To paraphrase the old saying, you may not be interested in the federal debt, but the federal debt is interested in you. There’s abundant evidence for this proposition across the economy right now as prices continue to soar for food, fuel, housing, and other necessities.
Inflation consists of too much money chasing too few goods and services. So President Joe Biden is right to observe that limitations on supply, some originating with the COVID-19 pandemic, are part of the problem. His observation is doing himself no political good, however, because Biden seems unwilling to deregulate key economic sectors or do anything else of consequence to boost the supply of good and services.
Moreover, Biden has taken no responsibility for his role — first as a senator and vice president, and now as president — in causing the first part of the problem, that of too much money, via many years of massive federal deficits financed by the Federal Reserve. In shirking his responsibility, Biden is hardly alone. Federal politicians of both parties share blame for deficit spending. Although they talk a good game about fiscal discipline, they rarely practice it.
State policymakers don’t have that luxury. Here in North Carolina, for example, the governor is legally required to submit an operating budget in which expected revenues exceed planned expenditures. The General Assembly, in turn, is legally required to enact such a budget. If during the ensuing year an operating deficit occurs, the governor is further required to close it by tapping reserves or cutting spending.
We voters have often promoted politicians from state to federal office, hoping that they’d retain their commitment to fiscal probity, only to be disappointed with the results. That’s because we focused too much on the character of our representatives rather than on the institutions within which they make decisions. We thought leaders would do the right thing even if it wasn’t required. We were mistaken.
That’s why I’ve come to believe that the only practical solution to the problem of rampant deficit spending in Washington is something that may seem at first to be wildly impractical: we need to amend the United States Constitution. We need to impose a balanced-budget requirement on Congress and the president, enforceable either by federal courts or state legislatures or both.
It’s not a new idea. Activists of various political stripes have proposed balanced-budget amendments to the federal constitution for decades. Indeed, Thomas Jefferson suggested something like it as early as 1798. Not only does almost every American state operate under such a requirement, but a number of European countries have either balanced-budget rules or borrowing caps imposed by law.
Do politicians find ways to evade such requirements? Of course! That’s even happened in North Carolina from time to time, though not lately. But a less-than-perfect rule is better than no rule at all. Moreover, even I think that Washington should be able to borrow to build long-lived assets such as aircraft carriers, or to finance deficits during wars or other national emergencies.
To my way of thinking, then, a federal balanced-budget rule must be carefully designed to keep these reasonable exceptions from destroying the rule. I think state constitutions can serve as a useful guide here. While operating budgets must be balanced, states and localities issue bonds or other debt instruments to build certain capital assets they own. But they can’t get away with declaring public-employee salaries or office supplies or grants-in-aid to be “capital” items they can fund with debt.
States aren’t just models for reform. They are the places from which reform will have to come. As lawmakers return to Raleigh this month for the General Assembly’s 2022 short session, they ought to give Senate Bill 414 a serious look. It would add North Carolina to a multi-state compact. If enough states sign on, that would trigger a constitutional convention to enact a balanced-budget amendment.
It’s the only answer. And it’s time to stop dodging the question.
John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history