A recipe for addressing our looming fiscal crisis
We must take necessary steps
Insidesources.com
THREE critical things took place in 1913. Proposals establishing the federal income tax and direct election of senators were adopted through constitutional amendments. In addition, the Federal Reserve was established via statute.
These three actions fueled the federal government’s growth, undercut states’ rights and enabled the federal government to manipulate interest rates and self-deal in its own debt.
As a result, the federal government is 10 times bigger as a percentage of the economy today than in 1912 — and it is still growing.
Congress controls less than 30 percent of the annual budget, down from 97 percent in 1912. Stated differently, the federal government has written a blank check for more than 70 percent of federal direct spending, and the more than $1.5 trillion in annual tax expenditures are not controlled at all. Ninety percent of federal spending is not part of the yearly budget. What kind of budget is that?
Congress has passed all the annual appropriations bills by the beginning of the fiscal year just four times in my lifetime.
Federal debt/gdp has reached record levels and is still increasing.
Total liabilities and unfunded promises of the federal government now exceed $125 trillion, which is five times our GDP and about $380,000 for every man, woman and child in the country.
Interest is the fastest-growing federal expense, for which we get nothing!
In fewer than 10 years, the Social Security and Medicare HI Trust Funds will be exhausted. Yet, the leading presidential candidates do not want to touch them. This is unacceptable and an example of laggardship rather than leadership.
It is time to recognize reality.
Clearly, we are on a fiscally irresponsible and unsustainable path. In fact, every major federal fiscal and monetary agency has publicly agreed with this statement for several years.
Failure to act is not an option because it directly threatens our future economic prosperity, national security, international standing and domestic tranquility.
The bad news will ultimately flow to the states and the American people.
Unfortunately, the debt ceiling has failed to constrain the growth of the government and limit mounting debt burdens. Other statutory fiscal constraints have also failed.
As I testified before the House Budget Committee in March, three steps are necessary to defuse our ticking federal debt bomb:
■ First, stop the bleeding: Cut federal spending levels for fiscal 2024 from the bloated levels of fiscal 2022 and 2023. Federal spending in fiscal 2023 was 40 percent higher than the PRE-COVID levels of fiscal 2019. We will see what happens when Congress passes the fiscal 2024 appropriations bills.
■ Second, stabilize the patient: Create a statutory Fiscal Sustainability (or Debt) Commission to educate and engage the American people with the facts, the truth and the tough choices. After doing so and soliciting input, make a package of recommendations to stabilize debt/gdp at a reasonable and sustainable level by a year certain. The package would receive an up-ordown vote in Congress. Fortunately, bipartisan bills to establish such a commission have been introduced in both houses of Congress.
■ Third, cure the disease: Adopt a Federal Fiscal Responsibility Constitutional Amendment that would limit the growth of government and cap debt/gdp at a reasonable and sustainable level absent a formal declaration of war or limited and unexpected circumstances with a super-majority vote in Congress. Such an amendment should be ratified by state conventions of pledged delegates like the 21st Amendment. This is the closest thing to a vote of the people under our system. Switzerland adopted a similar amendment about 20 years ago with 85 percent support from Swiss voters and very positive results.
Shockingly, in 1979, 39 states had active Applications for a Convention of States to propose a Fiscal Responsibility Amendment. Thirty of these applications were limited solely to fiscal responsibility, thereby providing a critical safeguard against a so-called “runaway convention.”
Despite this, Congress has failed to act, denying the states their equal right to propose amendments under Article V of the Constitution. This is unacceptable and unconstitutional.
Remember these key lessons from history:
First, when George Washington made his farewell address, he issued four warnings. They were to avoid excessive debt, avoid foreign wars, avoid regionalism and avoid factionalism (or political parties). How are we doing?
Second, Rome was arguably the greatest superpower in history. It was a republic for 500 years and then became an autocracy for an additional 500 years. Rome fell for several reasons. They included fiscal irresponsibility, political incivility, moral decline, an overextended military and the inability to control its borders. Does that sound familiar?
We must learn from history and others and take the necessary steps to create a better future. “We the People” are responsible for what our federal leaders do or fail to do. We owe it to our country, children and grandchildren to act and restore our stewardship duty for the future.