By Anthony W. Hawks
Among the 18-plus competing balanced budget amendments (BBA) now vying for the House Republican leadership’s endorsement is H.J. Res. 81, sponsored by first-term congressman and Tea Party favorite, Rep. Justin Amash (R-MI). What makes this proposal unusual is that Rep. Amash has not tinkered with the traditional BBA (currently H.J. Res. 2), but instead offers a novel approach that avoids many but not all of the flaws of competing BBAs. Here is the Amash proposal in its entirety:
“SECTION 1. Total outlays for a year shall not exceed the average annual revenue collected in the three prior years, adjusted in proportion to changes in population and inflation. Total outlays shall include all outlays of
the United States except those for payment of debt, and revenue shall include all revenue of the United States except that derived from borrowing.
“SECTION 2. Two-thirds of each House of Congress may by roll call vote declare an emergency and provide by law for specific outlays in excess of the limit in section 1. The declaration shall specify reasons for the emergency designation and shall limit the period in which outlays may exceed the limit in section 1 to no longer than one year.
“SECTION 3. All revenue in excess of outlays shall reduce the debt of the United States. Upon the retirement of such debt, revenue in excess of outlays shall be held by the Treasury to be used as specified in Section 2.
“SECTION 4. The Congress shall have power to enforce and implement this article by appropriate legislation.
“SECTION 5. This article shall take effect in the first year beginning at least 90 days following ratification, except that outlays shall not surpass the sum of the limit described in section 1 and the following portion of the prior year’s outlays exceeding that limit (excepting emergency outlays as provided for in section 2): nine-tenths in the first year, eight-ninths in the second, seven-eighths in the third, six-sevenths in the fourth, five-sixths in the fifth, four-fifths in the sixth, three-fourths in the seventh, two-thirds in the eighth, one-half in the ninth, and the limit shall bind in the tenth year and thereafter.”
As BBA drafts go, this one is fairly concise (only 280 words), which is not insignificant when crafting constitutional language. On the other hand, the Framers set an enviable standard for simple straightforward English, and regrettably the Amash BBA reads too much like a mathematical formula.
Aesthetics aside, the Amash BBA gets high marks for avoiding many of the doctrinal traps of the traditional BBA. For example:
— There is no reliance on estimates of outlays and receipts, which can be easily manipulated, but rather on actual revenue collected in the three prior years.
— There is no provision turning the debt ceiling statute into a constitutional mandate that punishes the American people with threats of government shutdowns and national default – threats that could now become real because of a super-majority voting requirement.
— There is no super-majority requirement to pass a “bill to increase revenue,” which could stymie tax and non-tax legislation alike. Republicans are fond of saying that we must increase revenue through economic growth, not tax increases. Would every bill promoting economic growth now be subject to a super-majority vote?
— There is no waiver for declared war or “imminent and serious military threat to national security,” which would cause the BBA to be still-born since we are now in a constant state of military conflict, and the “Authorization for Use of Military Force” (Public Law 107-40) enacted on September 18, 2001 following the 9/11 attacks has never been repealed.
— There is no spending cap based on some percentage of GDP, which would again punish the American people with threats of government shutdowns and national default – only now the Treasury could not even expend monies on essential programs (including the national debt and our troops in combat) once the cap was reached, absent a super-majority waiver.
On the other hand, the Amash BBA has technical problems of its own. Sections 1, 2, and 5, for example, all use the word “year” without clarifying whether it is the calendar or fiscal year that would be followed. This is a problem because fiscal year is the only option that makes any sense. Congress should have the authority and discretion under Section 4 to implement Section 1 and Section 2 using a fiscal year, but this option would not be available under Section 5, which by its own language determines the effective date of the amendment.
Regardless, the natural meaning of “year” is “calendar year”, and this is particularly true of Sections 2 and 5. If so, then for internal consistency Section 1 and would have to use a calendar year as well, which in turn would force Congress to change the current fiscal year (October 1 to September 30) to a calendar year.
I do not believe that this is Rep. Amash’s intent, but if so, then his proposal needs to be re-drafted to refer specifically to “fiscal year.” Similarly, it is puzzling why Rep. Amash has chosen to use the word “revenue” in Sections 1 and 3 instead of the more commonly used “receipts,” which is the word found in H.J. Res. 2 and other more traditional BBAs. Presumably, they are intended to be synonymous.
In any event, let’s assume that the Amash BBA is in effect for FY 2011, and that Congress adopts a fiscal year and “total receipts” approach. How would the “total outlays” limit in Section 1 be calculated exactly for FY 2011? As I read the Amash language, there are three steps to follow, none of which are completely clear.
First, whose numbers would we use for the calculations and how exact should they be? According to the OMB website, Historical Table 1.1 indicates that the total outlay numbers were $2,523,991,000,000 for FY 2008; $2,104,989,000,000 for FY 2009; and $2,162,724,000,000 for FY 2010. Assuming that it is permissible under the Amash BBA to round off to the nearest million, then the “average annual revenue collected” would be $2,263,901,300,000 for the 3-year period from FY 2008 to FY 2010.
Second, before the average $2,263,901,300,000 figure can be used, it needs to be “adjusted in proportion to changes in population and inflation.” Population numbers, however, are notoriously difficult to ascertain even if one can agree on the proper definition of “population.” (Are illegal aliens included?). Presumably, what Rep. Amash is trying to accomplish here is an adjustment upward to account for population growth over the prior three year period, but won’t this mean that some type of census count every year rather than every 10 years? How practical is that?
Also remember that Congress is supposed to pass appropriations bills before the fiscal year begins, but adjustments for population and inflation cannot be fully calculated until after the fiscal year begins since the adjustments are based on the three years that immediately precede the year in which the “total outlays” are to be limited.
Calculating inflation in the prior three years can be done more quickly and with greater certainty, but you still need a “constant dollar” standard by which to make the adjustment. Turning again to the OMB website, Historical Table 1.3 furnishes a set of figures for constant FY 2005 dollars (rounded this time to the hundred millions). Using FY 2005 as the “constant dollar” standard, the inflation adjusted numbers for the same 3-year period are now $2,524,000,000 for FY 2008; $2,105,000,000,000 for FY Year 2009; and $2,162,700,000,000 for FY 2010. This results in a slight downward adjustment in the “average annual revenue collected” figure from $2,263,901,300,000 to $2,263,900,000,000 (assuming no adjustment for population).
Note that Section 1 does not include any adjustment for deflation, which would necessarily have the effect of adjusting the prior 3-year revenue average upward to allow for greater spending in the current year. I do not know if this omission was intentional to prevent an upward adjustment, but if the purpose here is greater accuracy and allowance for economic growth, then this omission would appear to be an important oversight since there is no principled reason for including inflation but not deflation.
Third, now that we have established $2,263,900,000,000 as the dollar limit on “total outlays” for FY 2011 under Section 1, a final calculation is required under the transition rules in Section 5. Specifically, one more upward adjustment is needed equal to nine-tenths of the amount by which the outlays in FY 2010 exceeded the $2,263,900,000,000 dollar limit.
Since Section 5 does not include an adjustment for inflation, Historical Table 1.1 is again applicable, giving us a total outlay of $3,456,213,000,000 for FY 2010, and an excess amount of $1,192,313,000,000 (nine-tenths of which is $1,073,081,700,000). Adding this nine-tenths number back to the original 3-year revenue average, the final dollar limit on total outlays under Section 1 is $1,073,081,700,000 + $2,263,900,000,000 = $3,336,981,700,000.
In making these calculations, my assumptions could well be wrong, and I certainly have no problem with Congress enacting an implementation statute that explains precisely how these calculations are to be done. It is incumbent on Rep. Amash, however, to present what he believes the implementing statute should look like before asking that we support his proposed amendment.
Even if we assume that $3,336,981,700,000 is the correct dollar limit for FY 2011, there is a more fundamental problem that Rep. Amash shares with other BBA proposals and which cannot overcome with technical
drafting changes or a better implementation statute. This is the enforcement problem of what happens when the Treasury has spent $3,336,981,700,000 and the fiscal year is not over yet.
Like other BBA proposals, Rep. Amash allows for a general “emergency” waiver provision (Section 2), although it is more stringent than most. Thus, it increases the super-majority threshold for invoking the waiver from three-fifths to two-thirds. It requires Congress to authorize a specific dollar amount for the “emergency,” while specifying the reasons for invoking the waiver. It also limits the “emergency” to one year, but how this 1-year period is calculated is ambiguous.
If Congress succeeds in passing the waiver by a two-thirds majority, when does the one-year “emergency” period begin and end? If it starts on the date of the declaration, then it will necessarily extend through the current fiscal year. If not, does the “emergency” year start retroactively at the beginning of the current fiscal year, so that no “emergency” spending extends beyond the current fiscal year?
The alternative scenario, especially given the two-thirds threshold, is that no waiver is approved. Does the Treasury just shut down until the fiscal year expires? It would seem so since there is no other authority under the Amash BBA for allowing the Treasury to release funds no matter what the money is for. This of course brings us right back to the debt ceiling crisis and threat of “Fiscal Armageddon” that we faced this past summer.
Under Section 4, Congress has both “enforcement” and “implementation” powers, but the “enforcement” powers are superfluous since Congress can “enforce” a BBA right now with its current tax and spending powers.
The inclusion and limitation of “enforcement” powers in Section 4 to Congress is more likely for the purpose of precluding the President and federal courts from asserting any implied enforcement powers under Section 4.
If so, then we are right back where we started. Either the waiver provision will be routinely invoked, in which case there is no genuine balanced budget requirement under the Amash BBA, or we shall endure perennial government shutdowns and threats of Fiscal Armageddon.” In giving us this Hobson’s choice, I regret the Amash BBA is like all the others.
Copyright © 2011 Anthony W. Hawks. All rights reserved.