Vice President? Why not just Congress?

A. Because they share in the power of the purse. The President has the veto. The Vice President is president of the Senate. They play a role in decisions about how Congress will tax, borrow, and spend.

Q. Why eight years for the timeout period?

A. Eight years seems a happy medium between too long and too short.

Q. Why are there no exceptions for national emergencies or declared wars?

A. There’s no need. Congress can increase its credit limit at any time with the approval of the states.

Q. Under this scheme, won’t we lose the talents of truly indispensable statesmen? The Washingtons, the Jeffersons, the Lincolns of the future?

A. We won’t. The vast majority of office-holders, who are admittedly not statesman, will work hard to keep themselves in office, and thus guarantee the continued eligibility of the small fraction of office-holders who are statesmen.

Q. What federal offices, if any, could a person serve in, during the eight-year time-out period?

A. None. The provision bars any federal employment or position, in the legislative, executive, or judicial branches, regardless of whether or not it is compensated, during the eight-year time-out.

Q. Why not impose term limits instead?

A. This approach is better than term limits. Terms limits says, “Time’s up, hit the road.” This amendment says, “Hit your numbers, or hit the road.” Which is more likely to get results?

Q. Is section 3 (definitions) really necessary?

A. Yes, because we need to define the key terms used in the preceding sections. If we don’t, politicians will find a way to defeat the amendment through clever redefinition.

Q. Why define debt in the Constitution? Isn’t it already well understood, legally speaking?

A. Yes, debt is pretty well understood, but the definition is not legally fixed. Nothing prevents the government from changing the definitions of “debt,” “outstanding debt,” or “authorized debt.” If we ratified this amendment, the temptation to monkey around with those definitions would be overwhelming.

Q. Why does the draft not include an enforcement clause, e.g., “Congress shall have power to enforce this article by appropriate legislation”?

A. Because it is not necessary, and therefore it is necessary not to include it. As a legal matter, there is no need for a new grant of power. The proposed amendment creates no new powers. Rather, it adds a new qualification for holding federal office. As a practical matter, granting Congress a specific new power could be misread to exclude anyone else from exercising that power, which would defeat the purpose. The purpose is to police Congress. It would be silly to give Congress an excuse to claim an exclusive power to police itself.

Q. What’s a “constitutional dollar”? How does it differ from a regular dollar? Why is it even necessary to distinguish the two?

A. The amendment could be easily evaded without a fixed definition of “dollar.” If the government could simply redefine “dollar” at any time and to any extent, then our debt cap, no matter how it’s framed, would contain a big loophole. Nowadays the word “dollar” is regarded as not reflecting any fixed definition. But in the Constitution as originally understood, it did. It meant (and here I’m quoting the Coinage Act of 1792, which implemented the Framers’ understanding):

DOLLARS OR UNITS—each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver.

That is the precise definition of the word “dollar” as used in the United States Constitution. (For more on this topic, see my article on the Constitution’s seven money clauses.)

Q. How exactly would the president determine the amount of the debt “as measured in constitutional dollars”?

A. He would do the following simple math. To express the national debt in terms of constitutional dollars, he would divide the debt as expressed in Federal Reserve Notes (let’s call them “greenbacks”) by the value of the constitutional dollar (as defined by the Founders in terms of silver), also expressed in greenbacks. To obtain the latter figure, he would multiply the current troy-ounce-price of silver by 77.344 percent. (A constitutional dollar contains 77.344 percent of a troy-ounce of pure silver.) So, for example, when a troy ounce of silver is worth one dollar of greenback money, a constitutional dollar is worth 77 cents of that money. Likewise, when a troy ounce of silver is worth $10 in greenbacks, a constitutional dollar is worth $7.73 in greenbacks. And so on. (Precious metals are defined in terms of troy ounces, which are defined in terms of grains. One troy ounce equals 480 grains.)

Q. Would this amendment lead to a gold standard or the like?

A. No. This amendment would not eliminate the Fed, or constrain the Treasury’s ability to print greenbacks, impose a gold standard, or anything along those lines. Rather, it merely gives a clear, fixed, and reliable (and indispensable) definition of “dollar,” for the narrow purpose of enforcing this particular amendment.


Published: December 19, 2014.

Author: Dean Clancy.

 

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