[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
   WHETHER THE CONSTITUTION SHOULD BE AMENDED TO ADDRESS THE FEDERAL 
                                DEFICIT?

=======================================================================



                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON THE CONSTITUTION

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 13, 2011

                               __________

                           Serial No. 112-30

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov




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                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
TOM MARINO, Pennsylvania             [Vacant]
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona
[Vacant]

      Sean McLaughlin, Majority Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

                    Subcommittee on the Constitution

                    TRENT FRANKS, Arizona, Chairman

                   MIKE PENCE, Indiana, Vice-Chairman

STEVE CHABOT, Ohio                   JERROLD NADLER, New York
J. RANDY FORBES, Virginia            MIKE QUIGLEY, Illinois
STEVE KING, Iowa                     JOHN CONYERS, Jr., Michigan
JIM JORDAN, Ohio                     ROBERT C. ``BOBBY'' SCOTT, 
                                     Virginia

                     Paul B. Taylor, Chief Counsel

                David Lachmann, Minority Staff Director



                            C O N T E N T S

                              ----------                              

                              MAY 13, 2011

                                                                   Page

                           OPENING STATEMENTS

The Honorable Trent Franks, a Representative in Congress from the 
  State of Arizona, and Chairman, Subcommittee on the 
  Constitution...................................................     1
The Honorable Jerrold Nadler, a Representative in Congress from 
  the State of New York, and Ranking Member, Subcommittee on the 
  Constitution...................................................     2

                               WITNESSES

The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia
  Oral Testimony.................................................     5
  Prepared Statement.............................................     7
David M. Primo, Professor, University of Rochester and the 
  Mercatus Center
  Oral Testimony.................................................     8
  Prepared Statement.............................................    10
Robert Greenstein, Center on Budget and Policy Priorities
  Oral Testimony.................................................    16
  Prepared Statement.............................................    17
Andrew Moylan, National Taxpayers Union
  Oral Testimony.................................................    21
  Prepared Statement.............................................    23

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the American Federation of State, County 
  and Municipal Employees (AFSCME)...............................    44
Prepared Statement of Craig Jennings, Director of Federal Fiscal 
  Policy, OMB Watch..............................................    47
Prepared Statement of Alan Parks, President, Americans for a 
  Balanced Budget Amendment......................................    50
Letter from Colin A. Hanna, President, Let Freedom Ring..........    51
Letter from James L. Martin, Chairman, The 60 Plus Association...    52
Letter from Geoff Duncan, Chairman, Pass the Balanced Budget 
  Amendment, Georgia.............................................    54


   WHETHER THE CONSTITUTION SHOULD BE AMENDED TO ADDRESS THE FEDERAL 
                                DEFICIT?

                              ----------                              


                          FRIDAY, MAY 13, 2011

                  House of Representatives,
                  Subcommittee on the Constitution,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 11:24 a.m., in 
room 2141, Rayburn House Office Building, the Honorable Trent 
Franks (Chairman of the Subcommittee) presiding.
    Present: Representatives Franks, Chabot, Nadler, and Scott.
    Staff Present: (Majority) Zachary Somers, Counsel; Sarah 
Vance, Clerk; (Minority) David Lachmann, Subcommittee Chief of 
Staff; and Veronica Eligan, Professional Staff Member.
    Mr. Franks. The Subcommittee will come to order.
    We want to welcome everyone to the Subcommittee on the 
Constitution, particularly the witnesses that are here with us 
today. I also want to say that I know that because of the 
change in the schedule this morning, that we are going to have 
a few people that will not be here. One of the notable absences 
will be Mr. Jim Jordan, the Chairman of the RSC, who is very 
strongly in favor of a balanced budget amendment, and I wanted 
to express his comments in that regard.
    We called a hearing today because we must examine ways to 
change America's course on Federal spending and the enormous 
Federal deficits that we face. It is absolutely necessary that 
a balanced budget once again become the norm in America. 
Currently, the Federal Government is borrowing $0.40 of every 
dollar it spends. The massive amount of borrowing is causing 
the Federal deficit to grow rapidly as a percentage of 
America's total economic output. If we continue on our current 
path, the Federal deficit will climb to at least 100 percent of 
our annual Gross Domestic Product by the end of this decade.
    To put that another way, if we begin to pay our deficit and 
debt off today at $1 billion a year, a very modest effort on 
our part, it would take us somewhere in the neighborhood of 12 
to 15,000 years to do that. And the good news is we are not 
doing that, we going into debt at a thousand times that pace. 
So that puts it into perspective.
    Unfortunately, the deficit spending has become the way of 
life for the Federal Government. It hasn't always been this 
way, for the first 140 years of America's history, we lived 
under an unwritten constitutional rule that budgets should be 
balanced except during times of war. According to Nobel Prize 
winning economist James Buchanan, ``Politicians prior to World 
War II would have considered it to be immoral to spend more 
than they were willing to generate in tax revenue, except 
during periods of extreme and temporary emergency.''
    We must return to those roots. The Federal Government 
cannot continue to live beyond its means. The question is how 
do we turn the current pattern of overspending around for the 
long term.
    Some suggest that we can tax our way out of this crisis. 
However that has never been proven to work, in fact, it has 
been proven many times not to work. In order to pay for 
entitlement spending alone, solely by raising taxes, we would 
have to double the marginal tax rates for all income tax 
brackets over the next 30 years.
    Others suggest that statutorily imposing spending caps and 
other legislative restraints will solve the problem. In the 
past, however, such efforts have failed miserable in the long 
run. The one solution that has the teeth to impose spending 
restraint on the Federal Government is a constitutional 
amendment.
    Since the 1930's, there have been numerous proposed 
constitutional amendments to require a balanced budget or to 
control government spending or borrowing. Unfortunately, none 
of those constitutional approaches to spending restraints have 
been adopted. A balanced budget amendment has been unable to 
gather the necessary two-thirds majority of both Houses during 
the same Congress.
    But with this hearing, we can begin to consider once again 
whether the Constitution should be amended to control Federal 
spending. Hopefully our witnesses can help us determine whether 
Constitutional amendment is needed. And if it is, whether a 
balanced budget amendment is the correct approach and what the 
necessary components of such an amendment would consist of.
    Over 200 years ago, Thomas Jefferson wrote to James Madison 
that no generation can contract debts greater than may be paid 
during the course of its own existence. Because according to 
Jefferson, then the earth would belong to the dead and not to 
the living generation. Today America is contracting debts that 
will burden multiple future generations; it is time for 
Congress to act.
    And with that, I would now recognize the Ranking Member of 
the Subcommittee, Mr. Nadler, for his opening statement for 5 
minutes.
    Mr. Nadler. Thank you, Mr. Chairman. Here we go again, if 
you can't balance the budget, and you can't face your 
constituents after having voted for truly Draconian budget 
cuts, why not vote on the Constitutional amendment instead? 
That way you can vote for the idea of a balanced budget without 
having to make any hard choices and without doing anything real 
to get toward a balanced budget. Not a bad deal.
    Of course, we have all been down to road before. My 
Republican friends love constitutional amendments. For any 
complaint, there is the constitutional amendment. It is not, 
however, a free vote. If adopted, this proposed amendment would 
have catastrophic consequences for the Nation, for the economy, 
and for the future.
    While it would be nice to have some easy way to force a 
balanced budget, the world doesn't work that way. We know how 
to balance the budget because we have done it before. Under the 
Clinton administration, we balanced the budget, which would 
have remained in balance except for the reckless Bush 
administration's tax cuts and unfunded wars.
    In the not too distant past, we managed not only to balance 
the budget, but to run surpluses and begin paying down the 
debt. That is what you do in good times, you pay down the debt. 
Unfortunately, thanks to President Bush and a Republican 
Congress we managed to turn record surpluses into record 
deficits in record time. How did we do it? There was the huge 
tax cuts for the very wealthy; there were two wars fought off 
budget. I don't recall hearing a peep from any of my colleagues 
on the other side who are now born again fiscal conservatives. 
In fact, Vice President Cheney said, we have learned that 
deficits don't matter. That summed up the Republican attitude 
during the Bush administration.
    Having the regulators go to sleep while financial 
manipulators, banks and hedge funds crashed the economy, killed 
off revenues, and that is one of the main causes of our present 
budget crisis in addition to those ongoing tax cuts. But rather 
than admit the serious economic mismanagement and looking for 
ways to straighten things out, we got this dusted off quack 
remedy from the past.
    I guess it is easier to vote for something like this than 
to have to endure another Town Hall where angry constituents 
want to know why you voted to destroy Medicare.
    Strangest of all, the amendment calls for balancing the 
budget by 2016, even though the Republican budget the House 
recently passed doesn't project a balanced budget until 2040.
    The amendment would require a three-fifths votes by 
Congress to exceed a balanced budget. That should lead to some 
really history-making horse trading. Can you imagine what the 
holdouts, the ones that get to you 60 percent will get in 
exchange for passing a budget? I would predict if this goes 
into effect in order to pass budgets will need of 60 percent, 
and you will have monumental, monumental deficits to buy their 
votes, and monumental earmarks to buy their votes. It will make 
anything we do now look like child's play.
    Really troubling is the proposal to require a three-fifths 
vote to raise the debt limit. Do the sponsors really want to 
reduce U.S. Treasury notes to junk bond status? Do you think 
anyone will buy our paper if this becomes law? I wouldn't. The 
amendment also treats military engagements as the only true 
emergencies requiring the budget to be out of balance. That 
shows a poor understanding of history and of economics. By the 
way, given the proposal and the new Defense authorization bill 
that came out of Armed Services, we are going to be at war all 
the time anyway, so this would totally negate this amendment.
    Did Herbert Hoover win the last election? If in the middle 
of a recession when tax revenues are down and unemployment is 
up, we begin to slash the budget in ways my Republican 
colleagues are now suggesting, much less the far more Draconian 
measures that this amendment would require will go from the 
great recession right into another great depression.
    It has been tried before and if we want the Constitution to 
enshrine Herbert Hooverism, we will get what we deserve. We 
should know that in good times you should balance budgets and 
pay down the debt; in bad times, during a recession you should 
run deficits in order to prime the pump and get the economy 
running and put people back to work.
    Let's manage the budget the old fashioned way, by making 
hard choices, by promoting growth, by making everyone pay their 
fair share of taxes, including billionaires and oil companies. 
It isn't fun, and it won't make us a lot of friends. We have 
done it before and we can do it again. It only requires the 
courage of our own convictions to face the voters with the 
actual budget you are proposing. And I know how hard those Town 
Halls can be, I held many of them myself, but that is the job. 
Let's get down to business and quit fooling around with 
proposals that could never be implemented with anything that 
the Congress, that the Republicans for that matter would be 
willing to vote for. Thank you, I yield back. 
    Mr. Franks. Thank you, Mr. Nadler. And without objection, 
other Member's opening statements will be made part of the 
record. We have a very distinguished panel of witnesses today. 
Our first witness is representative Bob Goodlatte, he has been 
a major force in all of this. Congressman Goodlatte is serving 
his 10th term as representative of Virginia's sixth 
congressional district. He is Chairman of the House Judiciary 
Committee's Subcommittee on Intellectual Property, Competition 
and the Internet, and serves on the House Agriculture 
Committee, where he is currently Vice Chairman of that 
Committee.
    On January 5, 2011, Representative Goodlatte introduced two 
balanced budget amendments: H. Res. 1, which has 131 
cosponsors, and H. Res. 2, which has 221 cosponsors. Welcome 
you today, Bob.
    Our second witness is Professor David Primo. Professor 
Primo is an associate professor of political science at the 
University of Rochester and a senior scholar at the Mercatus 
Center at George Mason University. He received his doctorate in 
political science from Stanford University, his research 
focuses on American politics, government spending and campaign 
finance. Professor Primo has authored, or coauthored, several 
journal articles and policy reports, as well as three books, 
including Rules and Restraint, Government Spending and the 
Design of Institutions.
    Our third witness is Robert Greenstein. Mr. Greenstein is 
the founder and president of the Center on Budget and Policy 
Priorities. He is considered an expert on the Federal budget 
and a range of domestic policy issues. He has written numerous 
reports, analyses, book chapters, op ed pieces and magazine 
articles. Prior to founding the Center, Professor Greenstein 
was administrator of the Food and Nutrition Service at the U.S. 
Department of Agriculture. He was appointed by President 
Clinton in 1994 to serve on the bipartisan Commission on 
Entitlement and Tax Reform and headed the Federal budget policy 
component of the transition team for President Obama. He is a 
graduate of Harvard College, and has received honorary 
doctorates from Tufts University and Occidental College.
    Our fourth witness is Mr. Andrew Moylan. Mr. Moylan is vice 
president of the Governmental Affairs for the National 
Taxpayers Union, where he lobbies on Federal and State issues, 
conducts policy research and analysis, assists in taxpayer 
education efforts, and formulates reports and opinion pieces. 
His writings have appeared in publications such as The Wall 
Street Journal, The Washington Times, Investors Business Daily 
and Forbes Magazine. Mr. Moylan is a graduate of University of 
Michigan, and prior to joining NTU, worked at the Cato 
Institute. Welcome, sir. I welcome all of you.
    Each of the witnesses' written statements will be entered 
into the record in its entirety. I ask that each witness 
summarize his or her testimony in 5 minutes or less. And to 
help you stay within that timeframe, there is a timing light on 
your table. When it switches from green to yellow you will have 
1 minute to conclude your testimony, when the light turns red, 
it signals that the witness' 5 minutes have expired. Before I 
recognize the witnesses it is the tradition of the Subcommittee 
that they be sworn. So please stand to be sworn in.
    [Witnesses sworn.]
    Mr. Franks. Be seated. I will now recognize our first 
witness, the Honorable Bob Goodlatte for 5 minutes.

 TESTIMONY OF THE HONORABLE BOB GOODLATTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF VIRGINIA

    Mr. Goodlatte. Thank you, Mr. Chairman and Ranking Member 
Nadler, and Members of the Subcommittee. It is an honor to be 
before my colleagues on the Judiciary Committee to talk about 
this important issue. It is not a new issue. In fact, in 1798, 
less than 10 years after our Constitution took effect, Thomas 
Jefferson wrote to John Taylor and said ``I wish it were 
possible to obtain a single amendment to our Constitution. I 
mean, an additional article taking from the Federal Government 
the power of borrowing.''
    This is also not the first time a serious effort has been 
made to pass a balanced budget amendment to the United States 
Constitution. On March 2, 1995, a pivotal day in the history of 
our country, the United States Senate failed by 1 vote to send 
a balanced budget amendment to the States for ratification. The 
amendment had passed the House by the requires two-thirds 
majority, with more than 70 Democrats joining with almost all 
the Republicans to provide 300 votes in favor of it. And the 
Senate vote was the last legislative hurdle before ratification 
by the States. If that amendment had passed and been ratified 
by the States, 49 out of 50 of which have balanced budget 
amendments of their own, then we would not be facing the fiscal 
crisis we now face.
    If that amendment had passed, then balancing the budget 
would have been the norm rather than the exception over the 
past 15 years, and we would have nothing like the annual 
deficits and skyrocketing debt that we must address today.
    The good news is that like 1995, this Congress is again 
standing at a crossroads at this very moment. The decisions we 
made today will steer the direction of our country for the next 
15 years. And we have an opportunity now to take action to 
ensure that 15 years from today, our children will face a much 
brighter fiscal picture. We must not allow ourselves to miss 
this opportunity.
    Here's what we know, experience has proven time and again 
that Congress cannot, for any significant length of time, rein 
in excessive spending. The annual deficits and the resulting 
debt continue to grow due to political pressures and dependency 
on government programs. Budget plans that purport to cut 
spending over long periods of time are great goals, but in 
order to achieve the results these budgets promise, a majority 
of fiscally conservative Members must be elected in perpetuity. 
While it is one of my strongest desires that this will occur, 
we simply cannot afford to bet our children and grandchildren's 
future on this happening.
    In order for Congress to be able to consistently make the 
very tough decisions necessary to sustain fiscal responsibility 
over the long term, Congress must have an external pressure to 
force it to do so. I believe the most realistic chance we have 
today to enact the institutional reform necessary is through a 
balanced budget amendment to our Constitution.
    Many Members of Congress have introduced balance budget 
amendments to this Congress. I introduced two versions on the 
first day of the 112th Congress. House Joint Resolution 2 is 
the exact text that passed the House in 1995 and failed in the 
Senate by 1 vote. This amendment requires that total annual 
outlays not exceed total annual receipts. It also requires a 
true majority of each Chamber to pass tax increases, and 
requires a three-fifths majority to raise debt limit. This 
legislation has limited exceptions for times of war.
    House Joint Resolution 1, which I also introduced, goes 
much further. In addition to provisions of H. Res. 2 it also 
requires a three-fifths majority to raise taxes and imposes an 
annual spending cap that prohibits spending from exceeding 20 
percent of GDP. In the U.S. Senate, 47 Republican senators have 
cosponsored a balanced budget amendment that is similar to 
House Joint Resolution 1, which is a strong sign that the 
Senate is ready to engage in debate on this subject.
    While my preference is to pass the stronger version of the 
balanced budget amendment, I want to be very clear in my 
testimony today, the two-thirds majority requirement for 
passing an amendment to the Constitution demands that we 
achieve bipartisan support for any balanced budget amendment. 
Our extraordinary fiscal crisis demands an extraordinary 
solution. So we simply cannot afford to succumb to political 
posturing on this issue at a point in time so critical to our 
Nation's future. We must rise above that and move forward with 
the strategy that includes legislation that will get at least 
290 votes on the House floor.
    So as we consider a balanced budget amendment, I encourage 
the Members of this Committee to devote our effort to passing 
the strongest balanced budget amendment that can garner two-
thirds of the House of Representatives.
    We are at a crossroads in America. We can make the tough 
choices and control spending, paving the way for a return to 
surpluses and ultimately paying down the national debt. Or we 
can allow big spenders to lead us further down the road of 
chronic deficits and leave our children and grandchildren 
saddled with debt that is not their own. The choice is ours, 
the stakes are high and failure is not an option. Thank you, 
Mr. Chairman.
    Mr. Franks. And thank you, Mr. Goodlatte.
    [The prepared statement of Mr. Goodlatte follows:]
          Prepared Statement of the Honorable Bob Goodlatte, 
        a Representative in Congress from the State of Virginia
    March 2, 1995 was a pivotal day in the history of our country. On 
that day, the U.S. Senate failed by one vote to send a balanced budget 
amendment to the states for ratification. The amendment had passed the 
House by the required two-thirds majority previously and the Senate 
vote was the last legislative hurdle before ratification by the states.
    If that amendment had passed, then we would not be facing the 
fiscal crisis we now face. If that amendment had passed, then balancing 
the budget would have been the norm, rather than the exception over the 
past 25 years and we would have nothing like the annual deficits and 
skyrocketing debt that we must address today.
    The good news is that like 1995, this Congress is again standing at 
a crossroads at this very moment. The decisions we make today will 
steer the direction of the country for the next 25 years. We have an 
opportunity now to take action to ensure that 25 years from today, our 
children will face a much brighter fiscal picture. We must not allow 
ourselves to miss this opportunity.
    Here's what we know: experience has proven time and again that 
Congress cannot for any significant length of time rein in excessive 
spending. The annual deficits and the resulting debt continue to grow 
due to political pressures and dependency on government programs.
    Budget plans that purport to cut spending over long periods of time 
are great goals, but in order to achieve the results these budgets 
promise, a majority of fiscally conservative Members must be elected 
into perpetuity. While it is one of my strongest desires that this will 
occur, we simply cannot afford to bet our children and grandchildren's 
future on this happening.
    In order for Congress to be able to consistently make the very 
tough decisions necessary to sustain fiscal responsibility over the 
long term, Congress must have an external pressure to force it to do 
so.
    I believe that the most realistic chance we have today to enact the 
institutional reform necessary is through a balanced budget amendment 
to our Constitution.
    Many Members of Congress have introduced balanced budget amendments 
this Congress. I introduced two versions on the first day of the 112th 
Congress. H.J.Res. 2 is the exact text that passed the House in 1995 
and failed in the Senate by one vote. This amendment requires that 
total annual outlays not exceed total annual receipts. It also requires 
a true majority of each chamber to pass tax increases and requires a 
three-fifths majority to raise the debt limit. This legislation also 
has limited exceptions for times of war.
    H.J.Res. 1, which I also introduced, goes much further. In addition 
to the provisions of H.J. Res. 2, it also requires a three-fifths 
majority to raise taxes and imposes an annual spending cap that 
prohibits spending from exceeding 20% of GDP.
    In the U.S. Senate, 47 Republican Senators have cosponsored a 
balanced budget amendment that is similar to H.J.Res. 1, which is a 
strong sign that the Senate is ready to engage in debate on this 
subject.
    While my preference is to pass the stronger version of the balanced 
budget amendment, I want to be very clear in my testimony today. The 
two-thirds majority requirement for passing an amendment to the 
Constitution demands that we achieve bipartisan support for any 
balanced budget amendment.
    Our extraordinary fiscal crisis demands an extraordinary solution, 
so we simply cannot afford to succumb to political posturing on this 
issue at a point in time so critical to our nation's future. We must 
rise above that and move forward with a strategy that includes 
legislation that will get at least 290 votes on the House Floor.
    So, as we consider a balanced budget amendment, I encourage the 
Members of this Committee to devote our effort to passing the strongest 
balanced budget amendment that can garner two-thirds of the House of 
Representatives.
    We are at a crossroads in America. We can make the tough choices 
and control spending, paving the way for a return to surpluses and 
ultimately paying down the national debt, or we can allow big spenders 
to lead us further down the road of chronic deficits and leave our 
children and grandchildren saddled with debt that is not their own.
    The choice is ours. The stakes are high. Failure is not an option.
                               __________

    Mr. Franks. We will now recognize Professor Primo for 5 
minutes.

TESTIMONY OF DAVID M. PRIMO, PROFESSOR, UNIVERSITY OF ROCHESTER 
                    AND THE MERCATUS CENTER

    Mr. Primo. Thank you very much, Chairman Franks, Ranking 
Member Nadler and Members of the Subcommittee. Thank you for 
inviting me here today to discuss whether the U.S. Constitution 
should be amended to deal with the Nation's fiscal problems. As 
Chairman Franks mentioned, I am an associate professor of 
political science at the University of Rochester, and a senior 
scholar at the Mercatus Center at George Mason University.
    I have spent several years researching the mechanics of 
budget rules and I have written a book Rules and Restraint, on 
this subject. In my testimony this morning, I will establish 
why attempts to create long-term fiscal reforms are likely to 
fail in the absence of Constitutional budget rules.
    The recent bipartisan attention to our Nation's fiscal 
problems is heartening. Eelected officials in both parties have 
proposed bold changes to the status quo. And finally voters are 
paying attention. In a recent poll an astonishing 95 percent of 
the respondents agreed that the Federal budget deficit is a 
problem, and 81 percent agreed that action is needed now. So I 
think this is a rare opportunity for meaningful, long-term 
change. But I fear, I fear that there's a significant risk that 
promises made today will not be kept tomorrow. The political 
reality is that the hard cuts in any plan are usually deferred 
until well into the future. So the likelihood of having long-
term agreements with durability, in the absence of some 
enforcement mechanism, is unfortunately very small. I believe 
that a Constitutional amendment can help us avoid making this a 
wasted opportunity.
    Today I will focus my testimony on three main points. First 
I will establish why a Constitutional amendment is necessary. 
Second, I will discuss three principles that Congress should 
follow as it designs a Constitutional rule. Third, I will argue 
that the benefits of Constitutional reform outweigh its 
potential risks.
    So first, why Constitutional reform? After all, there are 
other ways to enforce budget rules. The House and the Senate 
can create internal rules such as the PAYGO rule enacted in 
2007. Congress and President could reach agreement on a statute 
with enforcement mechanisms such as Gramm-Rudman-Hollings in 
the 1980s. Well, the answer lies in Article 1, Section 5 of the 
U.S. Constitution, and this is going to establish why Chamber-
based and even statutory rules are inferior to Constitutional 
rules.
    Article 1, Section 5 states plainly, ``Each House may 
determine the rules of its proceedings.'' What this means is 
that a current Congress cannot bind future Congresses. 
Historically, Congress and the President have chosen to evade 
or undo rules that proved to be inconvenient. PAYGO and Gramm-
Rudman-Hollings are just two examples.
    Constitutional rules are different. Unlike internal or 
statutory rules, Constitutional rules can only be changed after 
several significant hurdles have been overcome. Constitutional 
rules, therefore, provide the means to help keep Congress in 
check and ensure that fiscal discipline is maintained even when 
the temptation to abrogate agreements is hard to resist.
    The promise of Constitutional rules as enforcement 
mechanisms lies in this durability. But this durability is also 
a peril. Bad rules can be locked in just as good rules can be. 
And this brings me to my second main point. To prevent bad 
rules from being locked into the Constitution, legislators 
should follow three principles when constructing them: One, the 
rule should be general and apply to the entire Federal budget; 
a Constitutional rule is meant to be permanent, and as a 
consequence, it should focus on total spending and not on some 
programs at the exclusion of others.
    Two, the rules should be precise to prevent the use of 
loopholes or gimmicks. A Constitutional rule that leaves too 
many implementation details up to the Congress is likely to be 
eviscerated despite the best of intentions. Third, rules should 
have limited, carefully constructed exit options. In order to 
send a signal that Constitutional rules ought to be waived only 
in extraordinary circumstances, the threshold for waiving the 
rule should be very high, something like 90 percent of both 
Chambers.
    My final point addresses the critics of Constitutional 
reform. Amending the Constitution is a serious, some might even 
say drastic step for this country. Some critics argue that a 
Constitutional amendment is unnecessary or too risky. Well, the 
history of failed budget rules suggests that Constitutional 
rules are necessary. As for alleged risks, such as increased 
financial burdens for the States or the delegation of too much 
power to the U.S. Supreme Court, these are speculative risks 
and ought to be weighed against the very real danger that 
Congress will not be able to abide by the rules it sets out for 
itself.
    In closing, Congress and the President have a rare 
opportunity to enact meaningful budget reforms. Constitutional 
rules, unlike statutory or internal rules, can provide the 
enforcement mechanism that will help ensure that reforms to 
entitlements and other spending areas are not undone by future 
congresses.
    Thank you again for inviting me to testify and I welcome 
your questions.
    Mr. Franks. Thank you Professor Primo very much.
    [The prepared statement of Mr. Primo follows:]
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Franks. We will now recognize Mr. Greenstein for 5 
minutes.

                TESTIMONY OF ROBERT GREENSTEIN, 
             CENTER ON BUDGET AND POLICY PRIORITIES

    Mr. Greenstein. Thank you for the invitation. And I should 
start by saying I very much agree that our fiscal policy is on 
an unsustainable course. However, a Constitutional balanced 
budget amendment would, in my view, be a highly ill-advised way 
to address that. It would require a balanced budget every year 
regardless of the State of the economy, unless a super majority 
of both Houses overrode that. And that would thereby require 
the largest budget cuts or tax increases precisely when the 
economy is weakest and would hold substantial risk of tipping 
faltering economies into recessions and making recessions 
longer and deeper.
    When the economy weakens, revenue growth drops and revenues 
may even contract while expenditures for programs like 
unemployment insurance increase. Those revenue declines and 
expenditure increases are temporary, but they are critical for 
helping struggling economies to keep from falling into a 
recession and from moderating the depth of recessions that do 
occur.
    When the economy weakens, consumers and businesses spend 
less and that causes further job loss. The drop in tax 
collections and increase in unemployment and other benefits 
that occur automatically when the economy weakens cushions that 
blow. It keeps the purchases of good and services from falling 
even more, and that's why economists use the term automatic 
stabilizers to describe these reductions in revenue and 
increases in expenditure that occur automatically when the 
economy weakens. These changes help stabilize the economy.
    The Constitutional balanced budget amendment effectively 
suspends the automatic stabilizers. That's the opposite course 
from what sound economics should call for. That's why one of 
the Nation's leading economists and budget experts, Bob 
Reischauer, as the director of CBO in 1992 explained, and I am 
quoting, ``If it worked, a Constitutional balanced budget 
amendment would undermine the stabilizing role of the Federal 
Government.'' It is why when a Constitutional amendment was 
considered in the '90's, more than a thousand economists, 
including 11 Nobel laureates issued a joint statement saying 
the proposed amendment mandates perverse action in the face of 
recessions.
    To keep the budget balanced every year would aggravate 
recessions and that is why this January when asked in a Senate 
Budget Committee hearing, the current CBO director, Douglas 
Elmendorf, sounded essentially the same warning. To be sure, 
the balanced budget requirement could be waived by a vote of 
three-fifths of the House and Senate, but that doesn't address 
the problem. It is difficult to get three-fifths vote for 
anything considering the paralysis that regularly marks the 
Senate.
    In addition, it may take months after a downturn begins 
before sufficient data are available to convince three-fifths 
of the Members of both Houses that a recession is underway. And 
it is all too likely that even after evidence of a downturn is 
clear, that a minority in the House or the Senate would hold a 
waiver vote hostage to demands for concessions on other 
matters. By the time a recession were recognized to be underway 
and there were three-fifths in both Houses, if that could be 
achieved at all, extensive economic damage could have been done 
and hundreds of thousands, or even millions of additional jobs 
lost.
    The bottom line is the automatic stabilizers need to be 
able to continue to work automatically to protect American 
businesses and jobs. And the balanced budget amendment 
effectively precludes that. I would also note that it would 
make it harder than it already is to raise the debt limit by 
requiring a three-fifths vote of both Chambers. Frankly, I 
think that is playing with fire. It would heighten the risk of 
a default which could damage our economy for years to come.
    I don't have time to go into it in my opening remarks, but 
the Constitutional balanced budget amendment could interfere 
with the proper workings of Social Security and even the 
Federal Reserve as well.
    A final point I would make is that the fact that States 
must balance their operating budgets even in recessions makes 
it all the more important from the standpoint of economic 
policy that the Federal Government not be subject to the same 
stricture. That was theme of a recent article by the American 
enterprises institute scholar Norman Ornstein.
    And I will close by saying what Ornstein wrote. Ornstein 
wrote, ``Few ideas are more seductive on the surface and more 
destructive in reality than a Constitutional balanced budget 
amendment.'' Thank you.
    [The prepared statement of Mr. Greenstein follows:]
    
    
          Prepared Statement of Robert Greenstein, President, 
                 Center on Budget and Policy Priorities
    Thank you for the invitation to testify today. I am Robert 
Greenstein, president of the Center on Budget and Policy Priorities, a 
policy institute that focuses both on fiscal policy and on policies 
affecting low- and moderate-income Americans. We, like most others who 
analyze fiscal policy developments and trends, believe that the 
nation's fiscal policy is on an unsustainable course. As part of our 
work, we have been analyzing proposed changes in budget procedures for 
more than 20 years. We have conducted extensive analyses of proposals 
to write a balanced-budget requirement into the Constitution, among 
other proposals.
    The purpose of changing our fiscal policy course is to strengthen 
our economy over the long term and to prevent the serious economic 
damage that would likely occur if the debt explodes in future decades 
as a share of the economy. But we need to choose our fiscal policy 
instruments carefully. We want to avoid ``destroying the village in 
order to save it.''
    The goal of a constitutional balanced budget amendment is to 
address our long-term fiscal imbalance. Unfortunately, a constitutional 
balanced budget amendment would be a highly ill-advised way to try to 
do that and likely would cause serious economic damage. It would 
require a balanced budget every year regardless of the state of the 
economy, unless a supermajority of both houses overrode that 
requirement. This is an unwise stricture that many mainstream 
economists have long counseled against, because it would require the 
largest budget cuts or tax increases precisely when the economy is 
weakest. It holds substantial risk of tipping faltering economies into 
recessions and making recessions longer and deeper. The additional job 
losses would likely be very large.
    When the economy weakens, revenue growth drops and revenues may 
even contract. And as unemployment rises, expenditures for programs 
like unemployment insurance--and to a lesser degree, food stamps and 
Medicaid--increase. These revenue declines and expenditure increases 
are temporary; they largely disappear as the economy recovers. But they 
are critical for helping struggling economies to keep from falling into 
a recession and for moderating the depth and length of recessions that 
do occur.
    When the economy weakens, consumers and businesses spend less, 
which in turn causes further job loss. The drop in tax collections and 
increases in unemployment and other benefits that occur automatically 
when the economy weakens cushions the blow, by keeping purchases of 
goods and services from falling more. That is why economists use the 
term ``automatic stabilizers'' to describe the automatic declines in 
revenues and automatic increases in UI and other benefits that occur 
when the economy turns down; these actions help to stabilize the 
economy.
    A constitutional balanced budget amendment, however, effectively 
suspends the automatic stabilizers. It requires that federal 
expenditures be cut or taxes increased to offset the effects of the 
automatic stabilizers and prevent a deficit from occurring--the 
opposite course from what sound economic policy calls for.
    Over the years, leading economists have warned of the adverse 
effects of a constitutional balanced budget amendment. For example, in 
Congressional testimony in 1992, Robert Reischauer--then director of 
the Congressional Budget Office and one of the nation's most respected 
experts on fiscal policy--explained: ``[I]f it worked [a constitutional 
balanced budget amendment] would undermine the stabilizing role of the 
federal government.'' Reischauer noted that the automatic stabilizing 
that occurs when the economy is weak ``temporarily lowers revenues and 
increases spending on unemployment insurance and welfare programs. This 
automatic stabilizing occurs quickly and is self-limiting--it goes away 
as the economy revives--but it temporarily increases the deficit. It is 
an important factor that dampens the amplitude of our economic 
cycles.'' Under the constitutional amendment, he explained, these 
stabilizers would no longer operate automatically.\1\
---------------------------------------------------------------------------
    \1\ Statement of Robert D. Reischauer before the House Budget 
Committee, May 6, 1992.
---------------------------------------------------------------------------
    Similarly, when a constitutional balanced budget amendment was 
under consideration in 1997, more than 1,000 economists including 11 
Nobel laureates issued a joint statement that said, ``We condemn the 
proposed `balanced-budget' amendment to the federal Constitution. It is 
unsound and unnecessary. . . . The proposed amendment mandates perverse 
actions in the face of recessions. In economic downturns, tax revenues 
fall and some outlays, such as unemployment benefits, rise. These so-
called ``built-in stabilizers' limit declines of after-tax income and 
purchasing power. To keep the budget balanced every year would 
aggravate recessions.'' \2\
---------------------------------------------------------------------------
    \2\ This statement was issued on January, 30, 1997.
---------------------------------------------------------------------------
    More recently, in January 2011, the current CBO director, Douglas 
Elmendorf, sounded a similar warning when asked about a constitutional 
balanced budget amendment at a Senate Budget Committee hearing. 
Elmendorf observed:

        ``Amending the Constitution to require this sort of balance 
        raises risks . . . [t]he fact that taxes fall when the economy 
        weakens and spending and benefit programs increase when the 
        economy weakens, in an automatic way, under existing law, is an 
        important stabilizing force for the aggregate economy. The fact 
        that state governments need to work . . . against these effects 
        in their own budgets--need to take action to raise taxes or cut 
        spending in recessions--undoes the automatic stabilizers, 
        essentially, at the state level. Taking those away at the 
        federal level risks making the economy less stable, risks 
        exacerbating the swings in business cycles.'' \3\
---------------------------------------------------------------------------
    \3\ Federal Service, Transcript of Senate Budget Committee hearing, 
January 27, 2011.

    Proponents of a constitutional amendment likely will respond to 
these admonitions by noting that the proposed constitutional amendment 
would allow the balanced-budget requirement to be waived by a vote of 
three-fifths of the House and the Senate. That, however, does not 
address this problem. It is difficult to secure three-fifths votes for 
anything; consider the paralysis that marks the work of the Senate. 
Moreover, it may take months after a downturn begins before sufficient 
data are available to convince three-fifths of the members of both 
houses of Congress that a recession is underway. Furthermore, it is all 
too likely that even after the evidence for a downturn is clear, a 
minority in the House or Senate would hold a wavier vote hostage to 
demands for concessions on other matters (such as new, permanent tax 
cuts). By the time a recession were recognized to be underway and 
three-fifths votes were secured in both chambers, if such support could 
be obtained at all, extensive economic damage could have been done and 
hundreds of thousands or millions of additional jobs unnecessarily 
lost.
    The bottom line is that the automatic stabilizers need to continue 
to be able to work automatically to protect American businesses and 
workers. The balanced budget amendment precludes that.
    Nor is a recession the only concern. Consider the savings and loan 
crisis of the 1980s, or the financial meltdown of the fall of 2008. A 
constitutional balanced budget amendment would have hindered swift 
federal action to rescue the savings and loan industry or to rapidly 
put the Troubled Assets Relief Program in place. In both cases, history 
indicates that federal action helped save the economy from what 
otherwise likely would have been far more dire problems.
    Moreover, the federal government provides deposit insurance for 
accounts of up to $250,000; this insurance--and the confidence it 
engenders among depositors--is critical to the sound functioning of our 
financial system so that we avoid panics involving a run on financial 
institutions, as occurred in the early 1930s. A constitutional 
prohibition of any deficit spending (unless and until a supermajority 
of both houses of Congress voted to authorize it) could seriously 
weaken the guarantee that federal deposit insurance provides. That is a 
risk we should not take.
    These are illustrations of why fiscal policy should not be written 
into the Constitution.
    A parallel problem is that the proposed constitutional amendment 
would make it even harder than it already is to raise the debt limit, 
by requiring a three-fifths vote of both the House and Senate to raise 
the limit. This is playing with fire. It would heighten the risk of a 
federal government default. A default would raise our interest costs 
and could damage the U.S. economy for years to come.
               Mistaken Analogies to States and Families
    Proponents of a constitutional amendment sometimes argue that 
states and families must balance their budgets every year and the 
federal government should do so, too. But statements that the 
constitutional amendment would align federal budgeting practices with 
those of states and families are not accurate.
    While states must balance their operating budgets, they can borrow 
to finance their capital budgets--to finance roads, schools, and other 
projects. Most states do so. States also can build reserves during good 
times and draw on them in bad times without counting the drawdown from 
reserves as new spending that unbalances a budget.
    Families follow similar practices. They borrow--they take out 
mortgages to buy a home or student loans to send a child to college. 
They also draw down savings when times are tight, with the result that 
their expenditures in those periods exceed their current incomes.
    But the proposed constitutional amendment would bar such practices 
at the federal level. The total federal budget--including capital 
investments--would have to be balanced every year, with no borrowing 
allowed for infrastructure or other investments that can boost future 
economic growth. And if the federal government ran a surplus one year, 
it could not draw it down the next year to help balance the budget.
    I would also note that the fact that states must balance their 
operating budgets even in recessions makes it all the more important 
from the standpoint of economic policy that the federal government not 
be subject to the same stricture. American Enterprise Institute analyst 
Norman Ornstein addressed this matter in a recent article, where he 
wrote: ``Few ideas are more seductive on the surface and more 
destructive in reality than a balanced budget amendment. Here is why: 
Nearly all our states have balanced budget requirements. That means 
when the economy slows, states are forced to raise taxes or slash 
spending at just the wrong time, providing a fiscal drag when what is 
needed is countercyclical policy to stimulate the economy. In fact, the 
fiscal drag from the states in 2009-2010 was barely countered by the 
federal stimulus plan. That meant the federal stimulus provided was 
nowhere near what was needed but far better than doing nothing. Now 
imagine that scenario with a federal drag instead.'' \4\
---------------------------------------------------------------------------
    \4\ Norman Ornstein, ``Four Really Dumb Ideas That Should Be 
Avoided,'' Roll Call, January 26, 2011.
---------------------------------------------------------------------------
                  H.J. Res. 1 Raises Additional Issues
    The foregoing concerns apply to all versions of the balanced budget 
amendment that have been introduced. Some versions of the balanced 
budget amendment, such as H.J. Res 1, raise additional serious 
concerns, because they would write into the Constitution new 
prohibitions against raising any revenues--including closing wasteful 
tax loopholes--to help balance the budget and also would prohibit 
federal expenditures in any year from exceeding a figure such as 20 
percent of the Gross Domestic Product. These constitutional 
prohibitions could be overridden only by supermajority votes in both 
the House and the Senate.
    This requirement for a supermajority to raise taxes would be 
extremely unsound. It would protect what President Reagan's former 
chief economic advisor, Harvard economist Martin Feldstein, has called 
the biggest area of wasteful government spending in the federal 
budget--what economists call ``tax expenditures'' and Alan Greenspan 
has called ``tax entitlements.''
    In 2010, tax expenditures amounted to $1.1 trillion, more than the 
cost of Medicare and Medicaid combined (which was $719 billion), Social 
Security ($701 billion), defense ($689 billion, including expenditures 
in Iraq and Afghanistan), or non-defense discretionary spending ($658 
billion, including expenditures from the Recovery Act). Many of these 
tax expenditures are fully the equivalent of government spending. Let 
me use child care as an example.
    If you are low- or moderate-income, you may get a federal subsidy 
to help cover your child care costs, and the subsidy is provided 
through a spending program. If you are higher on the income scale, you 
still get a government subsidy that reduces your child care costs, but 
it is delivered through the tax code, as a tax credit. (Moreover, if 
you are a low or modest income parent with child care costs, you likely 
will miss out because the spending programs that provide child care 
subsidies are not open ended and can only serve as many people as their 
capped funding allows. By contrast, if you are a higher income 
household--and there is no limit on how high your income can be--your 
child care subsidy is guaranteed, because the tax subsidy you get 
operates as an open-ended entitlement.) It is difficult to justify 
making the tax-code subsidy sacrosanct and the program subsidy a 
deficit-reduction target merely because one is delivered through a 
``spending'' program and the other is delivered through the code.
    And as the child care example illustrates, sharply distinguishing 
between subsidies delivered through the tax code and those delivered 
through programs on the spending side of the budget also has a 
``reverse Robin Hood'' aspect. Low- and moderate-income households 
receive most of their government assistance through spending programs; 
affluent households receive most of their federal subsidies through tax 
expenditures. Effectively barring reductions in tax expenditures from 
contributing to deficit reduction is a prescription for placing the 
greatest burden of deficit reduction on those who can least afford to 
bear it.
    The problems do not stop there. If it requires a supermajority to 
raise any revenue, another likely outcome is a proliferation of tax 
loopholes. New loopholes--including loopholes that Congress did not 
intend but that high-priced tax lawyers and accountants have found ways 
to create--could become untouchable once they appeared, because it 
would require a supermajority of the House and Senate to raise any 
revenue. It would become more difficult to close tax loopholes that 
opened up, since special-interest lobbyists could seek to block such 
action by preventing a supermajority in one chamber.
    Finally, H.J. Res 1 would bar federal spending from exceeding 20 
percent of GDP. To hit that level would require cuts of a draconian 
nature. This can be seen by examining the austere budget that the House 
of Representatives passed on April 15, sometimes referred to as the 
Ryan budget.
    Under that budget, Medicare would be converted to a voucher system 
under which, the Congressional Budget Office has said, beneficiaries' 
out-of-pocket health-care costs would nearly triple by 2030 (relative 
to what those costs would be that year under the current Medicare 
program). CBO also has written that under the Ryan budget, federal 
Medicaid funding in 2030 would be 49 percent lower than it would be if 
the Affordable Care Act's Medicaid expansion were repealed but Medicaid 
otherwise was unchanged. And funding for non-security discretionary 
programs would be cut more than one-third below its real 2010 level. 
Yet CBO says that under this budget, total federal spending would be 
20\3/4\ percent of GDP in 2030, so it would breach the allowable limit 
under H.J. Res 1. This illustrates the draconian nature of the proposed 
20 percent-of-GDP requirement.
    Another way to look at the 20 percent of GDP level is to examine 
federal expenditures under Ronald Reagan. Under President Reagan, who 
secured deep budget cuts at the start of his term, federal expenditures 
averaged 22 percent of GDP. And that was at a time before any members 
of the baby boom generation had retired and when health care 
expenditures throughout the U.S. health care system (including the 
private sector) were one-third lower as a share of GDP than they are 
today. It also was before the September 11 terrorist attacks led 
policymakers to create a new category of homeland security spending, 
and before the wars in Iraq and Afghanistan led to increases in 
veterans' health-care costs that will endure for a number of decades.
                               Conclusion
    Policymakers need to begin to change our fiscal trajectory. As 
various recent commissions have indicated, we need to stabilize the 
debt as a share of GDP in the coming decade, and to keep it stable 
after that (allowing for some fluctuation over the business cycle). But 
establishing a balanced budget amendment in the Constitution would be 
most unwise. It would likely exact a heavy toll on the economy and on 
American businesses and workers in the years and decades ahead. It is 
not the course the nation should follow.
                               __________

    Mr. Franks. Thank you, Mr. Greenstein. We now recognize Mr. 
Moylan for 5 minutes.

                  TESTIMONY OF ANDREW MOYLAN, 
                    NATIONAL TAXPAYERS UNION

    Mr. Moylan. Chairman Franks, Ranking Member Nadler, Members 
of the Subcommittee, thank you for the opportunity to testify 
this morning on behalf of the American taxpayer regarding the 
important questions surrounding a Constitutional amendment to 
address the Federal deficit. My name is Andrew Moylan and I am 
vice president of Government Affairs for the National Taxpayers 
Union, a nonpartisan citizen organization founded in 1969 to 
work for limited government at all levels.
    I want to start with an old joke that our budget tells us 
what we can't afford, but it sure doesn't keep us from buying 
it. And unfortunately, that has been true of Washington for far 
too long, and that's why for decades, NTU has been one of the 
most powerful voices supporting durable, structural reforms to 
our budget process to protect taxpayers. We believe that a 
strong balanced budget amendment is not only necessary to 
address our debt problems, but would provide the very life 
blood that will restore and sustain the financial health of our 
republic.
    Our current situation is certainly bleak, and I want to 
point out just three nuggets that I think are instructive about 
just how bleak it is. First of all, under President Obama's 
budget outline for this year, our borrowing this year alone 
will be roughly equal to the entire Federal budget of 1982 
after adjusting for inflation. To put this another way, again, 
after adjusting for inflation, we are spending both the 2003 
Federal budget, and the 1982 Federal budgets this year.
    Second, in the President's plan the lowest single year 
deficit we see in the coming decade is $607 billion, which is a 
number higher in absolute terms than every yearly deficit from 
1789 to 2008, and roughly equal in inflation adjusted terms to 
our overspending in war mobilized 1944.
    Finally, while many in Congress attributed the recent 
explosion in spending due to crisis response due to a financial 
meltdown in a resulting recession, the Federal Government has 
actually run deficits in 44 of the last 50 years, which ought 
to give pause even to the most diehard of Keynesians who 
believe that surpluses should be the norm in most economic 
growth cycles.
    We have been told for the better part of 40 years now that 
fiscal discipline would evolve by electing the right people, 
while Republican and Democrats alike abuse the Nation's good 
credit. We were told statutory measures were sufficient to 
bring outlays under control, even as laws like Gramm-Rudman-
Hollings were trampled underfoot. We were told that our 
foundational document shouldn't be cluttered by mundane matters 
of budgeting as the tax, spend, and borrow culture in 
Washington threatens to erode the foundations of prosperity for 
people like my 2-year old daughter.
    No one would argue that the Founders of our Nation lacked 
political will. And even they could not balance the budget and 
keep up payments on the national debt without a structure to 
facilitate it. In 1786, the Articles in Confederation collapsed 
in large part because of chaotic finances and it took a 
structural change then, the drafting of a new Constitution. And 
it will take a structural change today, the drafting of a 
balanced budget amendment to ensure fiscal discipline.
    While the views I express here are mine alone, I also come 
today as the ambassador for more than 90 grassroots 
organizations across the country that comprise the BBA Now 
coalition. This collaborative effort, which you can read more 
about at bbanow.org worked together to develop a commonsense 
balanced budget amendment that has, at its core, three 
principles: A balanced budget requirement, a super majority 
threshold for passage of a tax increase, and a limitation on 
Federal spending. There are several resolutions that have been 
introduced that include these important pillars, including 
Representative Goodlatte's H.J.Res 1, Senator Hatch's S.J.Res. 
3, and the so-called consensus BBA, introduced as H.J.Res. 56 
by Representative Walsh, and S.J.Res. 10 by Senator Hatch and 
his 46 Republican colleagues.
    Opponents of a BBA often argue that it would leave Congress 
unable to respond to emergencies or recessions. But the truth 
is that under most BBAs, Congress can enact whatever kind of 
spending or taxation policies it chooses so long as the super 
majority of its Members vote in the affirmative. And 
furthermore, despite claims to the contrary, Congress is not 
only capable of the achieving such super majorities but has 
done so regularly when faced with truly urgent decisions. And 
as an example, I would point to the trouble Troubled Asset 
Relief Program which is surely as unpleasant a vote as has ever 
been cast in Congress. And yet it passed with a three-fifths 
majority in the House and with 74 votes in the United States 
Senate.
    It is also important to note that a BBA is not an economic 
policy, and it is not a Federal budget. It is simply a set of 
guidelines within which Congress can create a sustainable 
economic policy and a Federal budget. If we failed to seize 
this opportunity, the result could well be a painful debt 
crisis that could begin not over the span of 6 months, but over 
the course of 6 hours on a Sunday evening while you sit with 
your family, and investors in Asian markets begin to stampede 
away from American debt.
    The President has said that he hopes his era will be 
remembered as a time when ocean levels stopped rising, but to 
modify that line slightly, I hope that we can look back on this 
time together and say that this was the moment when the rise of 
red ink began to stop and our budget began to heal. Thank you, 
and I look forward to questions.
    [The prepared statement of Mr. Moylan follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Franks. Thank you, Mr. Moylan, and I thank all of you 
for testimony. I will now begin the questioning by recognizing 
myself.
    Now Mr. Moylan said I think this is perhaps a moment for us 
to deal with things that we haven't thus far been able to deal 
with. I don't often quote Shakespeare, but he said, ``There is 
a tide in the affairs of men, which, taken at the flood, leads 
on to fortune. But omitted all the voyage of their lives is 
bound in shallows and in miseries, and on such a full sea we 
now find ourselves afloat, and we must take the current when it 
serves or lose our venture.''
    And I think that this is a moment when the American people 
are awake, they understand the significance of the issue. They 
understand that the deficit they are dealing with may be able 
to eventually destroy us in a way that no military power has 
ever been able to be do. And I think this is the time for this 
Congress to take a stand. I want to especially thank Mr. 
Goodlatte for having the courage to come forward with this, and 
I want to also reiterate on behalf of Mr. Jordan, his support 
for this effort and the support of much of the RSC in Congress 
in that vein.
    I know that there are those who testified here today that 
we need deficits to prime the pump, in times of low economic 
activity, but I am convinced that if we prime the pump much 
more with deficits, we are all going to fall in the well. And I 
know that there are those who have said that there's an 
automatic stabilizing factor with deficits, but as Mr. Moylan 
pointed out, 44 of the last 50 budgets have been with deficits.
    And it seems to me that the deficits are not stabilizing 
us, but they are leading us to what has become one of the most 
significant points of instability in our history.
    So I am going to ask Mr. Goodlatte a question. The annual 
Federal budget has been balanced only six times since 1960, and 
yet many of the opponents of the balanced budget amendment seem 
to be more concerned with ensuring that the government can run 
deficits during recessions than addressing the major economic 
downturn that will eventually occur if we don't get spending 
under control.
    And I would ask you, Mr. Goodlatte, do you believe that 
either of your balanced budget amendment proposals are so 
inflexible that Congress would not be able to address the short 
term needs of the country during a recession or a critical 
emergency?
    Mr. Goodlatte. Well, thank you, Mr. Chairman. No, I do not 
believe that's the case. In fact, I think Mr. Moylan has just 
cited a very good example with the TARP vote, very 
controversial, very difficult vote, but passed with majorities 
that exceed the requirements of even my stronger balanced 
budget amendment.
    So I don't think that's the case. I think the greater 
concern is this, there is no automatic stabilizer that Mr. 
Greenstein refers to. The evidence, of course, is in the few 
times that the budget has been balanced in the last 50 years, 
but it also defies Keynesian economic theory. An abbreviated 
version of Keynes would say in difficult economic times, the 
government will borrow money, spend that money to stimulate 
economic activity which will create jobs in theory, which will, 
in turn, result in increased revenues coming back to the 
Federal Government which the Federal Government will then use 
to pay back the money that it borrowed.
    Obviously, that last part of Keynesian economic theory is 
theory and not practice, and therein lies the problem and why I 
think we need to have the strongest rule possible to restrain 
the desires of Members of Congress representing people who have 
desires to see government spend money on lots of different 
things know that they have to live within their means. And 
that's obviously the core purpose of a balanced budget.
    Mr. Franks. Well, thank you, sir. I think history may bear 
out that your efforts were not only timely, but may have been 
critically important to the success of the country.
    Professor Primo, it will take years for a balanced budget 
amendment to be ratified and have the force of law, and that 
leads to two questions. First, is the delay in an amendment 
becoming effective a reason not to pursue the amendment? And 
second, what should Congress do to control spending while we're 
waiting for the enactment of a balanced budget amendment? 
    Mr. Primo. I believe that while we--it will take several 
years to put into effect a Constitutional amendment, but that 
doesn't mean that we can't take steps now to put us on the 
track to abiding by that amendment when it goes into effect. 
And right now the debate that's going on between the Congress 
and the President over how to deal with the Nation's fiscal 
problems, that debate should continue. And there should be an 
agreement that's reached that takes on the difficult 
entitlement issues and takes on some difficult tax issues. 
There are reasonable positions on both sides of that issue, I 
believe. And those two sides should come together to formulate 
an agreement that will put us on the glide path toward abiding 
by that Constitutional amendment when it comes into effect.
    And the benefit of doing this is that it will send also a 
very strong signal to the markets that the United States is 
serious about fiscal reform. So the passage of the amendment 
today or the process of beginning of the passage of the 
amendment today is very important because of the signals it 
sends to the markets as well as the spur it will give, I 
believe, to the Congress and President to reach agreement on 
fiscal reform.
    Mr. Franks. Could I ask unanimous consent for 1 minute to 
ask Mr. Moylan a question?
    Mr. Nadler. By all means.
    Mr. Franks. Mr. Moylan, some of the opponents of balanced 
budget amendments argue that the Constitution is not the place 
for budget rules, that it somehow would be an inappropriate 
place to put a balanced budget requirement in the Constitution 
itself. Can you address that?
    Mr. Moylan. I think that it is precisely the place to lay 
out what we see as sort of the rules of the road for how 
Congress can budget moving forward. The Constitution is not the 
place to enshrine specific policies; it's not the place to 
enshrine what marginal tax rates will be or anything like that. 
But laying out what the rules of the road are and establishing 
what those guidelines are is extremely important to be able to 
guide Congress in the direction that respects taxpayers and 
respects the burdens that they have to pay and that ensures 
that we can get to balance.
    So I think that that's an objection that I find wanting a 
little bit because we're not talking about enshrining any kind 
of particular policy or any particular implication to a budget 
or a program. I mean, all of that stuff is within the purview 
of Congress once the amendment is passed.
    Mr. Franks. Thank you, sir, I would now recognize the 
Ranking Member for 5 minutes for questions.
    Mr. Nadler. Thank you. I would start off by pointing out 
that one of my objections to this amendment is that it 
precisely does exactly what you just said it doesn't do. It 
enshrines in Constitutional our particular views as economics 
and the budget. It says it takes the view, for example, that we 
ought to cut expenditures rather than increase taxes, that's 
legitimate political debate. But it's a legitimate political 
debate our grandchildren ought to be as free to have as we are 
to have. Maybe we should increase taxes rather than reduce 
expenditures, maybe the other way around. That's a decision 
every generation should be able to make for itself.
    And this amendment deliberately biases that by saying you a 
need three-fifths vote to increase the debt limit. You need a 
whole majority of those, not just persons voting, an 
extraordinary majority to increase taxes.
    Second, let me ask Mr. Goodlatte, and please answer quickly 
because I have a number of questions for a lot of people. This 
amendment demands a balanced budget by 2016. The House 
Republican budget that we just passed that some people are 
saying was rather Draconian in its cuts wouldn't get to a 
balanced budget by 2040. In broad strokes, how would you 
advance the balanced budget from 2040 beyond what the 
Republican budget does in 2016, which would be necessitated by 
this amendment?
    Mr. Goodlatte. Thank you, Mr. Nadler. I would direct to you 
the House Republican Study Committee Budget which balances it 
in 9 years.
    Mr. Nadler. It's not 2016?
    Mr. Goodlatte. No, we don't know it is 2016 because we 
don't know how long the States will take to ratify this. But I 
certainly am prepared to adjust that budget by accelerating 
some spending.
    Mr. Nadler. Let me ask you the second question. Most of the 
States have balanced budget amendments; New York State adopted 
it in 1847. But those amendments, like any rationale 
corporation differentiate between the capital budget and an 
operating budget. This does not necessitate, if there were that 
we would never borrow money. If you never borrow money a family 
wouldn't afford the house or the car, the corporation couldn't 
invest, the Federal Government couldn't invest in long-term 
investments. It makes no sense. How do you reply to that?
    Mr. Goodlatte. As you know the Federal Government budgets 
on an annual basis and it does not make expenditures well into 
the future as it is now. So quite frankly, that certainly is 
another alternative to consider, but given the fact that we 
have a deficit--a debt that is now over $14 trillion, we have 
got a lot of debt on the plate we have to work--I think it is 
better to limit the----
    Mr. Nadler. Let me just observe that any organization 
whether it be a government or a corporation, et cetera, ought 
to have some debt for long-term investments. If you want to 
balance an ongoing expense budget, that's what most States do 
and that's what a lot of corporations do. And you want to limit 
the amount of the debt for long-term investments and not say 
you should never borrow for it.
    Mr. Greenstein, the basic theory behind this amendment is 
that we're spending too much and we're--period. What is the 
basic cause of the change? In 2000, the debate of the 
presidential election between Bush and Gore was what should we 
do with the anticipated $5.6 trillion deficit over the next 10 
years--I'm sorry, what should we do with the anticipated 5.6 
surplus then anticipated over the next 10 years? What turned 
that into the huge deficits we have now?
    Mr. Greenstein. We just issued a paper on this earlier this 
week just using basically the Congressional Budget Office 
analyses. There are really three main factors, one of the 
largest factors were the costs including the extra interest, as 
a result of 2001 and 2003 tax cuts. Another large factor were 
additional expenditures that certainly weren't contemplated in 
2001 for the wars in Iraq and Afghanistan and related funding 
for Homeland Security. We really didn't spend much on that 
before----
    Mr. Nadler. Tax cuts and the wars and Homeland Security?
    Mr. Greenstein. And third big issue, of course, is the big 
increase in the deficit that resulted as a result of the 
biggest recession since the Great Depression.
    Mr. Nadler. If we got unemployment down to 5 percent as it 
was in 2007, what would that do to the size of our deficit?
    Mr. Greenstein. Excuse me?
    Mr. Nadler. If unemployment were gotten down to 5 percent 
as it was in 2007 before the onset of the great recession, what 
would that, by itself, do to the size of the deficit?
    Mr. Greenstein. I don't have the figures in front of me, 
the economic maybe it would reduce it a third, but we'd still 
have very large deficits.
    Mr. Nadler. It would reduce it by about a third. Let me ask 
you, lastly, I saw a figure recently that as a percentage of 
GDP, total taxation is now running at about 15 percent, 
historically it has run 22, 23 percent, are those figures 
correct?
    Mr. Greenstein. Well, historically if you take a long 
average it is in the 18 to 19 percent range. It is very low 
now, that's a combination of the tax cuts but also the fact the 
economy is so weak, whenever the economy weakens this much that 
reduces revenues a share of the gross----
    Mr. Nadler. And finally, my last question is the following: 
I read this amendment and it says, no bill to--it says that the 
Congress shall enforce and implement this article by 
appropriate legislation. The President shall submit a budget 
which shall be balanced in terms of anticipated revenues and 
anticipated expenditures. Let's assume the President submitted 
a budget under this amendment and he said we're going to cut 
taxes and therefore revenue is going to go up. So my--or 
because taxes are already cut I'm assuming this level of 
revenues. The revenues are, in fact, much lower and the 
expenditures are the same or higher. How would you enforce this 
amendment if the estimates were off? And if Congress decided to 
take wrong estimates either deliberately or not deliberately?
    Mr. Greenstein. I don't think this is clear, two parts to 
the answer is I read the wording of the Constitutional 
amendment. It does say that estimates can be used in 
determining whether the balanced budget requirement has been 
met. The bigger issue is what happens if, due to factors in the 
economy, whatever the factors would be, we're running a deficit 
in a given year, it is clear in the estimates it is going to be 
a deficit and the Congress and the President don't rein it in, 
what happens? Do people have standing to go into court? Do the 
courts or the President unilaterally? Who is empowered to take 
the action to restore balance if the Congress and the President 
don't pass legislation to do that? I don't think that's clear 
how that would be enforced from the wording of the amendment.
    Mr. Nadler. Thank you.
    Mr. Goodlatte. Mr. Nadler, I wonder if I might be allowed 
to answer the question.
    Mr. Nadler. Please.
    Mr. Goodlatte. First of all, the obvious answer it will be 
enforced at the polls in the next election, but secondly.
    Mr. Nadler. That hasn't seemed to work in the last 30 
years, that's the whole point of your amendment.
    Mr. Goodlatte. There is no such Constitutional requirement 
or even a requirement in the law that we balance the budget. 
But the second thing is that most States that have this 
requirement also have additional budget rules that may require 
the governor of the State to step in and make adjustments to 
expenditure in the middle of the budget process in order to 
bring it back into balance, that certainly is what is done in 
Virginia, and governors of both parties have to step in and 
make some tough decisions in the middle of process if the 
projections don't match up with the initial budget.
    Mr. Franks. Thank you, Mr. Nadler. And I would now 
recognize Mr. Scott for 5 minutes for questions.
    Mr. Scott. Thank you, Mr. Chairman. Mr. Chairman, this 
entire discussion is interesting because you get down to the 
bottom line if we're going to balance the budget, it is going 
to require some tough votes, whatever the mechanism is. And 
many of them will be career-ending votes. In 1993, we passed a 
budget by the thinnest of margins. One vote could have 
switched, would have ruined it in the House, the Vice President 
had to vote in the Senate. We received zero Republican votes in 
the House or Senate. There were tough votes. As a matter of 
fact, when the 218th vote was cast in the House, Marjorie 
Margolies-Mezvinsky was greeted by a chorus of cheers from the 
Republican side, bye-bye Marjorie. That vote was used to defeat 
her in the next election, along with 50 Democratic colleagues 
who lost their seats primarily because of those tough results.
    Those votes resulted a record number of jobs, record 
economy as measured by the Dow Jones industrial average. The 
Republicans tried to dismantle that plan in 1995. President 
Clinton let the government get shut down rather than sign those 
bills. The result was not only did we balance the budget, we 
were on course to paying off the entire national debt by 2008. 
Had we not fought two wars without paying for it, prescription 
drugs without paying for it, tax cuts without paying for it. We 
would have paid off the national debt by 2008. We'd owe no 
money to China, Japan, Saudi Arabia. We would have paid off the 
entire debt held by the public. In fact, when Greenspan was 
testifying in early 2001 he was asking questions like what 
happens if you pay off the national debt too quickly, what 
happens if there are no government bonds, what happens to 
investments and long-term interest rates?
    In 2001, we eliminated PAYGO which we had, which meant if 
you wanted to do a tax cut, you'd have to pay for it with 
spending cuts. If you wanted to increase spending, you'd have 
to raise taxes to pay for it, PAYGO. We eliminated PAYGO, 
passed the tax cuts and everything else and went directly into 
the ditch; instead of paying off the debt we doubled the debt.
    Now at some we are going to have to actually vote for tax 
increases and/or spending cuts to get the budget under balance. 
This is not magic, it is arithmetic. Now if we look at the 
proposed amendments, one of the questions that's been responded 
to is, we had all these questions responded to. One question 
that was not asked is how this proposal will actually help 
balance the budget?
    Now we have been debating the title, but not really the 
provisions. The provisions of the bill basically, not just 
dismiss H.R. 1, because that has a super majority to increase 
taxes, that will obviously make it more difficult to balance 
the budget. But all of them have--if you're going to pass an 
unbalanced budget, you require a 60, a three-fifths vote.
    The question is will that help or hurt passing a severe 
meaningful deficit reduction plan? Now the Clinton budget never 
got anywhere close to 60 percent, Ryan's budget which is the 
one the House passed, didn't get anywhere close to 60 percent. 
If you needed 60 percent those budgets wouldn't have passed. 
Now we have heard examples of how you do get to 60 percent, you 
can pass an $800 billion TARP, spending. You can pass an $800 
billion tax cut from last December, that got 60 percent. That's 
obviously not the direction we need to go.
    My question is, how is a requirement of a super majority 
going to help you get people to cast career-ending votes? Would 
it be easier to pass the Ryan plan, for example, with a simple 
majority, or a three-fifths vote in both the House and the 
Senate?
    Mr. Greenstein, can you explain to me whether it would be 
more likely or less likely that a plan like Ryan's would pass 
when you increase the number of votes required?
    Mr. Greenstein. I think clearly less likely. In my view, 
super majorities requirements in some States, California as an 
example, have really led to gridlock and they have made it 
harder for a policymakers to make the very tough decisions that 
are needed. We're going to need very tough decisions in the 
years ahead, whether it is a Constitutional amendment or not, 
the Constitutional amendment, I think, everyone on the panel 
agrees is, in itself, something that changes a program or 
raises a tax.
    Mr. Scott. Let me ask a follow-up question on that. There 
is no proposal on the table, the colleague from Virginia 
mentioned the Republican Study Group which balances the budget 
in 9 years. That budget to pass would require what percentage 
under this proposal?
    Mr. Goodlatte. It would require a majority vote.
    Mr. Scott. No, it would require the Republican majority--
may I have an additional minute, Mr. Chairman?
    Mr. Franks. Yes.
    Mr. Scott. The Republican Study Committee Balances the 
budget in 9 years would require a three-fifths vote in the 
House and Senate to pass.
    Mr. Goodlatte. No, it would require majority vote because 
it did not contain tax increases?
    Mr. Scott. It's an unbalanced budget this year.
    Mr. Goodlatte. Correct, correct.
    Mr. Scott. And you're going to pass an unbalanced budget 
this year.
    Mr. Goodlatte. Again, as I said before, it presumes that 
you have--the budget hasn't been balanced in more than a 
decade, so you've got to have a glide path; there's no question 
about that.
    Mr. Scott. Right. But the glide path requires a three-
fifths vote to enact.
    Mr. Goodlatte. No, not until this it ratified.
    Mr. Scott. Right, exactly. If the balanced budget amendment 
were in effect, the Republican Study Committee budget, it would 
take a three-fifths vote to pass.
    Mr. Goodlatte. If the balanced budget amendment were in 
effect, that's correct, but only if we hadn't been doing the 
work together to get to a balanced budget----
    Mr. Scott. But the point is that requiring a three-fifths 
vote to pass the Republican Study Committee's budget would make 
it more difficult to pass rather than less likely.
    Is there anything in the three-fifths requirement that 
makes it more likely that a fiscally responsible budget would 
be enacted rather than a fiscally irresponsible budget? You 
didn't have any trouble getting three-fifths to pass an $800 
billion tax cut late last year.
    Mr. Goodlatte. But we didn't balance the budget.
    Mr. Scott. It made it worse, it made it worse. And you got 
three-fifths for that.
    Mr. Goodlatte. But that would be contrary to this law.
    Mr. Scott. Where is it in the law that prefers a fiscally 
responsible--once you get to three-fifths--and any budget that 
is going to pass under this, any budget this year, if this was 
the law, any budget that would pass would require three-fifths, 
my question is, why is it more likely that it would be fiscally 
responsible requiring three-fifths or ``Katie, bar the door'' 
Democrats get their spending, Republicans get their tax cuts, 
and we are further in the ditch.
    Mr. Goodlatte. Because you've got to go face the voters 
after you've done that.
    Mr. Scott. We faced the voters after we cut taxes $800 
billion. I don't see anybody that got any pain for putting us 
$800 billion worse in the ditch last December than we are 
today; who's suffering from that?
    Mr. Goodlatte. There was no requirement that the budget be 
balanced, that's the difference.
    Mr. Scott. And there's no requirement that the budget be 
balanced under any of these proposals. The only requirement is 
it takes three-fifths to pass the budget.
    Mr. Goodlatte. That's correct. But I think it would have 
tremendous pressure on individual Members to go home and 
explain why they voted for something that didn't balance when 
there was an alternative offer that did balance and they didn't 
vote for it.
    Mr. Scott. You have that today. You have that today.
    Mr. Moylan. Mr. Chairman, may I respond briefly to that? I 
think that the three-fifths supermajority requirement, we view 
that as a bulwark against what we view as irresponsible tax 
increases. And part of the reason that we hold that view is 
that even if you assume extension of the 2001/2003 tax cuts, 
even if you assume patching of the AMT, revenues will get back 
to historical average levels by about the end of this decade. 
And so eventually we are going to get back to average levels of 
revenue even if we again assume extension of the policies that 
I know you're not a supporter of. And so we see this as really 
spurring the needed spending restraint to be able to bring the 
budget back to balance.
    Mr. Scott. You're absolutely right, I don't support those 
provisions. I support a budget that is $1.3 trillion better 
than the Republican budget we passed. As a primary author of 
the Congressional Black Caucus budget that let the tax cuts for 
the wealthy expire and we came up with revenues to be able to 
extend, by paying for them, the tax cuts under $250,000. We 
extended them, but we paid for them. And we ended up $1.3 
trillion better than the Republican budget without repealing 
Medicare.That's what I support.
    Mr. Moylan. I think there's no question that we can balance 
the budget at a higher level of spending; it requires a much 
higher level of taxation. And I don't have the numbers in front 
of me, but my recollection of a lot of the alternative budgets 
that came from the Democratic side is that we're talking about 
balancing the budget at 23, 24, 25 percent of GDP. The question 
is whether or not that's advisable. I would submit that it's 
not.
    Mr. Scott. There is a difference between a tax limitation, 
limiting taxes and balancing the budget. If the society 
decides, for example, that it wants universal health care and 
society is willing to pay for it as the health care reform did, 
we had significant additional spending and we more than paid 
for it.
    Now unfortunately, under this proposal, you can pass a new 
spending plan with a simple majority, but then turn around and 
can't pay for it because you can't get the supermajority to pay 
for it. That's how you end up in the ditch.
    Mr. Franks. The gentleman's time has expired. But Professor 
Primo, did I hear you would like to make a response?
    Mr. Primo. Yes, I would. Thank you.
    One important thing that a Constitutional amendment will do 
is create a norm that used to be present in the Congress: that 
budgets ought to be balanced. The presumption of a 
Constitutional amendment that requires a balanced budget or 
that limits spending to a certain percent of GDP is that that 
is what is expected of Members of Congress. Deficits would no 
longer be the norm, but would have to become the exception. And 
so I believe that having a Constitutional amendment in place 
will send a very different signal to voters than the current 
status quo, which is that deficits are acceptable.
    Mr. Scott. How do the provisions--not just the title, how 
do the provisions of the Constitutional amendment actually help 
get to a balanced budget?
    Mr. Primo. If I may respond, they would help to get to a 
balanced budget because elected officials would be able to go 
back to their districts and say I had to cast this tough vote 
because the Constitution requires fiscal responsibility, and 
that is a very different message. So right now you go back to 
your districts and you say, ``Oh, I had to make a cut to this 
program, but look, we got some fiscal responsibility out of 
it.'' Voters are going to say, but you cut my program.
    Mr. Franks. The gentleman's time has expired.
    I would just say that we do have a fairly good laboratory 
to answer some of these questions; that is, in Arizona we have 
a balanced budget amendment, and it has, even in difficult 
moments like this, allowed us to balance our budget and improve 
our economy. It has worked very well in the States, and we do 
that all the time. So some of these doomsday, and when they 
talk about tax cuts being the problem, that is creating 
increased revenues.
    But in the interest of fairness, without objection, I will 
give the gentleman one more minute.
    Mr. Scott. I will just ask a question about Arizona. You 
said you have a balanced budget. Does that include capital 
expenditures? You have to balance the total budget, as these 
amendments would, all outlays and all revenues; or does your 
Constitutional amendment to balance the budget allow you to 
borrow money for capital expenditures like all the other----
    Mr. Franks. I just answered the gentleman's question. There 
are some efforts on the part of the legislature to try to 
circumvent that, but yes, we have to balance the budget on 
capital expenditures, too. But there are sometimes leasing 
programs to try to get around that, and I think the gentleman's 
point is well taken.
    But in Arizona and a lot of other States who have balanced 
budget amendments that are not only not able to deficit spend, 
but they are not able to print money and they are not able to 
do a lot of other things that the Federal Government does, it 
has worked very well. Arizona was hit harder than just about 
anyone in this recession, and yet we are coming out of it very 
effectively, the United States isn't. And the primary 
difference is the fact that we have a balanced budget, we have 
no alternative.
    But with that, I want to be fair, but if----
    Mr. Greenstein. Could I have one sentence?
    Mr. Franks. Please. 
    Mr. Greenstein. All I want to say is, what is the key goal? 
If the key goal is fiscal responsibility--and we all agree that 
requires tough choices, regardless of your views on what those 
choices should be--then I would urge not to erect new 
supermajority requirements which will make it harder, not 
easier, to get the tough choices made.
    Mr. Franks. Mr. Moylan, you have a last word?
    Mr. Moylan. I would just respond to Mr. Scott's statement 
that what would incentivize a balanced budget here is, first of 
all, simply the requirement that the budget be balanced, and 
second of all, we view these supermajority requirements again 
as these backstops against tax hikes. You could theoretically 
balance the budget by raising taxes. You would have to convince 
more of your colleagues to be able to do that than if you were 
to choose to do so through spending restraint. I view that as a 
feature of it, you may view it as a bust. But the requirement 
of the balanced budget is the most important portion of it 
because it requires that you square income and outlays, and the 
question is how do you get to that?
    Mr. Franks. I don't know how to add anything more to that 
and would concur with that.
    Mr. Scott.
    Mr. Scott. Just very briefly. There is no requirement in 
these that the budget be balanced. You need a 60 percent vote 
to pass any budget that is pending in Congress today. There is 
no requirement to balance the budget.
    Mr. Franks. Well, with that, I am just saying that perhaps 
there is an alternative here, and that is to repeal the law of 
mathematics. So let's work on that.
    Without objection, all Members will have 5 legislative days 
to submit to the Chair additional written questions for the 
witnesses, which we will forward and ask the witnesses to 
respond as promptly as they can so that their answers may be 
made part of the record.
    Without objection, all Members will have 5 legislative days 
within which to submit any additional materials for inclusion 
into the record.
    And with that, again I thank the witnesses, thank the 
Members for the lively discussion, and observers. And this 
hearing is now adjourned.
    [Whereupon, at 12:30 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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