A Crisis is a Terrible Thing to Waste

Byline: | Category: 2012, Taxes & Spending | Posted at: Thursday, 14 July 2011

Jennifer Rubin (hat tip: Glenn Reynolds) lays out the various plans now being debated to solve the debt ceiling stand off.  I have a slightly different take, but read the whole thing nonetheless.  Rubin argues that the McConnell plan “may be the worst option except for all the others.” 

I think that it’s the worst possible outcome.  McConnell’s plan gives Republicans in the House only political cover, but they gain that by engaging in a constitutionally dubious dodge, meanwhile they get nothing as a result.  Remember, Republicans earned the majority because they promised that this time they would get spending under control.  If all Republicans are going to accomplish is to ensure that future out of control spending can be blamed only on Democrats, we voters could achieve the same result by putting Nancy Pelosi back in control.

The truth is that the House majority is the only entity that matters in this debate.  Without them, no Presidential action can raise the debt limit, and the Senate is powerless to act on its own. 

But that doesn’t mean that the President is without his own cards to play (continuing the President’s playing card analogy, which by the way, he badly played).  As I argued back in April, we have no debt crisis problem as a result of the soon to be reached debt ceiling.  In fact, the 14th Amendment, which does NOT give the President the power to unilaterally raise the debt limit, ensures that we will not have a crisis.

“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

In other words, the President has no latitude about what bills he has to pay first:  he must pay our creditors–ie, there is no immediate bond crisis.

After that he has a great deal of latitude.  The only problem is that to exercise that latitude, he must violate the anti-impoundment act.  He has no choice.  It is either violate a law or the Constitution.  In other words, math makes the anti-impoundment act anti-constitutional.

But, here is where The President can play his cards.  Aside from our debts, the bills that the President refuses to pay until the debt ceiling is raised are entirely up to him.  He can make Republicans squirm by squashing Republican programs the most.

That puts the GOP in an awkward position.  Big donors and the Republican base (exemplified by the Tea Party) are not in alignment.  Defense contractors, insurance firms, banks, and the real estate industry, they have all traditionally been big GOP contributors over the years.  They want this “crisis” solved, because they know that they’re on the losing side in this card game.  On the other hand, the Tea Party would like nothing more than to kick the monied-GOP power elite out of the party.  Obama could put 2012 Republicans in the difficult position of having enormous grass roots support but no money.  (My hunch is that Eric Cantor is quite fine with that outcome, but John Boehner and Mitch McConnell are horrified–hence Cantor’s swagger.)

But eventually there is going to have to be a debt ceiling increase.  I wish it weren’t so, but too many things that the government does can’t realistically shut down overnight.  Besides, the deficit (40% of every federal dollar spent) is too big for the President to only attack GOP programs.  At some point he’s going to have to compromise.

What Eric Cantor and the renegade House Republicans should hold out for is exactly what Glenn Reynolds suggests: a constitutional solution that solves the America’s debt problem once and for all.

And here is the Amendment I would write:

1. Congress shall levy no tax on individual citizens except that it be applied equally to all, and without threshold, exemption, deduction, credit, exception, or limitation of any kind.

2. The Federal government shall be required to operate without an annual fiscal deficit except in years containing a period of declared war, not to exceed a total of four years in any consecutive ten year period.

This amendment accomplishes three things: First, it balances the budget in every year except when there is a true crisis. (Oh, how I hate the overuse of that word.)  Second, the amendment, while not limiting the amount of taxation that may be applied, distributes it evenly, thus making it very difficult to raise taxes too high since all Americans are equally effected.  Finally, it removes class warfare and cronyism from the tax code and makes taxes what they are supposed to be:  a way to raise necessary revenue for the government, instead of what they are now: a way to reward friends and punish enemies.

Ultimately that amendment will do more to bolster the US debt rating than any short term plan could ever accomplish.  So Eric Cantor, I ask you to not let this crisis go to waste.

UPDATE:  Thanks for the link, Glenn.  And thanks to all who stopped by.  Special thanks to those who have commented on proposed amendments.  Look around.

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17 Responses to “A Crisis is a Terrible Thing to Waste”

  1. Jacob Says:

    Here is a better ammendment:
    “Pigs shall fly.”

  2. F Says:

    I think one of the problems with this kind of amendment is that it ignores a glaring reality: most Senators imagine that some day they will be president, and they don’t want to tie their hands in advance. But if it could pass the Senate, it might just pass 2/3rds of the states.

  3. Squid Says:

    Congress shall levy no tax on individual citizens except that it be applied equally to all, and without threshold, exemption, deduction, credit, exception, or limitation of any kind.

    I love this. A $9,000 levy on every taxpayer would raise about $1 trillion, which is about what the feds pull in now.

    Sure, some bingo grannies and burger-flipping teens would complain…

  4. Ray Says:

    I think the second section is not ideal. Wars don’t come on a timetable. I think it better to make any public official lose the ability to be re-elected or re-appointed if during their term there is a deficit in any year.

    Thus, if we have an expensive war, the USA can fight it, but we get a new set of politicians every few years. Sounds like a win-win to me. :-)

  5. rosignol Says:

    If all Republicans are going to accomplish is to ensure that future out of control spending can be blamed only on Democrats, we voters could achieve the same result by putting Nancy Pelosi back in control.

    Absolutely correct.

    We did not give the R’s the House so they could play CYA.

    We gave them the House to stop the insanity.

    Republicans: Do the job we sent you to do or you will be replaced by candidates who will.

    This is no time to go squishy.

  6. J Says:

    Bad idea. A balanced budget amendment is nothing more than a license to raise taxes, with political cover thrown in. Here’s an alternative:

    1. The federal government, divisions thereof, and entities acting on behalf of the federal government shall not take any action of any kind which imposes a spending requirement on a subordinate level of government without providing the funds to pay for that spending requirement. “Any action of any kind” means any and all conceivable actions, and specifically includes:

    A. The enactment of legislation, the creation of any law, rule, regulation, order, directive, instruction, procedure or any other action which creates or has the effect of creating a spending requirement.

    B. The sltering of the interpretation of anything listed in paragraph 1.A.

    C. Legal action of any kind whatsoever, including legal action which consists of or results in a jury verdict or judicial ruling of any kind.

    D. The sole exception to this rule shall be cases in which an appellate court operated by the federal government declines to review a case based on state or local law.

    2. Serving as president, vice president, or member of congress for any portion of any year in which total federal spending exceeds 20% of trailing GDP shall be a felony, punishable by:

    A. Forfeiture of all personal assets and all assets owned by household members of anyone described in paragraph 2.

    B. A sentence of not less than 10 years in a randomly selected maximum security state prison, during which sentence the convict cannot be separated from the general prison population for any reason other than contagious disease.

    C. The sole exception to paragraph 2 will be years containing a period of declared war, in which at least 100 enemy personnel are killed by US forces.

    Basically, we strip the feds of any ability to shift costs, then cap federal spending, not with some sequestration scheme or other requirement, but by criminalizing service in any federal elective office when the government spends too much. Also, I like the wartime provision, but it needs a caveat so congress doesn’t make a gentleman’s agreement to declare war on, say, Canada, with no intention of engaging in combat.

  7. Snorri Godhi Says:

    “Congress shall levy no tax on individual citizens except that it be applied equally to all, and without threshold, exemption, deduction, credit, exception, or limitation of any kind.”

    Not sure about the “without threshold” bit:
    to me, that means that if you earn, pre-tax, just as much as you need for a decent living, then you are a fool to make the effort.

    In other words, it means that, if you cannot earn substantially more than you need for a decent living, then you are a ward of the State: it’s a recipe for statism.

  8. tom beebe st louis Says:

    I like this plan better than Glen’s. It addresses all transfers of wealth i.e., taxes and “entitlements”. Its progressive by taxing at a flat rate all DISPOSABLE income, thus poligtically feaseable. It starts by treating every resident equally. And it exempts education and health care, two hot issues, along with all savings to encourage investment. Finally it provides a way out for cities and states. When I first wrote it years ago, even I thought it unfeaseable, but I suggest it’s more feaseable politically than Glen’s. Here ’tis:

    1. All persons residing in the U.S. shall come together in “tax units”. Members need not be related, need not reside together, and a tax unit may consist of as few as one person.
    2. Each year congress shall set a “minimum wage” and a “tax rate”.
    3. The following shall not be subject to taxation:
    • An amount equal to a year’s earnings (2000 hours) at the minimum wage, for each adult (age 20-65), decreasing 10% per year to 50% at age 15, and increasing 10% per year to 150% at age 70.
    • All payments for necessary health care including medical care, pharmaceuticals prescribed by a health care professional, vision and hearing aids, and fees for health-enhancing entities such as gyms. Health care insurance premiums may be deducted but not health care expense paid for by such insurance.
    • All educational expenses including day care for children or legally incompetent persons, the portion of state and local taxes used for education, and tuition, fees and educational materials for private school education, including that portion of parochial school tuition and other expenses going for non-sectarian education.
    • All income saved into an account for investments; withdrawals from this account for the benefit of any member of the tax unit shall be reported as income.
    4. The “tax rate” shall be applied to any income greater than the deductions listed above, regardless of amount.
    5. Any municipality having greater than 100,000 inhabitants or any state may impose on their citizens a surtax which shall be applied the same as the Federal tax.
    6. Tax units whose deductions exceed income, shall be paid a sum equal to the tax rate multiplied by the shortfall in income.
    7. There shall be no federal tax on corporations or other business entities.
    8. The Office of Management and Budget shall compute revenues to be expected using the newly set tax rate and minimum wage, applied to the previous year’s reported incomes. No expenses in excess of that amount may be made without approval by 75% of each house of Congress. This tax shall be the only source of revenue for the federal government.

  9. Deeg Says:

    Here’s the problem with the balanced budget amendments being proposed–and I can say this seeing what Illinois has done to avoid balanced budget requirements–”annual fiscal deficit” DOES NOT necessarily mean that excessive borrowing is prohibited.

    Why not simply state that Congress shall not borrow or encumber any revenues not to be repaid during the time of the existing Congress? (In other words, any borrowing/taxing the 295th Congress wants to do has to be paid back before that Congressional term ends or it becomes null and void). That will also avoid these ridiculous tax/spend “savings” based on 10 years down the road…

  10. Stu_in_VA Says:

    I would add to the war exception: “…except in years containing a period of declared war with national mobilization of the armed forces (a draft)…”. This will prevent any tiny armed confrontation (or a new war on poverty) from being an excuse to ignore the limits.

    I would also like to see a hard limit on Fed speding as a % of GDP (like 18% or less)

  11. Chad Says:

    Mr. Krumm,

    I’ve been working through my thoughts on amendments and have to admit great pleasure in seeing your idea so align with mine.

    It helps keep me going that sensible ideas are alive across the country.

  12. ajacksonian Says:

    The first line of the Amendment is better stated as:
    Section 1.
    The sixteenth article of amendment to the Constitution of the United States is hereby repealed.

    Functionally the same thing. Section 2 can be done ‘as-is’. Or if you are really mean you could make it:
    Section 2.
    Congress shall not make any Thing but gold and silver Coin a Tender in Payment of Debts.

    This gets rid of a fiat currency and requires backing to all currency. Any debt is covered by a limited supply gold and silver, which can’t be inflated but can be increased by getting more of same. It is very difficult to run a deficits and get a debt when it must be paid back in hard currency. The Revolutionary War was not paid off until the 1830′s and the Civil War debt wasn’t retired until the 1910′s (if memory serves) and yet the dollar only lost 5% of its value from the Framing to the Federal Reserve. When debts can’t exceed available reserves you get limited budgets. Somehow ‘deficit spending’ gets very low when you have to pay it back in something that doesn’t inflate. Gotta wonder about that…

  13. Nathan Says:

    You need to specify that “equally to all” means that all citizens are taxed at an equal rate, not they all pay an equal number of dollars. Also, it’s worth noticing that the amendment enshrines federal income taxes in the Constitution, since alternatives such as the FAIR Tax would become unconstitutional.

    Also, before paragraph 2 takes effect, we need to find a way to keep Congress from declaring frivolous or malicious wars so they can keep spending.

  14. J. Madison Says:

    @F – Constitutional amendments must be ratified by 3/4 of the States, not 2/3.

    U.S. Constitution, Article V:

    “The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three fourths of the several States or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress; Provided that no Amendment which may be made prior to the Year One thousand eight hundred and eight shall in any Manner affect the first and fourth Clauses in the Ninth Section of the first Article; and that no State, without its Consent, shall be deprived of its equal Suffrage in the Senate.”

  15. Murgatroyd Says:

    Congress shall levy no tax on individual citizens except that it be applied equally to all, and without threshold, exemption, deduction, credit, exception, or limitation of any kind.

    Squid wrote:

    I love this. A $9,000 levy on every taxpayer would raise about $1 trillion, which is about what the feds pull in now.

    So what’s the penalty for failure to pay taxes? Does anyone think that sending low-income people to prison for failure to pay a $9,000 tax bill would be cost-effective?

    Or can the proposed amentment be interpreted to mean that “applied equally to all” allows an income tax, with the same percentage applied to all and without a lower threshold? That would make more sense in terms of feasibility and (ugh!) “fairness.”

  16. richard40 Says:

    Interesting proposal. I would add an ability to create a rainy day fund, in any year that has a surplus, that could be used to cover a future deficit. This would give the gov an incentive to run surplusses in good years, to add to the rainy day fund. The rainy day fund would prevent cuts from always occuring in bad years, and would encourage cuts, to refresh the rainy day fund, in good years.

  17. teapartydoc Says:

    Go with it.