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Twelve Economics as Moral Theory: Volckernomics, Reaganomics, and the Balanced Budget Amendment
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Should Spending Be Limited by Constitutional Amendment?

As the midterm elections approached, the overriding concern was whether a public attracted to Reagan's moral economy, but bowled over by the economic gale, would maintain the Republican de facto majorities in Congress. If not, then Republicans had to find some other appeal to help GOP legislators stay in office. What do you do about Reaganomics if your constituents need help now? One response was focusing attention on their strong moral grounds rather than the short-term economic disaster. Hence the Republicans pushed for a constitutional amendment to require a balanced budget. The proposed balanced budget, spending limit amendment was criticized as irrelevant to the existing deficit, but that, we believe, was neither the moral nor the political point.

An amendment to the Constitution that called for balancing the budget and limiting government spending had gathered support slowly since the mid-1970s. Two issue groups, the National Taxpayers Union and the National Tax Limitation Committee, provided most of the lobbying effort. Although balancing the budget was the more politically popular theme, these groups were more interested in limiting government spending


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balance at high levels of taxing and spending would be a defeat. Eventually a coalition of legislators and other interested parties formed to push a version of the amendment that would make unbalancing the budget difficult; spending cuts would become the most likely means to achieve budget balance.

Amendment proponents began with little hope of winning the two-thirds of each house necessary to submit an amendment to the states for ratification. Democratic legislators thought it was a bad idea, and their control of procedure, especially in the House, enabled them to keep the issue off the agenda. Amendment proponents, therefore, worked to build pressure on Congress by proceeding on the never-used second route to a constitutional amendment. If two-thirds (thirty-four) of the states so requested, Congress would have to call a new constitutional convention to propose amendments that would, in turn, be submitted to the states for ratification.

No one knew exactly how such a convention would work: who would participate in it, whether its actions could really be limited to balanced budget matters—and so on through a litany of uncertainty. Some argued that a convention might "run away" and radically alter the Constitution. Not likely: getting people to alter a body of law that we have all learned is nearly sacred, and then getting three-quarters of state legislatures to agree, seems wildly improbable.[30] The prospect however, served as a double-edged scare tactic. Although the specter of a "runaway" convention gave them fits because it was hard to prove a negative—a stick-to-the-budget convention—the amendment's advocates felt that these uncertainties added to the appeal of their strategy. They hoped that fear of a convention would cause Congress to act preemptively, that is, to submit an amendment to the states rather than open that Pandora's box.

Balanced budgets are very popular, in the abstract, with the American public. Spending limits are not necessarily so popular, but, because the amendment was presented as a budget-balancing effort and because the polls asked questions accordingly, its advocates could demonstrate overwhelming support for the idea. The amendment was far more popular, just like the balanced budget, than was any particular action to achieve its goal.

On January 31, 1982, Alaska became the thirty-first state to endorse the call. The mushrooming federal deficit strongly encouraged the amendment, for the cries of woe from all sides, liberals included, about interest rates and other supposedly deficit-related evils made action to restrain deficits seem more important, while the failures of first Carter and then Reagan to balance the budget encouraged the belief that only powerful medicine would cure the deficit disease. In American political thinking, a constitutional amendment is the most powerful medicine of


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all. With the tally of states nearing the magic thirty-four, and with deficits mushrooming, the amendment movement in Congress grew stronger.

A constitutional amendment to enforce any particular budgeting result takes to an extreme, but hardly unprecedented, point a common political tactic: shaping decisions by changing the rules for deciding. The budget acts of 1921, 1974, and 1985 (Gramm-Rudman-Hollings) were, at least in part, efforts by factions to change budget results by changing procedures. State constitutions include many provisions—such as balanced budget requirements, item vetoes, and limits on how a legislature can alter a governor's budget—designed to ensure balance.[31] The U.S. Constitution is amended far less frequently than are state charters; both the presumption against elevating policy to fundamental law and the difficulty of amendments are greater at the national level. Yet the Constitution itself had emerged from particular concerns, not just abstract principles of governance; the evils of the Articles of Confederation, after all, were more evident to creditors than debtors. The Federalist Papers remains the classic text on how rules may shape results.

Martin Anderson's "Policy Memorandum No. 1" (August 1979) proposed a menu of constitutional changes that include "a constitutional limitation on the percentage of the people's earnings that can be taken and spent by the federal government," a line-item veto, and a balanced budget amendment. These proposals were downplayed in Reagan's campaign because they did not respond to the immediate budget problem; therefore, they could easily be attacked as grandstanding.

Early in the administration, efforts were focused on more direct attacks on the deficit and domestic spending. CEA Chairman Weidenbaum was able to declare:

The President's economic program would accomplish all of the objectives that are sought in the many proposals to balance the budget via Constitutional change. But it would do so without the many drawbacks, such as encumbering the Constitution with matters that more appropriately belong in the policy arena or attempting to rule on matters of technical fiscal administration.[32]

By early March 1982, attacks for grandstanding were still more plausible, but the administration had less to lose by pursuing the constitutional agenda. Getting tough on spending was wearing them down. "We have a lot of Republicans, not to mention Democrats, who absolutely are not going to vote for the size deficits that we face if they can't see a balanced budget at the end of the tunnel," Newsweek quoted a "senior Administration official." "What's more reassuring than an honest-to-God constitutional amendment?"[33] Weidenbaum and Regan issued statements of qualified support. The cabinet met to consider a formal endorsement.


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Senate Republicans moved a version of the amendment out of their Judiciary Committee on July 10, 1981. As 1982 began, this version, S.J.Res. 58, had not been brought to the floor. A House companion, H.J.Res. 350, was buried in House Judiciary. The House committee had held hearings but had taken no action.

If it were passed and worked, the amendment would help to entrench the Reagan agenda of a smaller role for government in American society. By backing the amendment, the president also could testify to his support for the balanced budget. More important, he could embarrass the Democrats who had been beating him over the head with his own balanced budget rhetoric and big deficits. Some of them, like James Jones, might be as committed to a balanced budget as Reagan himself, but even those believers would resist the amendment as it was structured. Let them try to explain either that they objected to the text because it was antispending as well as probalance or that a balanced budget was fine but not appropriate for enshrining in the Constitution. When Reagan endorsed the amendment at his March 31, 1982, press conference, he could be accused of hypocrisy for supporting it while simultaneously proposing wildly unbalanced budgets. "It was almost as if the nation's leading distiller," Time commented acidly, "had suddenly come out in favor of Prohibition."[34] But the White House was facing those attacks anyway and would, with at least equal logic, scorn its opponents who denounced both unbalanced budgets and the amendment. Insofar as the amendment was basically about spending and revenue limits, moreover, the president agreed entirely with it.

On April 29, as part of his television address about the breakdown of negotiations in the Gang of 17, he declared:

Once we've created a balanced budget—and we will—I want to insure that we keep it for many long years after I've left office. And there's only one way to do that…. Only a constitutional amendment will do the job. We've tried the carrot [arguing that budget balance is good for the economy so that sacrifices will be repaid] and it failed. With the stick of a balanced budget amendment, we can stop the Government's squandering ways and save our economy.[35]

The amendment would institutionalize the changes that Reagan wanted so they would live on after him.

In the House the amendment's chief sponsor, Barber Conable (with Ed Jenkins, D-Ga.), filed a discharge petition with the House clerk. If 218 members signed the petition, then the amendment could be forced out of House Judiciary over that body's opposition. Although the House version, H.J.Res. 350, had 221 sponsors, it remained to be seen whether


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they would all choose to override the committee or whether some of them rather liked cosponsoring a bill that was safely buried.[36]

On July 12 Howard Baker called up S.J.Res. 58 for Senate consideration. The Senate text provided:

 

1.

"Prior to each fiscal year, the Congress shall adopt a statement of receipts and outlays for that year in which total outlays are no greater than total receipts." Congress could provide for a deficit only by a vote of three-fifths of the whole number of each house (261 representatives or 60 senators; an abstention therefore was identical to a "No"). "The Congress and the President shall ensure that actual outlays do not exceed the outlays set forth in such statement."

2.

Total receipts for a fiscal year could not increase faster than national income had increased in the previous calendar year. That is, FY83 receipts could not grow faster than the 1981 economy. Receipts could only grow beyond that level if a majority of the whole number of each house endorsed a bill (thus again, abstention was a "No") which the president signed into law. This was constitutional indexing of the tax system taken a step further: higher real incomes would no longer raise taxes through the progressive rate structure.

3.

Congress could waive these provisions if a declaration of war were in effect.

4.

"The Congress may not require that the states engage in additional activities without compensation equal to additional costs." That is, Congress could not fob programs off on the states to save money….

5.

Borrowing did not count as receipts, and repayment of debt principal would not count as outlays. The latter was at best an academic concern for the foreseeable future.

6.

"This article shall take effect for the second fiscal year beginning after its ratification"—no earlier, that is, than FY85, and that was highly improbable.

On July 19 Reagan led a GOP rally on the steps of the Capitol in which he asked the familiar question about why the government could not be run like a family: "How can families and family values flourish, when big Government, with its power to tax, inflate and regulate, has absorbed their wealth, usurped their rights and too often crushed their spirit?" James Jones emphasized respect for institutions: "There can only be two results if the amendment is adopted. The most likely is that it will mirror Prohibition—a sham. A second possible result is that it will be enforced, and thus fundamentally change the checks and balances of


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the three branches of the Federal Government."[37] Policy, power, and political philosophy were all at stake.

The Senate debated the bill for two weeks and accepted two amendments. One, by Domenici, attempted to calm fears about impoundment; the other, an attempt by William Armstrong to ensure the amendment did its job, took all the slack out of the constitutional change. Armstrong proposed that an increase in the debt ceiling should also require a three-fifths vote. Therefore, if the president and Congress tried to ignore the amendment in the event of, say, increases in recession-related outlays, the debt limit would force action. Most Republicans thought it was trouble and opposed it 20 to 31. In a classic case of sabotage, Democrats, convinced Armstrong's modification would make the whole business less palatable, supported him 31 to 14. Nevertheless, the amendment passed the Senate by 69 to 31 (2 votes more than the 67 needed) as a number of senators, after voicing grave doubts, supported the amendment. The vote was as much regional as partisan. Republicans, who had to go on record, voted 47 to 7 for the amendment, southern Democrats 13 to 2 in favor, and northern Democrats 9 to 22 against.

The battle now shifted to the House, where no doubt some senators hoped the bill would be buried. Many Washington leaders doubted that the amendment, even if passed by Congress, would actually be ratified; signs at the state level suggested they might be right.[38] But also they might be wrong, and House leaders were not about to take that chance. Their resistance meant proponents had to blow the amendment out of committee with a discharge petition. On September 29, after a last-minute drive led by Vice President Bush, Stockman, and House GOP leaders, proponents got the 218th signature.

Rather than let the issue sit for a couple of weeks at the height of election season—as standard procedure and Republican hopes prescribed—House leaders responded by bringing the amendment to the floor immediately. Their rule also allowed a substitute by Representative Bill Alexander (D-Ark.), heavily watered down. Alexander's proposal would provide political cover so that some members could vote against Conable-Jenkins yet still say they had voted for a balanced budget amendment.[39]

At 10:00 a.m. on October 1, 1982, the House convened to debate and to vote on enshrining in the Constitution the balanced budget and spending limits. Congressmen pleaded with each other and played to the gallery, rising to impressive levels of rhetoric or descending to equally impressive depths of sophistry. We cannot capture all the arguments, but we can provide the flavor of the debate, a picture of the House at work during one of the rare times when the work really was done on the floor and the differences in political philosophy came to the fore.


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Richard Bolling led the debate, professing a nonpartisan worry for the fate of the political process. He expressed sorrow that "the gentleman from New York (Mr. Conable) … has truly given up on the essential democratic process. He puts certain things in his resolution … which would require super majorities to decide that there will be an unbalanced budget."[40] Conable replied:

We have already done irreparable damage to the Republic in seventeen of the eighteen years I have served here…. Congress should be a place of judgment. When judgment is not wisely exercised it is appropriate that we put some limitations on that exercise of judgment and that is what the Constitution does in many cases.[41]

Delbert Latta scored the big spenders who wanted to grab tax money, spreading benefits now that would have to be paid for by their grandchildren. Where Latta saw spenders, David Obey saw cowards and hypocrites:

Mr. Speaker … this administration is giving hypocrisy a bad name. This administration pretends that it is fighting for a balanced budget. If it is losing that battle, it is losing that battle to itself….

I have talked to at least twenty members on that side of the aisle, and more members on this side of the aisle. I have asked them how they could sign this discharge petition and how they can vote for this today, including members of the Judiciary Committee. They have hung their heads, and they have said, "Well, I know, I hate to do it, but I just cannot go home and explain it to my people."

I would suggest that it goes with the territory…. If members are not willing to go home to their own districts and tell them what their honest beliefs are about something as crucial as this, then you do not belong here.[42]

After the rule was passed, debate was controlled by the two leaders of the Judiciary Committee: Peter Rodino (D-N.J.) and Robert McClory (R-Ill.). McClory spoke to charges that the amendment would be ineffective.

I do not accept the notion that Congress will ignore the mandate of the Constitution if House Joint Resolution 350 is proposed and ratified. Congress has made good faith efforts to obey the Constitution throughout its history. While it may have been mistaken about the constitutionality of its legislation, I cannot accept that its errors were willful…. In fact, it is my observation that Members would prefer to be so constrained than to be free to be unduly pressured by special interests.[43]

"Forced to be free" was a theme of the debate among those who responded to widespread concern about inability to govern effectively.


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In what would be the main opposition speech, Peter Rodino went step by step through the alleged uncertainties in the text—the inability to predict deficits, the antimajoritarian cast, the delegation of powers to the president or the courts. "What do the courts do then?" he asked, "Write the budget? Appropriate the money? Order arrests?" He concluded:

The proposal would demean the Constitution. The Constitution is a document that guarantees fundamental rights and freedoms and provides for the orderly operation of Government. This amendment is a constitutional guarantee of nothing. It provides a balanced budget—except sometimes: When three-fifths of Congress says otherwise; when revenues fall below estimates; in times of declared war; when Congress cannot agree on cutting spending; when Congress cannot agree on raising taxes. It could be an invitation to fiscal gimmickry or a prescription for paralysis of Government, for confrontation among the branches, for economic chaos.[44]

The proposed amendment led the party of change to a more ardent defense of an unchanging Constitution than had been its custom.

Phil Gramm replied by describing the bias toward spending the amendment sought to correct:

In the last Congress, the average bill we worked on with amendments cost about $50 million. There are 100 million taxpayers. That is 50 cents a head. The average beneficiary got $500. You do not have to have studied economics at Texas A&M [where he had taught] to know that somebody is willing to do more to get $500 than somebody is willing to do to prevent spending 50 cents…. This is a perfect example of where a constitutional constraint on elected officials is required.[45]

A leader of southern Republicans, Ed Bethune, made one of the most interesting arguments against the amendment. Conservatives, he declared, should be leading the opposition to such attempts to hamstring the play of political forces. The amendment would fail because it depended on the "fallacious assumption that budgeteers can accurately calculate one indispensable, exalted number—the deficit—which will tell us whether we are winning or losing the battle for a rational fiscal policy. Nothing could be further from the truth." Not only were estimates wildly unreliable, Bethune continued, but the spending figures did not "begin to reflect the many ways in which the Government can and does impact our nation's economy." The amendment would not deal with what he considered the real problem. The Senate Judiciary Committee, Bethune proclaimed,

published a wordy finding that Congress is plagued with an institutional "spending bias." They concluded that politicians will not cast "politically


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disadvantageous votes" to restrain spending and that a constitutional amendment is the only way to overcome such a disease…. That may be so under the circumstances we can see today, but there is nothing new in the Senate findings. These same problems have plagued democratic governments since the origin of man. The strained analysis, however, basically comes down to a contention that the people at large are too stupid and indifferent to know how to correct the problem.

That attitude, Bethune argued, was wrong. The people had perceived and were correcting overspending. Conservatives were being elected to Congress, attitudes had changed, and "the politically disadvantageous vote in today's climate, contrary to the Senate's findings, is a vote for new spending or a vote which does nothing to restrain the growth of spending." New forces were forming; old actors were adjusting to new realities; old institutions, like Senate staffs, were transformed; and "the political parties are competing intensely on the basis that one is better equipped than the other to bring a balanced budget." Perhaps all that would come to nothing. But if the forces were not strong enough, a constitutional amendment would also fail. Although the people had little faith in men and parties, they did have faith in the Constitution. That trust should not be hazarded lightly.[46]

California Republican Jerry Lewis returned to the mythology that surrounds and buttresses our political system: What, after all, would the hallowed Founders have said about this proposal? Where Rodino and Bethune had argued that their work should be left untouched, Lewis proclaimed:

The Founding Fathers were most reserved about the prospect of expanding central Government. They recognized that Government growth would require taxes and that to tax was to take people's property. Never in their wildest dreams would they have imagined that the Congress would come to the point where they were taking not only high percentages of the productive value of today's citizens—but placing in debt the property and productive potential of their children and grandchildren as well. Mr. Chairman, I suggest it is absolutely reasonable to let the people decide whether or not in the future there shall be required by the Constitution an extra majority of the Congress before it can budget beyond our means.[47]

Lewis's side was invoking the majority's right to adopt an antimajoritarian provision (the people should decide whether to adopt the amendment) while his opponents ultimately were relying on an antimajoritarian procedure (the two-thirds requirement on amendments) in their fight against the antimajoritarian proposal. Ironic, yes, but nothing new. While we eschew the Spockian "mindlock" (recall "Star Trek") with the


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framers others so easily achieve, the Founding Fathers so fervently invoked remain practical politicians, leaders who lived on the fine line between principle and expedience. Thus, Hamilton would inveigh against the debt if it helped him get the Constitution ratified, and Jefferson, the great apostle of limits on both executives and government itself, was actually the most dominant of presidents, purchasing Louisiana with absolutely no authority. Perhaps there were no Jeffersons or Hamiltons in the House on October 1, 1982, but the task and burden of the politician remained the same.

The Alexander substitute went down 77 to 346, but it provided cover for many southern Democrats who opposed the amendment but wanted to go on record in favor of balancing the budget. Then the balanced budget amendment fell short of the required two-thirds vote, with 236 yeas and 187 nays. Led by the former minority leader, Arizona's John Rhodes, Silvio Conte, Ed Bethune, and Jack Kemp, twenty Republicans opposed the president and their party.

"One way or another we're going to get this," Barber Conable declared. But the amendment did not take hold as an election issue, and 1982 was a bad year for Republicans. The proamendment forces, surveying the postelection wreckage, could see little hope in the states and none in the House.[48] At this writing (summer 1988), it seems that the campaign for a constitutional amendment, after cresting on October 1, 1982, has receded; two states have reversed their support. But the effort to change the politics by changing the rules continues.

In this elevated conversation two truths compete: Efforts to thwart majority rule are likely to fail when people learn how to avoid, use, or circumvent any provision (our book has enough examples of gamesmanship to suit anyone). However, the rules of the game, including institutional biases, help determine the outcomes; this is the truth on which our constitutional structure, including the separation of powers, is based. Like the great constitutional debates of the past, the issues are illuminated but remain unresolved. An occasional conservative may argue in favor of allowing the balance that comes in shifts of public opinion to diminish the tendency to spend more and tax less. A liberal may accept the desirability of erecting institutional impediments to being overly generous, as Congress did when it erected obstacles in the path of new entitlements. On the whole, however, positions about rules followed from opinions about desirable outcomes—moderated by perceptions of constituency pressure. There had to be a moderate majority out there somewhere, or so the budget balancers hoped. TEFRA showed it. If only they could adjust the rules, so the moderates could govern again, then they might find the pony under all the dirty budget work.


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Although the term moderate-extremist may appear to be an oxymoron, the passion of those committed to budget balance would grow in proportion as its realization declined. Then we would be treated to an unusual spectacle indeed: moderate defenders of responsible government violating its procedures in the name of a higher value—the ever-elusive balance.


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Twelve Economics as Moral Theory: Volckernomics, Reaganomics, and the Balanced Budget Amendment
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