Crisis and opportunity

As baby boomers age and retire, a crisis looms.  The benefits they expect and need threaten to bankrupt the federal government, already laboring under an $18 trillion debt.  Fundamental reforms are needed, but Congress has been and will be incapable of enacting them.

This crisis is an opportunity for the states, and the people, to assert their authority over the federal government.  27 of the needed 34 states have passed Resolutions calling for an Article V Balanced Budget Amendment.  Republicans are in total control of the seven legislatures still needed.  If these Republican legislatures can be persuaded to pass the needed Resolutions the first Amendment Convention in our history will meet.

Is a Balanced Budget Amendment the answer to all our problems?  A traditional BBA, consisting of spending and debt restraints, is necessary but woefully insufficient.  An expanded understanding of what constitutes a Balanced Budget Amendment is needed.

Budget deficits can be eliminated by reductions in spending or by increases in revenue.   A “balanced” Balanced Budget Amendment should include both.  Once it is accepted that increasing revenue to the federal government is within the scope of a Balanced Budget Amendment, the possibilities of using the BBA to enact fundamental reforms open up.

Federal regulations are a huge impediment to the sustained 4% economic growth we need to generate the revenue needed to balance the budget over the long term.  The Competitive Enterprise Institute recently estimated regulatory cost to the economy at $1.8 trillion a year.  An increase in economic activity in half that amount would produce an enormous amount of revenue to the federal government.  Regulatory reform thus belongs in a Balanced Budget Amendment.  Such reform could range from a requirement that all new regulations must be approved by Congress to one which only required approval of regulations with more than $100 million in impact.  The decision on how far to go is a political decision which will be made by the Convention.

Land transfers to the states would also vastly increase federal revenue, provided that a significant portion of the revenue which would be generated by development on this land be reserved to the federal government.  So, for instance, if the 69% of Alaska that is owned by the federal government were to be transferred to state ownership (excluding national parks, Indian reservations, and active military installations) there is no question that a portion of the former Alaska National Wildlife Refuge (ANWR)  would be leased for oil and gas development.  The bonanza of tax revenues and lease payments would be split between the state and the federal Treasury.  All throughout the West, from Montana south to New Mexico, and all points west, the story would be the same.  BLM and Forest Service land that has valuable resources on or under it would, under state control, produce enough economic activity to have a major impact on the deficit.  The fracking revolution could be doubled, as vast oil and gas fields would open up on formerly federal lands.

Regulatory reform and land transfers to the states would go a long way toward facilitating the kind of economic growth this country needs.  But the greatest impediment to such growth is the IRS and the Internal Revenue Code.  Adoption of a consumption tax or a flat tax, such as the one recently proposed by Sen. Rand Paul, would, over the long run, create an economic boon bigger than the Roaring Twenties.  Such an economic expansion would not only eliminate deficits it would allow paying the debt down.

When the Amendment Convention convenes it, and it alone, is the judge of what can properly be included within a Balanced Budget Amendment.  If it decides to follow the Byrd Rule all of the ideas set out above would be allowed.  The United States Senate, on numerous occasions, has used the Byrd Rule to justify inclusion of such items as opening up ANWR in a budget reconciliation bill.

The debate over an Article V Balanced Budget Amendment has not, until very recently, included discussion of using it as a vehicle to promote economic growth.  Once it is widely recognized that such a course is open, the question becomes one of political judgment.  How much can be included, and still be ratified by 38 states.  If Congress is supportive it can specify that ratification take place at State Ratification Conventions, as was done with the 21st Amendment repealing Prohibition.  If the Amendment proposed by the Convention has broad public support, Congressional leaders may be pressured into choosing this method.

Then it will be up to the voters.  If delegates to State Ratification Conventions are chosen at a special election, many low information and low motivation voters would not vote, increasing the chances of passage.  Purple states like Maine, Minnesota and Washington would hold the key.  Can the political independents and moderate Democrats in these states be persuaded to vote for a Balanced Budget Amendment that includes some or all of the revenue generating proposals outlined above?  It’s a once in a century opportunity.

It may never come again.

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