A Balanced-Budget Amendment and the Constitution

This post is in two parts. Part I rebuts a fatuous attack on proposals for a balanced-budget amendment to the U.S. Constitution. Part II offers an amendment that would result not only in a balanced budget (with appropriate exceptions) but also would limit the federal government’s ability to spend for purposes not contemplated by the Framers of the Constitution.


The blogger known as Patterico points approvingly to Carson Holloway’s “The Balanced Budget Amendment: What Would Hamilton Say?” at Public Discourse. I am less enthusiastic, to say the least, about Holloway’s arguments against a balanced-budget amendment. Here are key quotations (in italics) from Holloway’s article, followed by my comments (in bold):

[T]he Constitution, as it stands and as the Founders crafted it, empowers the Congress to “borrow money on the credit of the United States.” The Founders, evidently, intended that the government be capable of incurring debt.

Holloway begins by framing the problem incorrectly; it is spending, not borrowing. A balanced-budget amendment need not keep the federal government from borrowing, and could easily be framed to allow borrowing under specified conditions and for specified purposes.

It is possible that circumstances have changed and that a balanced budget amendment is now necessary to realize those basic principles, such as limited government, to which the Founders were committed.

It is obviously true that circumstances have changed. Look at the massive future outlays implied in “entitlement” programs, and consider the effects of those outlays on the productive sectors of the economy. A balanced-budget amendment is as necessary today as Amendment XIII (abolishing slavery) was deemed in 1865.

[F]or those who respect the Founding and seek to be guided by it, the fact that such an amendment would take away or restrict a federal power that the Founders thought necessary should be a cause for hesitation and further reflection. Before deciding to support a balanced budget amendment, we ought to ask: why did the Founders empower the government to borrow?

I respect the Founding and am guided by it. Article V of the original Constitution provides for amendments, and does not restrict the character of amendments. (There was one restriction, which lapsed in 1808.) When the citizens of the United States are confronted with crippling economic policies perpetrated by the government of the United States, amending the Constitution to rectify those policies is among the least drastic of means available to the citizenry.

Here we might turn with particular profit to that Founder most associated with the establishment of America’s public finances, the first Secretary of the Treasury, Alexander Hamilton. Upon taking office, Hamilton was confronted with an infant republic, saddled with considerable debt from the revolution and far behind in its repayment obligations. In late 1789, the House of Representatives charged him with devising a plan to put the nation’s finances back on a sound footing, and he responded with his masterly and much-admired Report on Public Credit; Congress subsequently adopted its recommendations. While the Report’s primary purpose was to provide a financial plan, Hamilton, seeking perhaps to educate public opinion and influence the views of legislators, opened the Report with some general reflections on the importance of public credit. It is here that we might gain some insights to enlighten the contemporary debate on the balanced budget amendment.

It is ironic that Holloway should turn to Hamilton, whose  expansive view of the powers of the federal government.has been openly praised and emulated by legislators, executives, and judges. If any one person can be blamed for the runaway spending that threatens Americans’ prosperity, it is Hamilton.

Why, then, do Hamilton’s principles seem to condemn a balanced budget amendment to the Constitution? Though Hamilton claims that public borrowing should be undertaken in response to unforeseeable “exigencies” or “emergencies,” he nevertheless claims that public borrowing is a “necessity.” This is the case because, while the exact nature of such exigencies cannot be known in advance, we can know, with great confidence, that they will arise, in one shape or another, and that they will overtax the ordinary revenues of the government.

Holloway, again, shifts the focus from spending to borrowing. Borrowing is not the problem, nor is borrowing out of the question under a balanced-budget amendment.

[T]he proponents of the balanced budget amendment might respond that it can be crafted in such a way as to allow for public borrowing in cases of war or crisis…. [I]t would surely be foolhardy to write the amendment in such a way as to allow public borrowing only in cases of war, because it does not take too much imagination to summon to mind many potential crises short of war that might be addressed best through public borrowing….

Holloway assumes that “crises” short of war are any of the federal government’s business, and that — if they are — they could not be addressed simply by re-prioritizing the federal budget. The “crisis” of the Great Depression elicited many unconstitutional schemes. Social Security is the most notable of them and, until the advent of Medicare, perhaps the most disastrous.

[A]n inability to borrow would not only hamstring the government in responding to grave public evils; it might also prevent the government from seizing positive opportunities that could produce public benefits for generations. America might, at some point, have a chance to purchase some valuable new territory, perhaps rich in natural resources, that will enhance the nation’s prosperity. Such a purchase, however, might require an immediate transfer of money that would be impossible without the ability to borrow.

Here, Holloway resorts to fantasy and appeals to mercantilism. If there is “some valuable new territory, … rich in natural resources” to be acquired, let it be “exploited” by the most efficient producer (of whatever nationality). Americans will benefit by being able to purchase more, newer, and better things at better prices from the “exploiter.” There is no particular advantage if the “exploiter” is American, for even in that case its products will not be given away to other Americans. If the “exploiter” chooses — for some insane reason — not to offer products to Americans, that would be the exploiter’s loss. If the “exploiter” is a foreign nation with evil designs, a peaceful acquisition is unlikely and the evil designs are best met through federal government’s constitutional authority to provide for the common defense.

One could, of course, try to avoid all of these problems by framing the necessary exception broadly enough in the language of a balanced budget amendment. The amendment might, for example, allow public borrowing not only in cases of war but also in cases of public crisis. But if a narrowly drawn exception accomplishes too much by preventing borrowing when it is really needed, a broadly drawn exception would accomplish too little and would, in fact, make the amendment useless for all practical purposes.

What about an exception that is drawn in a way that accomplishes what is needed? (I’ll come to that.) Holloway’s generalities are uninformative, and clearly designed to support his prejudice against a balanced-budget amendment.

The proponents of a balanced budget amendment might instead try to discipline borrowing by establishing a serious procedural obstacle to incurring debt. For example, the amendment might require a two-thirds majority of each House to authorize borrowing on behalf of the public. Based on the American experience, it is not clear that such a requirement would seriously deter the government from incurring new debt. In the Senate, the filibuster already creates a supermajority requirement (of three-fifths) for increasing the nation’s debt, yet debt-ceiling increases have routinely passed the Senate. Indeed, debt-ceiling increases have been routinely enacted with overwhelming support in both Houses of Congress. In the most recent, and most hotly contested, debt-ceiling debate ever, 62% of the House of Representatives and 74% of the Senate voted to issue more debt. One might try for an even more stringent requirement—calling for, say, a three-fourths vote in each House of Congress—but this would only exacerbate an already serious failing in any supermajority requirement: namely, any supermajority requirement is anti-majoritarian, and the higher the bar is set, the more anti-majoritarian it is. A balanced budget amendment framed in this way thus strikes at one of the vital principles of American republicanism: majority rule. It would be a step backwards in the direction of the Articles of Confederation, which required supermajorities for important actions of the Federal government.

Holloway once again deploys shifty logic and dubious facts in the service of big government. As for the recent debt-ceiling debate, it resulted not only in a higher debt ceiling but also in the reduction of planned spending — a precedent, as far as I know. As for the use of rules that require approval of certain actions by supermajorities, Holloway’s earlier appeal to the Founders (Framers, really*) should put him on the side of such rules. (That he appeals only to one such Framer, big-spending Alexander Hamilton, gives him away.)  For one thing, the Constitution specifically states that “Each House may determine the Rules of its Proceedings” (Article I, Section 5).

More generally, the Constitution was meant to thwart majorities and, therefore, to ensure that the federal government remained limited in its power and scope. The need for supermajorities in certain matters is merely an entirely constitutional effort to restore checks that have been eroded by unconstitutional actions: leglistative, executive, and judicial. Majority rule is not a vital principle of American republicanism, as Holloway asserts. Indeed, for reasons advanced eloquently by James Madison in Federalist No. 10,  majority rule is to be feared and circumscribed. If supermajorities are required for important actions of the federal government, it is only because the federal government has slipped its constitutional bounds.

Holloway would admit such things were he an honest advocate of the Constitution, and not just of Alexander Hamilton’s successful but unconstitutional scheme to enlarge the federal government. But if Holloway were an honest advocate of the Constitution, he would admit, also, that the Constitution has been “amended” by stealth, to allow the federal government to run up huge bills and huge debts, instead of having been amended properly, as provided in Article V.

In summary, contrary to Holloway’s assertion a balanced-budget amendment would not be a step backward. Such an amendment is badly needed to restore the Framers’ original scheme: a government of limited, enumerated scope, as opposed to a government of unlimited scope, financed by the blank check of unlimited borrowing that Holloway seems so devoutly to wish.


Amendment XXVIII

Section 1.

The entire text of Sections 8 and 9 of Article I of the Constitution is replaced by the following:

Section 8.

Congress may, by a majority of three-fifths of the members of each House present, when there is a quorum consisting of three-fourths of the number of persons then holding office in each House:

a. collect revenues in order to pay the debts and expenses of the United States, so long as

• the debts and expenses are incurred through constitutional actions,

• the revenues are not collected through taxes or levies on income or assets,

• all taxes and levies are uniform throughout the united States, and

• there is published a regular statement and account of the receipts and expenditures of all public money;

b. borrow money on the credit of the United States in order to pay its legitimate debts,

(1) so long as the indebtedness of the United States does not increase over any ten-year period, as determined by comparing the amount of indebtedness at the end of the preceding fiscal year with the amount of indebtedness at the end of the tenth preceding fiscal year;

(2) except that, for the purpose of determining the change in indebtedness over any ten-year period. the amount of indebtedness at the end of the preceding fiscal year shall not include the sums spent during the ten-year period for any purpose contemplated in this Constitution, if said expenditures were made pursuant to appropriations approved by at least three-fourths of the members of each House present when there is a quorum of at least three-fourths of the number of persons then holding office in each House;

(3) if the indebtedness of the United States increases, as determined in accordance with the two preceding clauses, then no person who served as a member of Congress or as president or vice president of the United States during the ten-year period in which the amount of indebtedness increased shall thereafter be eligible for election or appointment to Congress or an executive or judicial office of the United States;

(4) further, if indebtedness shall have increased, as determined in accordance with clauses (1) and (2) above, outlays by the government of the United States for all purposes but national defense shall be reduced pro-rata — and without recourse to legislative, executive, or judicial action — in the amounts required to offset the increase in indebtedness within two fiscal years.

[This is adapted from Article V, Section B (Specific Powers of Congress), of “A New, New Constitution.” Go there for a complete listing of Congress’s powers and lack thereof.]

Section 2.

The following article is added to the main text of the Constitution:

Article VIII.

Section 1.

Each word, phrase, clause, sentence, section, and article of this Constitution, as amended, shall be construed in accordance with the meanings of the aforesaid at the time of their ratification.

Section 2.

Where there is ambiguity about the meaning of any portion of this Constitution listed in the foregoing section of this Article VIII, its meaning shall be determined by reference to the speeches and writings of the proponents of the language adopted through ratification.

Section 3.

The meaning of any portion of this Constitution may not be altered to include subjects or powers not specifically contemplated in the language of this Constitution, as determined in accordance with the foregoing sections of this Article VIII.

Section 4.

Despite exigencies, real or proclaimed, the subjects of this Constitution and the powers herein granted or denied may be changed only by amendment, in accordance with Article V.

[This is adapted from Article X, Section C (Construction), of “A New, New Constitution.”]

* “Founders” encompasses the entire founding generation of political leaders who led the Revolution, signed the Declaration of Independence, and crafted the Constitution. “Framers” refers strictly to the makers of the Constitution. Hamilton was one of them, and the assurances that he gave in his numbers of the Federalist about his belief in limited government proved to be deceptive.

See also “The Constitution: Myths and Realities“.