Speaking in Dallas this week, Federal Reserve Chairman Ben Bernanke gave a stern warning about the fiscal direction of our government: “Unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth.”
Bernanke further argues that a credible plan to reduce long-term deficits could help boost the economy. Stabilizing the federal budget would enhance investor’s confidence in the United States thereby reducing interest rates we pay on the national debt and attracting business investment.
But how do we achieve fiscal responsibility? Despite some claims by the President and Democratic leadership, the recent healthcare reform was anything but responsible. Instead of securing Medicare and Social Security, the bill created a new entitlement that will expand government spending and deficits.
Because of the relative strength of our economy even during these tough times interest rates on government borrowing have remained low. This situation will not last much longer with Moody’s Investors Service recently warning that the U.S. could be downgraded from our current AAA bond rating. As government borrowing becomes more expensive, debt payments will crowd out other spending priorities including healthcare and national defense.
There is a strong temptation for legislators to increase spending. Deficits have gone up under both Republicans and Democrats. For a long time, I have been concerned that we are spending too much and, during the Bush years, I voted against almost two-thirds of the appropriations bills considered in the House.
Many Americans have long called for a Balanced Budget Amendment to the Constitution. However, the easiest way to balance budgets is to raise taxes—something that would be bad for families and bad for the economy. I recently joined as a cosponsor of a better idea—a Spending Limit Amendment that would hold federal government spending to one-fifth of the U.S. economy.
Our average government spending since the end of World War II has stayed around 20 percent of gross domestic product. This level of spending allows for consistent economic growth in the private sector, as we have seen for the last six decades.
We are currently on a path for government spending to account for over 40 percent of the total economy. This level of spending would require more than doubling the level of taxation. Clearly, this would hold back our dynamic economy and future job growth.
Amending the Constitution to restrain the size of government is not a new idea. In fact, Thomas Jefferson himself wished that such an amendment could be used for “the reduction of the administration of our government.”
There will certainly be economic and military crises that our country will be forced to confront in the future. The Spending Limit Amendment allows for budget restrictions to be suspended with the agreement of two-thirds of the House and Senate or a declaration of war.
It is not a quick or easy process. As you may remember, amendments to the Constitution require passage by two-thirds of both the House and Senate and ratification by three quarters of the states. It could be years before such an amendment is in place.
I don’t think we should wait around for passage of an amendment to get our fiscal house back in order. Indeed, the longer we wait to strengthen and secure Social Security and Medicare, the more difficult it will be.
Douglas Elmendorf, director of the Congressional Budget Office, calls our present fiscal situation “unsustainable” and that our problems “cannot be solved with minor tinkering.” Limiting our federal government to sustainable spending will take significant will by the American people and bipartisan cooperation between elected officials.
Further down the road, I believe that establishing a spending limit through Constitutional amendment will force Congress to deal with budget problems before they become budget crises. Even now on the brink of losing our AAA bond rating, Congress is growing the federal government rather than attacking the deficit. A Spending Limit Amendment would ensure that Congress does not look to our children and grandchildren to bailout our present spending spree.
Rep. Joe Pitts (R) represents Pennsylvania’s 16th District in the U.S. House of Representatives.