Friday, 29 July 2011 06:11

Supporting a Constitutional Amendment to Require a Balanced Budget

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Constutional Ammendment to Require a Balanced BudgetI recently sent a letter to all the Arizona Senators and Congressmen asking them to support a constitutional amendment to require a balanced budget as part of the debt ceiling bill. Most Americans support this and 49 states already require it. If we've learned anything from recent decades, it's that both parties -- Republican and Democrat -- cannot be trusted to stop spending. The only thing that can put a lid on spending is a constitutional amendment.

So far I've only gotten one response. Below is the letter I received from Senator John Kyle:

Dear Mr. Ross

Thank you for contacting me about the national debt limit.

Earlier this year, President Obama urged Congress to increase the debt limit with absolutely no strings attached.  That would have been a license to continue business as usual, and the House of Representatives emphatically said no, voting 97 to 318 to reject the president's "clean" debt limit increase on May 31.

I do not believe a debt-limit increase should pass either house of Congress without addressing the root cause of our massive debt problem – spending.  The fact is, government spending has exploded since President Obama took office, largely as a result of the passage of his failed economic stimulus bill, Obamacare, and generous increases for numerous government programs.  Federal spending amounted to 20.7 percent of gross domestic product (GDP) in 2008 – about the 40-year historical average – but jumped to 24.1 percent of GDP this year. 

According to the Congressional Budget Office, the debt held by the public will increase from 41 percent of GDP in 2008 to 72 percent this year, and, if current policies are left unchecked, will exceed 100 percent of GDP by 2021.  Such heavy levels of debt will stifle economic growth and erode our standard of living.  It will also make it increasingly difficult for our country to pay for important national priorities as the share of future budgets that must be devoted to interest on that debt rises every single year.

This is no longer some distant academic discussion.  In Greece, we are now seeing the disastrous effects of failing to address out-of-control debt:  endless bailouts, economic chaos, and social unrest.  Because their leaders failed to act in time, Greeks must now make a terrible choice: accept massive tax hikes and budget cuts or go bankrupt.  This could easily become our reality too if we do not begin to address the root causes of this overwhelming problem, and soon. In fact, the head of the world's largest bond fund recently suggested that the United States is already in worse financial shape than Greece.  He calculated our gross debt, which includes money guaranteed for entitlement programs, at "nearly $100 trillion" – more than almost any other developed country.

There is still time to fix this problem.  But we have to start reducing spending now.

This year, more than 40 cents of every dollar the federal government spends will have to be borrowed.  While that incredible figure should spur us to action, it also means that it would take a 40 percent cut in all government spending to balance the budget today, and it is just not realistic to expect that such a large reduction can occur all at once.  The need to increase the debt limit, therefore, offers perhaps the best opportunity to force the president to accept deep spending reductions now, the adoption of binding enforcement mechanisms that will ensure additional reductions in the future, and necessary reforms to secure entitlement programs for future generations.

The president and members of his party have so far been resistant to the common-sense cuts and reforms we've proposed, insisting instead on raising taxes on American families and businesses already struggling in this economy.  While the president's allies insist they are merely proposing tax increases on "millionaires and billionaires," the proposals they have put forward would actually target job creators – including small businesses – and many Americans who are far from being "millionaires."  In any event, raising taxes is the worst thing we could do as the economy struggles to recover.

Moreover, if history is any guide, their tax increases would be immediate and permanent, while the spending cuts they promise are unlikely to ever materialize.  As Stephen Moore and Richard Vedder wrote in a November 2010 column in The Wall Street Journal:  "Over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in – and a little bit more."

Indeed, even as they have argued for tax increases in the debt-limit negotiations, the president and members of his party have been calling for billions in new spending – exactly the opposite of what is needed. For example, one of the president's closest allies in the Senate recently called for yet another "stimulus" bill that would cost up to $100 billion.

I oppose the president's demand for job-killing tax increases.  Congress should instead adopt significant spending cuts, entitlement reforms, and systemic changes that will constrain spending in the future (the best way to do that is by passing the Balanced Budget Amendment).

As you may know, Treasury Secretary Geithner has outlined a series of steps that his department can take to keep federal borrowing within the existing limit until approximately August 2.  Until then, I will continue to work for an agreement consistent with the principles I've outlined above.

Sincerely,
 

JON KYL
United States Senator

P.S. If you wish to share additional comments about this or any other matter, please visit my website at: http://www.kyl.senate.gov/contact.cfm

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