Alaska is Poised to Link Arms with Georgia to Fix the National Debt

Fiscal Policy, Recent News — By on April 15, 2014 at 5:21 PM

by: Nick Dranias, Constitutional Policy Director, Goldwater Institute

More and more people are discovering that the states have the power to originate federal constitutional amendments under Article V of the United States Constitution. And it just so happens that the Alaska legislature is on the cutting-edge of using that power to fix the national debt.

Led by Representative Wes Keller and Senator John Coghill, the Alaska Senate is poised to entertain a floor debate on the “Compact for a Balanced Budget” (HB284). If the Compact passes, as it should, Alaska would join the State of Georgia in an historic commitment to advance and ratify a powerful Balanced Budget Amendment, spanning the width of our nation from the Northwest to the Southeast, from the Pacific to the Atlantic.

The Compact is a turn-key approach to amending the Constitution from the states. In essence, it bundles together all necessary actions by the states in the amendment process into a single bill requiring adoption in 38 state legislatures (the supermajority required for ratification of a constitutional amendment).

The Compact is also designed so that Congress need only pass a single counterpart resolution to fulfill its entire role in the process.

By combining all necessary legislative actions into just two overarching legislative efforts, only the Compact approach makes it possible, in principle, to advance and ratify a Balanced Budget Amendment in as little as one session year. Equally important, Alaska would be one of the first three states that would be responsible for directing the Compact’s interstate commission, which will have the job of leading the charge and bringing onboard the remaining 36 states that are needed to make a federal Balanced Budget Amendment a reality.

With the Compact Commission serving as an institutional platform for uniting the states in bringing fiscal reform to Washington, the balance of power would shift in significant ways to the states—and Alaska—immediately upon passage of HB284.

But HB284 is more than an innovative vehicle for reform.

The proposed Balanced Budget Amendment payload carried by HB284 strikes at the root cause of national debt problem by ending the absurdity of a bankrupt federal debtor setting its own credit limit; providing for a mechanism to prevent games of chicken over the debt limit; creating a real sense of scarce resources in the federal government that corresponds the reality of scarce resources; reintroducing the states into national policy making; and ensuring spending is cut first before taxes are raised.

Specifically, the Compact’s Balanced Budget Amendment would impose a constitutional limit of 105% of outstanding debt on ratification. The constitutional debt limit would not be in the sole control of the federal government. Any increase in the debt limit would require approval from a majority of state legislatures within 60 days of the related congressional referral.

Rather than allowing the American People to be held hostage by midnight hour threats to Veteran’s and Social Security benefits, the BBA also regulates Presidential impoundment power. It requires the President to use his impoundment power months in advance of reaching the constitutional debt limit. The possibility of abusive impoundments are then checked and balanced by giving simple majorities of Congress the power to override them within 30 days.

 

Lastly, the BBA strongly incentivizes closing deficits with spending cuts first, not tax increases. It does this by reserving the current simple majority rule in Congress for new or increased taxes only for completely replacing the income tax with a non-VAT sales tax (“fair tax” reform), repealing existing taxation loopholes (“flat tax” reform), and increasing tariffs or fees (the Constitution’s original primary source of federal revenues). Any push for new revenue through these narrow channels will generate strong special interest push-back, ensuring all possible spending reductions are considered first.

As compared to the current status quo of unlimited federal borrowing capacity, HB284’s Balanced Budget Amendment would make debt harder for the federal government to generate and therefore more scarce. And by requiring a nationwide debate in 50 state capitols over any increase in a constitutional debt limit, it will shine more light on national debt policy and give the American people a greater chance to stop needless increases in the debt limit.

The ratification of this powerful Amendment would give Congress more than a gentle nudge towards a long overdue federal balanced budget. But it is important to emphasize that HB284’s Balanced Budget Amendment is not only powerful, it is politically plausible.

Compact for America, Inc., an advocate of HB284, commissioned a nationwide poll from one of the leading pollsters in the country, McLaughlin & Associates, to assess what policy reforms could command supermajority support from the American people and whether the Compact’s Balanced Budget Amendment in particular was politically viable.

Here is what McLaughlin & Associates concluded:

“Six in ten voters favor a balanced budget amendment and at least 70% favor Compact for America’s specific and common sense proposals to rein in the federal deficit. These survey results demonstrate that Compact for America has the potential to obtain broad support.”

In short, HB284 is not just great policy, it can plausibly secure support in 38 states and from simple majorities of Congress. By passing HB284, the Alaska Senate would give us the best shot of fixing the national debt—before we need to start thinking about a “National Bankruptcy Amendment.”

 

 

 

 

 

 

 

 

 

 

 

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