There’s a better way to deal with the debt ceiling: pass a balanced budget amendment

https://www.washingtonexaminer.com/restoring-america/faith-freedom-self-reliance/theres-a-better-way-to-deal-with-the-debt-ceiling-pass-a-balanced-budget-amendment

by: Steve Levy

June 6, 2023

Washington seems to be addicted to the drama of debt ceiling negotiations . Every few years, both parties use the prospect of a doomsday scenario as leverage to obtain approval of their legislative priorities.

There has to be a better way to get control of federal spending . Fortunately, there is.

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As I explain in my book, Solutions to America’s Problems, the better way is for Congress to pass a balanced budget amendment that requires the federal government to balance its ledger annually, the same way every state and municipality in the union must do.

This is not to say that such a budget should be unbending. There has to be flexibility for natural emergencies, wartime expenditures, severe economic downturns, and other unexpected contingencies.

But those piercings of the cap should only be permitted with a supermajority vote of Congress. This proposal would force prioritization of spending without preventing necessary responses to the unexpected.

We know on the state level that spending caps work. As summarized by our Center for Cost Effective Government, states with spending caps have lower taxes and more productivity than those that do not.

In New York, for example, a tax cap imposed by the state on schools and local governments has had a dramatic impact on lessening the increase in taxes since its inception. Prior to the cap’s enactment, school district taxes on Long Island were increasing at an average annual rate of more than 6%. In the decade after the cap was imposed, the average increase dropped to a mere 2%. This amounted to a remarkable $25 billion in savings for local taxpayers, averaging $7,600 per household.

And it was all because elected boards were forced to prioritize.

It’s time for the federal government to do the same. A balanced budget amendment would take some time to come to fruition, given that it would have to be approved by three-fourths of the states. But that could be a good thing. It would give our federal leaders adequate time to determine which programs are necessary, which ones can be cut, and how Congress can ensure that the expenditures they approve on a yearly basis do not exceed the amount of revenue they take in.

Once the federal budget has been balanced, the debt limit becomes far less important, since one of the biggest driving forces in our increased debt has been the need to pay the interest on money borrowed to pay for our annual deficits. According to the Office of Management and Budget, these payments are estimated to total $395.5 billion this year and 6.8% of all federal expenditures.

There was a time when even a $300 billion deficit seemed outrageous. Now, the deficit sits well over $1.5 trillion, with deficit spending skyrocketing to $3 trillion after the pandemic.

The public is eager to see deficits tamed. A Pew poll indicates 57% of Americans say reducing the deficit is a top priority.

So here’s the deal: Republicans should agree to automatic extensions of the debt limits if Democrats will simultaneously agree to support a balanced budget amendment that would kick in within the next decade.

This debt ceiling brinkmanship has to end. The United States is already being threatened with losing its preeminent hold on the world‘s currency. Where the dollar was once the main backing of 70% of the world’s transactions, that number has diminished to approximately 60%.

And that number will continue to decline as China continues to gain influence.

Nothing could be more catastrophic to our world standing than having other nations and investors around the world fear that the American dollar has lost its value due to a failure by Congress to ensure that we will pay our debts.

The best way to grow the American economy and American standing in the world is to stop spending like drunken sailors and send a clear message that, when we do spend and borrow, we will pay our bills.

Steve Levy is executive director of the Center for Cost Effective Government. He served as Suffolk County executive, a New York state assemblyman, and host of “The Steve Levy Radio Show.”