June 2020 Newsletter
- All Budget Balancing Restraints Are Not the Same
- Is There a Bottom to the Debt Hole Politicians are Digging?
- Podcast Offers Info on a National Federalism Task Force
- Could Article V Justify Limitless Powers for Congress?
- Say It Isn’t So: Koch & Soros Join, Oppose Civil Rights
- Tennessee House to Vote on Wolf-PAC Proposal
- Term Limits Leader Offers a Graphic Illustration of Article V
- Recommended, Related Good Reads
Depending on who is telling the story, the state constitutions of 45 to 49 states contain provisions to restrain spending to income… to minimize state debt. That story is told to emphasize that if states (and families) can act responsibly with their finances, why can’t the federal government.If not spelled out in their state constitution, most states at least have a statuary requirement that their budgets balance. Yet several states carry large debt balances.
Illinois has a BBA (balanced budget amendment) provision in its state constitution. But, it is also one of the states with massive (and growing) state debt. Illinois currently has an estimated $8 billion in unpaid bills, and virtually nothing in its “Rainy-Day” fund. No year since 2001 has Illinois balanced its budget, resulting in the nation’s second worst net debt.
Illinois also has the worst pension debt of any US state (totaling at least $138.6 billion in pension debt). Debt per Illinois taxpayer equals $52,600, according to financial watchdog Truth in Accounting. Why is that? These questions prompted an inquiry to the Illinois Policy Institute (IPI).
Adam Schuster, Budget and Tax Research Director at IPI says, “Illinois technically has a balanced budget requirement, but the requirement is toothless as written” (Article VIII, Section 2, of the state constitution. It only restrains initial budgeting to “funds estimated to be available,” and permits deficits to be rolled over from year to year.
He says, “This allows for various accounting gimmicks and overestimations to make the budget appear balanced on paper, but politicians either pass ’supplemental appropriations’ (extra spending) later in the year or just let unpaid bills (deficits) pile up.“
According to The National Association of State Budget Officers, eleven of the states with BBA provisions in their constitutions (or statutory fiscal restraints) allow carry-over of deficit spending/debts (Arizona, California, Connecticut, Illinois, Indiana, Louisiana, Michigan, Nebraska, Rhode Island, Vermont and Wisconsin).
The Illinois constitution, says IPI, “creates only a prospective balanced budget requirement. It requires the Governor to propose and the legislature to pass a budget that is balanced on paper given their projections for spending and revenues. If revenues come in lower than expected or spending is higher than expected, there is no requirement to balance the budget at the end of the year.”
Only 39 states have “true” balanced budget requirements that do not allow the state to close a fiscal year with a deficit and carry that over to the next year. IPI says states “should be required to maintain end-of-year “true” balanced budgets.”
The lesson for state legislators: Write “true” BBAs for your state. The lesson for those wishing to impose meaningful fiscal restraints on the federal government: Be sure your proposal truly restrains debt other than in times of national emergencies… and then requires debt payback.
The IPI feels so strongly about Illinois’ lack of fiscal restraint that in late April it issued a statement entitled Why Congress Should Reject Illinois’ Bailout Request. It says, “Congress should condition any additional aid for troubled states on taxpayer protections that ensure pensions are solvent, accounting is realistic and budgets are balanced.” Read that full statement HERE.
Is There a Bottom to Debt Hole American Leaders are Digging?
Political leaders of all stripes seem to agree that some level of massive federal spending/debt-building is necessary since COVID-19 (and measures to stop it) have so drastically and suddenly knocked down the American economy. Unemployment levels are currently the worst since the Great Depression.
The question is: How does the federal government stop the debt-building spending, and restore federal revenues to something approaching a balance between income and outflow?
On May 10 the Times Record (Ft. Smith, Arkansas) carried a piece by Steve Brawner entitled Another three months, another $3 trillion. He highlighted the federal government’s plan to borrow $3 trillion during the April-June period to respond to the COVID-19 pandemic. He points out “That’s equal to more than $9,000 for every American.”
Mr. Brawner says “When the coronavirus has been contained and the economy has recovered, we’d better start acting more like squirrels. But how? Because they [squirrels] save instinctually and we obviously don’t, one idea is to enact a constitutional amendment requiring a balanced budget with provisions for emergencies like the current one.” Read his article HERE.
Also during recent weeks the Wall Street Journal carried a piece entitled U.S. Treasury Expects to Borrow $4.5 Trillion in Fiscal Year as Stimulus Spending Soars, written by Kate Davidson. She said, “The anticipated new debt for the year ended Sept. 30 is more than triple last year’s $1.28 trillion,” and that observation was before talk of another round of multi-trillion dollar borrowing that is anticipated during the summer.
Ms. Davidson says, “As a share of gross domestic product, the roughly $3.6 trillion of emergency spending Congress has authorized in the past six weeks is about what it spent over five years during and after the 2008-2009 recession, according to the Committee for a Responsible Federal Budget.”
She points out that “the nonpartisan Congressional Budget Office projects an annual deficit equal to 18% of GDP, the highest since the end of World War II and nearly four times what it was in 2019. That would push the national debt to 101% of GDP, also the highest since the end of World War II.” Read her article HERE.
Meanwhile on May 11 the Deseret News (Utah), carried a piece by Matthew Brown wherein he mulls over the question Will record deficits to combat coronavirus usher in new era of government spending?
He says “For decades, federal budget hawks pointed to the United States’ fiscal picture at the end of World War II as a precarious high water mark to avoid. Fever charts show a line climbing sharply from 1941 to 1946, when the nation’s debt-to-GDP ratio — an often cited measure comparing a country’s debt to its economic output — peaked at 106%.”
Brown quotes Phil Smith, national field director for the Concord Coalition, a nonpartisan group that advocates “responsible fiscal policy” as saying, “I can’t tell you how many times I’ve said, ‘This is the biggest debt since World War II.’ I won’t be using that caveat anymore.”
The Brown piece reports that 60 members of the Republican Study Group, a conservative GOP House caucus, sent out a letter saying, “Congress should offset future COVID-19-related deficits. Given the present fiscal crisis, the thought of any more debt-financed spending seems unimaginable.”
Mr. Brown dedicates a large portion of his article to the Modern Monetary Theory espoused by Randall Wray, an economics professor at Bard College. The Modern Monetary Theory (MMT) is a theory built on the belief that “countries controlling their own currency can run up higher deficits to fuel economic growth without negative consequences.”
Bond market guru Jeffrey Gundlach at DoubleLine Capital has called MMT “a crackpot idea,” while former White House economist and Treasury Secretary Larry Summers has labeled it “dangerous.”
Brown also included quotes from Utah Democratic Congressman Ben McAdams, who introduced an ambitious balanced budget amendment last year. He says McAdams is blunt in his assessment of economists who argue the consequences of ballooning national debt are overblown. “Modern monetary theory is junk economics,” McAdams is quoted as saying, “Many economists will tell you that unrestrained deficit spending will eventually catch up with us and we will start seeing inflation rise and the value of the dollar devalued.” Read the Brown piece HERE.
Back in November 2019, when the federal debt stood at about $23 trillion (which the article stated was then 103.2% of GDP), the St. Louis Federal Reserve issued a report entitled Fed analysis warns of ‘economic ruin’ when governments print money to pay off debt. It stated that “Federal Reserve economists warn that printing money to pay for deficit spending has been a disaster for other nations that have tried it.” Read the full statement HERE.
On May 8 a contrarian view written by Nick Licata entitled Harnessing Debt for Economic Growth, was carried by CounterPunch Magazine (described as a left-leaning or “Progressive” blog). He contends that the recently increased national debt “could create an opportunity to expand our economy.” Read it HERE.
Podcast Offers In-Depth Info on National Federalism Task Force –
Last month’s edition of this newsletter reported on the proposal that a new National Federalism Task Force be established. The proposal is being promoted by former Utah State Representative Ken Ivory. Referencing the current COVID-19 situation, Ivory said, “It is times of crisis like this where government power tends to irreversibly centralize, if we do not take concerted action to neutralize and reverse this natural tendency.”
Following that introduction, the American Legislative Exchange Council (ALEC) hosted a podcast entitled How a National Federalism Task Force Would Deal with COVID-19. The 27-minute podcast features Ivory and Karla Jones, Senior Director of the ALEC Federalism & International Relations Task Force. The podcast gives state legislators a more in-depth understanding about why the proposed Task Force is needed. Listen to it HERE.
Could Article V Justify Limitless Subpoena Powers for Congress?
According an article published on May 15 by The Volokh Conspiracy, the existence of Article V could be used to persuade SCOTUS that there are no limits on Congress’ subpoena power.
The article, entitled Limitless Limiting Principles, by Josh Blackman, notes that Congress currently seeks to subpoena President Trump’s tax records, but during a recent hearing on the matter various SCOTUS Justices repeatedly inquired of House attorney Douglas Letter “what limiting principle exists for Congress’ subpoena power.” Blackman reported that Letter “refused to give an answer.”
Then Blackman pointed out that “Under Article V, Congress has the power to propose a constitutional amendment ‘on any topic under the sun.’ Therefore, Congress could request just about any information that could help the development of a proposed amendment.”
He offers an example that the House might consider a constitutional amendment that would allow Congress to alter, by constitutional amendment, the president’s qualifications. He says “Here, it may be reasonable to subpoena certain information from the President to determine how to properly structure that amendment. Does this amendment have any chance of ratification? Almost certainly not.” He goes on: “It will always be possible to craft, in good faith, a proposed amendment that requires the specific information the House already wanted.”
Blackman concludes, “Perhaps the answer [to the SCOTUS inquiry] is that Congress’s subpoena powers is [sic] unlimited because of Article V. So long as the House can draft up a possible constitutional amendment, it can seek any information to facilitate that process.” Read the Blackman article HERE.
Say It Isn’t So: Koch & Soros Join in Opposing Civil Rights –
A story in the May 21 edition of The Washington Free Beacon reports that the Quincy Institute, founded/funded last November by the Open Society Foundation (George Soros) and the Koch Foundation (Charles Koch), held an event that day moderated by Kaiser Kuo.
Kuo is the former director of international communications for the Chinese search giant Baidu. According to the article Kuo “[A]rgued that the Chinese Communist Party’s rigorous domestic censorship of unflattering facts and information about the regime has, at times, saved lives and that some cultures, including present-day China, are not ready for what is widely recognized as a core human right: the freedom of association.” Kuo is reported to have said “Perhaps, and I hate to say this, some cultures aren’t ready for free assembly.”
According to the Free Beacon article, “The Quincy Institute has sought to position itself as a leading voice for accommodating China’s rise and has launched repeated broadsides at critics of Chinese president Xi Jinping who are pushing the United States to take a harder line on issues ranging from Chinese trade policy to the country’s military expansion in the South China Sea.”
Soros and the many organizations he funds (such as Common Cause) have long been aggressive opponents of any use of the convention of states provision in Article V of the US Constitution. On the other hand, Charles Koch and his now-deceased brother David have long supported the American Legislative Exchange Council (ALEC), an organization which has aggressively supported use of all Article V provisions. The new Quincy Institute seems like an odd alliance of billionaires.
Writers for Quincy Institute’s blog have pushed for the United States to “accommodate China” by “stifling public hostility, ceding Beijing a sphere of influence, dramatically increasing diplomacy, and relegating pushback to bureaucratic channels and the international community.” Read the Washington Free Beacon article HERE.
Tennessee House to Vote on Wolf-PAC Proposal –
On June 1, the Tennessee House of Representatives is scheduled to conduct a floor vote on HRJ809, a Wolf-PAC-promoted Article V application for a convention of states to consider proposing a constitutional amendment reforming the federal campaign finance system.
The five sponsors of HJR809 are all Republicans, a sharp contrast to the sponsors of the similar applications that have been adopted so far in five other states. Wolf-PAC is the only national group advocating for an Article V convention on campaign finance reform. Another group, American Promise has similar goals, but is pinning their hopes on a congressionally-proposed constitutional amendment. The HJR809 bill can be read HERE.
Term Limits Leader Offers a Graphic Illustration of Article V –
On May 4, US Term Limits NE Regional Director Ken Quinn released a series of ten well-drawn cartoon-like panels that illustrate his view of the Framers’ intent for an Article V Convention. His focus is on the question of “Did the Framers of the US Constitution intend for an Article V convention to be limited to the subject agreed to by two-thirds of the states or an open convention?”
Quinn’s drawings present a very different approach to educating people about Article V. View his work HERE.
Recommended, Related Good Reads –
Just before leaving the country on a much-deserved 5-month sabbatical, constitutional expert Rob Natelson wrote two new pieces.
Attacks on Electoral College misplaced; unlimited government is the problem, published on May 14 by Complete Colorado (a state-wide political news blog).
Natelson writes “Critics complain that the [Electoral College] system is not working as intended. In fact, the Electoral College generally works fairly well. Among the reasons it does not work better are state ‘puppet elector’ laws. These laws force electors to vote in accordance with the dictates of whomever controls state government. Puppet elector laws strip the position of presidential elector of all real importance.
“As a result, those running for elector often are mere party hacks rather than the experienced and respected statesmen envisioned by the Founders. That’s why some states do not even put the name of elector-candidates on their ballots.” Read his excellent article HERE.
Civics 101: How to Understand the Constitution is a Natelson piece recently published by The Epoch Times. Natelson points out that, unlike many believe, the US Constitution is neither a set of vague generalizations nor the source of basic rights for American citizens. Rather, it is a set of limitations on governmental power where that power might infringe on natural civil rights.
Natelson’s 4-page commentary notes that “Much of the Constitution is made up of lists of powers granted by the people to persons and groups. Other components are analogous to terms you might find in complex 18th-century documents creating fiduciary relationships—statutes conferring authority, instruments creating trusts or agency relationships, and charters erecting corporations.” Read it HERE.
The Constitution’s Call of Duty is a brief commentary recently written by former Alaska State Senator Fritz Pettyjohn on his personal blog, the ReaganProject. He points out that the Framers were very concerned about the potential abuse of power by the federal government.
Pettyjohn asks, “But what if Congress itself becomes the threat? Who can control Congress? Neither the executive or the judiciary was given that power. That was given to me, and to all of my colleagues who serve in our 50 state legislators.”
He points out that Article V of the US Constitution “lays a solemn duty on every state legislator who takes their oath of office seriously. To defend the Constitution from Congress we must unite to control it, when the occasion calls for it.
“Because the Framers gave us this power, they also gave us the responsibility. If we fail to exercise this power, we are derelict in our duty, and unfaithful to our oath.” Read his posting HERE.
Words Worth Considering…
“We need officials in the federal government to get serious about supporting reforms that will balance the budget, and we need many state leaders to do the same. The debt and deficit problems faced by the federal government are a reminder that bipartisanship is not always a good thing.”
“The federal debt grew from just over $5 trillion to over $10 trillion
under President George W. Bush and then up to nearly $20 trillion
under President Barack Obama. Even without bailing out state governments, federal spending levels are unsustainable. It is exactly why we need a balanced-budget amendment to force politicians in Washington — in both parties — to get serious about balancing the federal budget.”
The New York Times, May 20, 2020