Compact for America and Arizona’s Balanced Budget Amendment – A National Sales Tax?

Below is stunning information on the Balanced Budget Amendment in Compact for America, which Arizona has just introduced. Also, you’ll find links to in-depth scrutiny. Is this a balanced budget plan or a plan to continue spending by adding a national sales tax to the income tax?


Pullout Quote:

Section 1 says the federal government may not spend more than they take from you in taxes or add to the national debt. [Yes, you read that right.]

The following is only a short snippet.

The stated purpose of Compact for America, Inc. is to get a balanced budget amendment (BBA) ratified. Here is their proposed BBA. State Legislators recently introduced it in Arizona.1

The gap between what this BBA pretends to do – and what it actually does – is enormous. It has nothing to do with “balancing the budget” – it is about slipping in a new national sales tax or value-added tax in addition to the existing federal income tax.

We have become so shallow that we look no further than a name – if it sounds good, we are all for it. We hear, “balanced budget amendment”, and think, “I have to balance my budget; they should have to balance theirs.” So we don’t read the amendment, we just assume they will have to balance theirs the same way we balance ours – by cutting spending.

But that is not what the BBA does. In effect, it redefines “balancing the budget” to mean spending no more than your income plus the additional debt you incur to finance your spending. To illustrate: If your income is $100,000 a year; but you spend $175,000 a year, you “balance” your budget by borrowing the additional $75,000. See?

Under the BBA, Congress may continue to spend whatever it likes and incur as much new debt as it pleases – as long as 26 States agree. And since the States have become major consumers of federal funding, who doubts that they can’t continue to be bought? Federal grants make up almost 35% of the States’ annual budgets! The States are addicted to federal funds – who thinks they won’t agree to get more money?

The BBA enshrines Debt as a permanent feature of our Country; gives it constitutional approval; does nothing to reduce spending or “balance the budget”; authorizes a new national tax; and wipes out the “enumerated powers” limitation on the federal government.

Let’s look at the BBA, section by section, using plain and honest English. And then let’s look at how our Framers wrote our Constitution to strictly control federal spending. Source: Grumpy Opinions – much more to this informative article, read it here.

Publius Huldah is the author of the above. Read her list of Congress’s Enumerated Powers here and All You Need to Know About Impeachment here.

Linked at Iowa Dawg’s Blawg – read Amnesty Ends the American Dream here (and know that that’s a very true statement).

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  • This analysis is weak and wrong for seven reasons.

    First, keep in mind that to secure ratification, any idea must be capable of attracting support from the Left and the Right. The standard cannot be the perfect Center-Right policy. The standard should be whether the status quo is structurally improved upon without compromising any principles. There is no way in the world that this BBA fails that test.

    Second, it can hardly be worse than the status quo that we add a state referendum to the process of lifting the federal debt limit. It is a step forward by giving the states a portion of the power they once held in the U.S. Senate when they could control through proxies half of the whole federal legislative power. Having two simple majority processes to jump to secure an increase in the federal debt limit–one within Congress and one requiring a majority of the States–is significant restraint on the federal debt. It is real scarcity.

    Third, the analysis fails to grapple with the fact that the status quo involves the debtor–Washington–setting its own credit limit with no oversight whatsoever. This is a concentration of power that naturally has led to a runaway debt. The States are closer to the people, less controlled by Washington interests that are dependent on debt. Decentralizing power and control over the debt limit to the states acting as a board of directors certainly enhances the ability of people to control the debt.

    Fourth, the analysis fails to notice there is no loophole for wars, emergencies, special entitlement programs. This is a typical feature of proposed BBAs in the past, which allows enormous gaming potential by Congress. At least any effort by Congress to increase its debt limit will be transparent and subject to a nationwide debate with a referendum of the states being necessary. While certainly the debt spenders in Washington will win a few of those battles, there is no question that having transparency and national debate over efforts to engage in borrowing will enhance the prospects of those who oppose mindless debt spending. Further, it is hard to imagine that even 26 states populated with Jerry Brown on the legislature would approve a debt limit increase by congress with no budget behind it.

    Fifth, the analysis of the impoundment feature forgets that section 1 of the BBA limits total spending to total receipts when the debt limit is reached. If the President does not impound anything, and the debt limit is reached, this forces an across-the-board sequester–in other words nearly 45% of the budget would be cut without any rational plan. It is ridiculous for you to think that such budgetary bloodletting would not incentivize Congress to impeach the President under those circumstances. Almost as ridiculous to think that the President would not use his impoundment power. No President that had the impoundment power in history did not use it! Power is used. If there were any reasonable critique of the impoundment feature, it would be its risk of abuse. But that’s why we included a congressional override process that is far lower than a veto override (only simple majorities). Also, yes, we did make a judgment that it was better to have clear lines of accountability to the President and risk abuse of that power, than to have no such accountability. Abuse of impoundments can be corrected by the ballot box just as well as through impeachment.

    Sixth, the analysis of our tax limit provision is… how do I put this? Complete nonsense. The status quo already allows for layering a sales tax or VAT on top of the income tax with simple majority support from a mere quorum. That is already part of our existing Constitution–which is not perfectly drafted. The tax limit provision raises the passage requirement for any such new tax to two-thirds of the whole number of each house of Congress. That is a clear improvement on the status quo. A simple majority allows for a new sales tax only if it “completely” replaces every income tax. That is another clear improvement on the status quo. Sure this provision does not completely obliterate the risk of taxation. It even continues to allow tariffs to be increased with simple majority support and for tax credits, deductions and exemptions to be closed with simple majority support. But none of this is worse than the status quo. If anything, the drive for revenue through these narrow simple majority thresholds will either fail due to strong push back from impacted special interests, causing spending reductions of necessity, or it will tend to flatten the income tax or replace it with more voluntary consumption based taxes. That’s better tax policy.

    Seventh, even if taxes were raised as a result of the increased debt scarcity established by the BBA, that is BETTER than limitless debt incurrence. Debt that is to be repaid IS taxes. It is taxation without representation. It is the worst kind of taxation both morally and also because there is no effective political check when the burden of taxation is felt by non-voting future generations. If a choice has to be made between increased debt spending or increased taxes on current voting generations, the proper thing is to risk increased taxes on current voting generations because it is politically self-limiting–politicians will get fired if they raise taxes too much.

    Suffice it to say, either the author of this analysis is not a careful reader or she was deliberately attempting to mislead. Either way, this analysis is weak and wrong.

    • bobmontgomery

      The author of the analysis is not only a careful reader, she is a careful annotator, explainer and constitutional enthusiast. Your problem is you want to bloviate about tax policy, blissfully oblivious to the attributes of a system of government and the foundation of same. The reason you are bloviating about balancing the budget is because for some reason you refuse to countenance the reason for a $17trillion debt in the first place, which is explained to you by Gone With The Wind in the comment below. Read it. Carefully.

  • GoneWithTheWind

    No government wants to limit spending, they will keep increasing it until the citizens slap them down. 1.The federal government should eliminate about half of the federal departments. 2.They should eliminate about half the federal workers left in remaining departments after step 1. 3.They should eliminate all welfare and subsidy programs. 4. They should remove SS from the federal cluthches and place it in under an atonomous management that does not have power to make changes only administer. 5. They need to concentrate on their constitutional responsibilities such as the military, the federal courts and stay out of things not required by the constitution.

  • Only Compact for a Balanced Budget Can Fix the National Debt

    Using an agreement among the states called an “interstate compact,” the Compact for a Balanced Budget invokes Article V of the United States Constitution to advance a powerful Balanced Budget Amendment. The BBA would require a majority of State legislatures to approve any increase above an initial debt limit. Like an active board of directors for our wayward federal executive and legislative branch “CEOs,” state legislatures would provide oversight and intervention when it comes to requested increases in the federal debt.

    The state debt approval requirement creates flexibility to finance justifiable wars and to address genuine crises without easily exploited loopholes. If the case can be made to a majority of state legislatures that the federal government should borrow more money, then the BBA will allow such borrowing.

    Some may question whether the states should have a voice in the national debt debate; but the states should have a voice for the same reason that the U.S. Constitution originally gave state legislatures control over the U.S. Senate. A centralized authority should not have a free hand in determining—or mortgaging—the future of every community in the nation.

    Long before the midnight hour arrives, the BBA is designed to compel Washington to balance its budget or prepare a budget that can make the case for more debt. It would require the President to start designating spending cuts when spending exceeds 98% of the debt limit. Congress must then override those cuts within 30 days with alternatives if they disagree. This would force Washington’s political players to put their cards on the table face-up long before hitting a hard debt limit, protecting our country’s credit from being held hostage.

    The BBA also recognizes that our national debt is primarily a spending problem. It requires any new or increased income or sales tax to secure two-thirds approval of both houses of Congress. Recognizing that fixing the debt may require new revenues, the amendment allows for simple majority approval of revenue increases that result from replacing the income tax code with a sales tax or reducing tax exemptions, deductions and credits. Any new tax burden would only result from making our tax code flatter, fairer and far more conducive to economic growth.

    An interstate compact provides the vehicle for advancing this bipartisan national debt solution because it transforms the state origination of a Balanced Budget Amendment into a “turn-key” operation. With the blessing of Congress furnished by simple majority passage of a single concurrent resolution, the Compact empowers the states to agree in advance to all elements of the amendment process—from the text of the proposed BBA, to the application to Congress, to delegate appointments and instructions, to the selection of the convention location and rules, to the ultimate ratification of the BBA. In short, the Compact for America consolidates everything Congress and the States do in the Article V process into just two overarching pieces of legislation—one congressional resolution and one interstate compact joined by thirty-eight states. It thereby cuts the time and resources needed to achieve a state-originated BBA by more than 60%.

    The Compact also eliminates any possibility of a “runaway convention.” It compels all member state delegates to follow convention rules that limit the convention agenda to an up or down vote on the BBA and to return home if those rules fail to hold. It prohibits member states from expanding the scope of the convention, violating the convention rules, or ratifying anything other than the contemplated BBA. Like a ballot measure directed to state legislators, governors and Congress, the Compact for America ensures the state-initiated constitutional amendment process efficiently, safely and exclusively advances a specific Balanced Budget Amendment.

    Get the facts, not the fear:

  • bobmontgomery

    You are micromanaging your own Balanced Budget Scheme into an absurdist rant. You say it requires a balanced budget OR or “prepare a budget that can make the case for more debt”. ???What does that mean? They make the damned case every time they pass a budget now, and even IF THEY DON’T.
    Yeah, by golly! We’re gonna make ’em make the case!! This is transparently unserious.