Saturday, April 23, 2011

The Shaft


One republican politician after another, when asked “Will you vote to raise the debt ceiling?” has the same answer, “I am against raising the debt ceiling, unless we get something major as a concession.”

So, what is a major concession, in their eyes? To many it consists of the same prize, a balanced budget amendment (BBA). “If we could attach the vote on raising the debt ceiling to a vote on the BBA, then I would vote in favor.”

Let’s weigh what we give up for what we get. First, what we give up. We will concede that the debt ceiling will be raised. Currently the U.S. debt limit is $14,294,000,000,000 ($14.294 trillion, or $46,000 per citizen). It was last increased from $12.394 trillion effective in February 2010. At the time of this writing (the evening of 4/22/2011), the current national debt, subject to this limit, stands at $14.245+ trillion. During the next few days we will reach the debt limit.

For every $1 trillion added in debt each citizen will owe an additional $3,200. For some additional perspective, our current national debt number, measured in seconds, would equal approximately 450,000 years. If our current debt were dollars laid flat, end-to-end around the equator, it would make a wall twenty feet tall. Yet, Washington does not appear to grasp the severity of the situation.

So, for each of us to assume an additional chunk of national debt, what will we be receiving in return? Our gift will be a “proposed amendment to the Constitution”. That’s right, we would not be unwrapping an actual law prohibiting the government from spending more than the national revenue; no, we would find in our package a proposed amendment being sent to all of the states for possible ratification. Yippee!

In order for a proposed amendment to become part of the Constitution, three fourths of the states (38 of the 50) must vote to ratify. So, even if the legislature were to pass this measure and it be sent to the states, there is a chance that it would not receive the required number of state approvals. Typically, the states are given seven years to complete the debate and voting for ratification.

If at least 38 states ratified the BBA and it took seven years to do so, the new amendment would take effect the beginning of the second fiscal year following its ratification. If it went to the states for consideration this summer and took seven years to ratify. The BBA would take effect in the fall of 2019. If all of the required states ratified the BBA within the first six months, it would still not take effect until the fall of 2017 (according to the wording of the document – House Joint Resolution – HJR).

There are actually multiple versions of a BBA existing as HJR. The two with the most support are HJR-1 (130 cosponsors) and HJR-2 (219 cosponsors). The two are very similar with one major difference; HJR-1 would limit outlays to 20% of GDP (Gross Domestic Product, which is the total market value of all goods and services produced in the country during one year).

Ignoring the potential for 38 states to fail to ratify the BBA and also the fact that it would not take effect for several years, at the very earliest; what would the BBA accomplish if it did become part of the U.S. Constitution? In my opinion, almost nothing!

The BBA is full of loopholes that the government will use to exempt one year after another from falling under its limits. For instance:

Section 1 – the budget must be balanced unless 60% of the legislature votes to exceed revenue,
Section 2 – the debt limit shall not be increased unless 60% of the legislature votes to raise the debt limit,
Section 4 – bills to increase revenue (taxes) require a majority of each house,
Section 5 – Congress may waive the BBA in any year in which we are at war or when the U.S. is engaged in a military conflict causing an imminent and serious military threat to national security,
Section 7 – total receipts used in the BBA do not include amounts from borrowing and total outlays do not include repayment of debt.

In summary, we will be taking the very serious step of changing our Constitution by adding an amendment that will rarely take effect in any given year. If Congress does not vote to increase spending or raise the debt limit in some year, they can exempt that year due to a serious military conflict somewhere in the world. If the President cannot get Congress to vote to authorize increased spending in one year, all he needs to do is send our troops off to fight and get the spending increased through the back door.

We would still need to continue to borrow and increase our debt due to Section 7. Our government will spend what it brings in through revenue and need to borrow money to pay the debt.

We are trading a present increase in national debt for a potential limit in spending years from now. Note that even if the BBA had been in effect for the past ten years, we would have been exempt from its limits each and every year due to military conflict.

Do not be fooled. The BBA is not the solution to our fiscal problems. If our representatives were serious about stopping the out-of-control spending, they could do it without an amendment to the Constitution. Spending bills must originate in the House. If the republicans in the House would draw a line in the sand and refuse to cross it, they could control spending. No increase in the debt limit and no bill to raise taxes and no spending bill can ever become law without republican approval in the House.

1 comment:

  1. Phew. You managed to make the situation seem quite hopeless. Now, onto the "solution". Love the visuals you give for the debt. The stacked dollar bills around the equator really puts it in perspective.