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Fiscal Democracy in America: Kurt Couchman on the Case for a Balanced Budget Amendment · Liberty + Leadership

• 0:01
  SPEAKER_01: Welcome to the Liberty and Leadership Podcast, a conversation with TFAS alumni, faculty, and friends who are making an impact today.
• 0:11
  SPEAKER_01: I'm your host, Roger Reen.
• 0:14
  SPEAKER_01: My guest today is someone I've had on our podcast previously.
• 0:18
  SPEAKER_01: Kurt Couchman is Senior Fellow in Fiscal Policy at Americans for Prosperity.
• 0:23
  SPEAKER_01: He's the author of a great new book, Fiscal Democracy in America: How a Balanced Budget Amendment Can Restore Sound Governance.
• 0:32
  SPEAKER_01: That will be the topic of most of our conversation today.
• 0:35
  SPEAKER_01: Kurt is an expert on federal budget policy, having worked for several members of Congress and for several organizations that work on budget priorities.
• 0:43
  SPEAKER_01: He's regularly called on from major television and radio to comment on the budget and has written pieces for a number of national publications.
• 0:52
  SPEAKER_01: Kurt is also a TFAS alum, having attended our undergraduate program one summer when he was in college, and also having done our public policy fellows program.
• 1:03
  SPEAKER_01: In 2003, we recognize Kurt with our Kevin Burkett Alumni Service Award.
• 1:08
  SPEAKER_01: Kurt, thanks for joining me on the Liberty and Leadership Podcast today.
• 1:11
  SPEAKER_00: Thank you so much for having me.
• 1:12
  SPEAKER_00: I'm really excited to be here and to talk about fiscal democracy in America.
• 1:16
  SPEAKER_01: I was thinking as I read it that young people today are taught in school that there is an existential threat that mankind faces, and it tends to be environmental policy, climate change, things like that.
• 1:29
  SPEAKER_01: And I'm not a scientist, so I can't comment on those.
• 1:32
  SPEAKER_01: But it seems to me the existential threat that you talk about is a real one, and that is fiscal insolvency and the problems we have with growing national debt being over 100% of GDP, plus all the promises we've made.
• 1:45
  SPEAKER_01: Could you talk a little bit about the situation that led you to consider supporting a balanced budget amendment or fiscal situation?
• 1:54
  SPEAKER_00: Yeah, absolutely.
• 1:54
  SPEAKER_00: The story goes back to 2010, during the heyday of the Tea Party times, when the debt burden was already high and rising.
• 2:02
  SPEAKER_00: And I had been in grad school at George Mason University studying economics, took a class with Pete Betke in constitutional economics about the rules of the game.
• 2:11
  SPEAKER_00: And I got interested in, you know, how do we get the budget under control?
• 2:16
  SPEAKER_00: And I happened to be in a conversation between David Malpus, who was then running for the U.S.
• 2:22
  SPEAKER_00: Senate, and Bill Niskanon, who was then one of the board members and senior fellow at the Cato Institute.
• 2:27
  SPEAKER_00: I was doing government affairs there.
• 2:29
  SPEAKER_00: And Bill responded to a question from Malpus about balanced budget amendments, and that kind of set me down a road about like how do you design them and all of that.
• 2:37
  SPEAKER_00: But it was something that was in the air.
• 2:40
  SPEAKER_00: The question of we have the spending growing faster than the economy or the debt growing faster than the economy.
• 2:45
  SPEAKER_00: And at some point there's going to be a problem.
• 2:47
  SPEAKER_00: We thought the problem was going to arrive at a much lower level of debt than it has, but just like Peter and the wolf, at the end of the story, the wolf does come.
• 2:56
  SPEAKER_00: And so we do need to get control of this, or we face some pretty dramatic negative consequences.
• 3:02
  SPEAKER_01: There's the problem of the debt, of course.
• 3:04
  SPEAKER_01: And you talk about how that can impact economic growth and is impacting economic growth.
• 3:09
  SPEAKER_01: There's also the problem of the total burden of government spending, whether it's collected through borrowing or taxes.
• 3:15
  SPEAKER_01: So I think the debate in the past from Milton Friedman and other experts has been do we aim to limit the total amount of spending, say as a percentage of GDP, or do we aim to push for a balanced budget that could be balanced through higher taxes?
• 3:30
  SPEAKER_00: Yeah, the way that I approached this book project was to focus on the things that can appeal broadly to both Republicans and Democrats and independents.
• 3:39
  SPEAKER_00: Because if you're going to change the system, whether through a constitutional amendment or the statutory pieces, you need to have a broad degree of consensus.
• 3:47
  SPEAKER_00: And then once we've fixed the incentives that are inherent in the system, then it's possible to fight over the actual policy levers that you want to change.
• 3:55
  SPEAKER_00: I'm a constitutional conservative.
• 3:57
  SPEAKER_00: I'm very much in favor of reducing the size and scope of the federal government, something much closer to the enumerated powers in the constitution.
• 4:04
  SPEAKER_00: But in order to have any chance of getting toward that, we have to have a budget system and a Congress that works.
• 4:10
  SPEAKER_00: And so this book is mostly about balancing the budget and the institutions that will allow those conversations to take place.
• 4:16
  SPEAKER_00: It's not as much about the substance of how do you change this or that program.
• 4:21
  SPEAKER_01: There's something you talk about that's particularly harmful with the borrowing we're doing, and that is this idea of intergenerational theft.
• 4:28
  SPEAKER_01: Obviously, these problems are not just intergenerational.
• 4:31
  SPEAKER_01: They're going to impact people living today, but they're going to be particularly difficult for the future.
• 4:36
  SPEAKER_00: That's right.
• 4:37
  SPEAKER_00: And there's a moral component as well as a practical component.
• 4:40
  SPEAKER_00: The moral component is what you say, the intergenerational theft.
• 4:44
  SPEAKER_00: One of the things that happens in a political system like ours is that those who are well organized to lobby for their interests, what are often called the concentrated beneficiaries of whatever policy intervention, they pursue it and they're very aggressive and they're very skilled.
• 4:58
  SPEAKER_00: And they more often than not get it when they're up against the diffuse public interest.
• 5:03
  SPEAKER_00: I talk about the sugar program very briefly in there about how that costs every American about$10 per year.
• 5:09
  SPEAKER_00: But of course, that's many, many billions of dollars for the relative handful of people who produce and refine sugar in this country.
• 5:16
  SPEAKER_00: When you think about that as applied to an intergenerational context, you're talking about moving some of the costs of today's government services into the future who are less organized, less able to push back on that.
• 5:30
  SPEAKER_00: Some of those people aren't even old enough to vote.
• 5:32
  SPEAKER_00: Some of them are, but younger generations tend to vote in lower proportions than older generations.
• 5:38
  SPEAKER_00: So we really do need to have an institutional fix to this.
• 5:41
  SPEAKER_00: On the more practical side, yeah, we've already seen what happens when the Federal Reserve gets dominated by Congress and the executive branch in terms of spending and borrowing too much.
• 5:50
  SPEAKER_00: We saw that, you know, during the later part of the pandemic.
• 5:53
  SPEAKER_00: And so we have higher inflation and higher interest rates because of that.
• 5:57
  SPEAKER_00: We're also experiencing uh slower economic growth, less opportunity, less prosperity, because that government debt, just the service of it, is crowding out.
• 6:06
  SPEAKER_00: Funds that otherwise could be used to invest in things that make people more productive and raise our standard of living.
• 6:11
  SPEAKER_00: It makes our politics worse.
• 6:13
  SPEAKER_00: A lot of the fighting that we're seeing now is because of this clash over relatively scarce resources to be able to do new things with.
• 6:21
  SPEAKER_00: And then, of course, the risk of a debt crisis is a pretty big factor as well.
• 6:24
  SPEAKER_00: And the higher the debt burden goes, the greater the risk is.
• 6:27
  SPEAKER_01: Well, let's talk about that.
• 6:28
  SPEAKER_01: You quote Paul Winfrey of the Economic Policy Innovation Center's warning that we only have a decade until we pass the event horizon and debt crisis becomes inevitable.
• 6:39
  SPEAKER_01: Another source you quote gives us only about two years until a quote fiscal crisis and insolvency and ultimately default a short time later.
• 6:48
  SPEAKER_01: Why doesn't this situation get more attention, either from the president, the Congress, or the media?
• 6:55
  SPEAKER_01: It seems like it's just brushed under the rug and ignored.
• 6:58
  SPEAKER_00: When I spend time on Capitol Hill, you wouldn't believe the number of times where people say, I care about this, my boss cares about this, but no one else does.
• 7:06
  SPEAKER_00: And I tell them, well, I hear that a lot from folks on Capitol Hill, so why don't you all get together and, you know, do something about it?
• 7:13
  SPEAKER_00: And there is some of that that's been going on in both this position at Americans for Prosperity and my previous one at Committee for a Responsible Federal Budget, getting members connected with each other that care about these things and want to fix them is an important part of the job.
• 7:26
  SPEAKER_00: The thing is, though, that a lot of members do want to address this.
• 7:31
  SPEAKER_00: They just don't know how to do it and make it be politically survivable.
• 7:34
  SPEAKER_00: Social Security is known as the third rail of American politics.
• 7:38
  SPEAKER_00: A lot of times when people propose some big Social Security reform plan, it's when they've already decided to retire.
• 7:44
  SPEAKER_00: So they don't really face political consequences for it.
• 7:46
  SPEAKER_00: And there are things that members have said that have been twisted oftentimes to make it sound like they just want to shut all these programs down without any consideration of costs and benefits.
• 7:56
  SPEAKER_00: So it is tough.
• 7:58
  SPEAKER_00: And the challenge is how do you make it possible for Congress to do the things that they know they need to do that is tough but necessary, but also make it possible to keep coming back as members of Congress?
• 8:10
  SPEAKER_00: Because if they don't, then obviously someone who is less capable will take their place, right?
• 8:14
  SPEAKER_00: In their minds.
• 8:14
  SPEAKER_00: Right.
• 8:15
  SPEAKER_00: That's how they think.
• 8:16
  SPEAKER_01: I know that Social Security is on a trajectory that will lead, may lead to across the board cuts and benefits under current law at least.
• 8:24
  SPEAKER_01: Medicare, Medicaid are financially unable to meet their obligations in the future.
• 8:30
  SPEAKER_01: So what does default or insolvency look like if we reach that point?
• 8:35
  SPEAKER_00: Well, we don't know exactly what it would look like, but we have clues looking from other countries that have had troubles.
• 8:42
  SPEAKER_00: So a lot of people think that the first sign of trouble would be a bad bond auction.
• 8:46
  SPEAKER_00: The Treasury Department is always putting up auctions for this amount for this term, this yield of debt.
• 8:53
  SPEAKER_00: The primary dealers or the 24, I think, market makers for federal government debt, they'll come and buy that.
• 8:59
  SPEAKER_00: I think you can buy directly from the Treasury as well.
• 9:02
  SPEAKER_00: But if they have a low, what's called bid-to-cover ratio, so that means the amount of bids relative to the amount that is available for auction.
• 9:10
  SPEAKER_00: If that's lower than what it's traditionally seen to be a healthy number, then people might start to get skittish.
• 9:15
  SPEAKER_00: The next round of bids might come in for a higher interest rate for that or a similar lot of auctions, and then things would start to unravel from there.
• 9:23
  SPEAKER_00: It could come about because we're already in a recession, the primary dealers and other financial institutions are under pressure, and then we start to see confidence eroding in the system.
• 9:32
  SPEAKER_00: And this can happen incredibly fast.
• 9:34
  SPEAKER_00: It's not something that would take place over a number of years or even months.
• 9:38
  SPEAKER_00: It could be a couple of days.
• 9:39
  SPEAKER_00: Silicon Valley Bank failed, just sort of like a flash thing that happened, or the 2008 financial crisis.
• 9:45
  SPEAKER_00: That kind of simmered for a little while and then kind of went off the deep end in September of 2008.
• 9:51
  SPEAKER_00: So it could be we'd have a little bit more time, but when you're thinking about policy changes, oftentimes they need to start small and phase in.
• 9:58
  SPEAKER_00: And so the fallout from that could be that we would see massive tax increases, major indiscriminate spending cuts.
• 10:05
  SPEAKER_00: And some of those cuts would be justified if phased in, but some of them could actually lead to significant security vacuums abroad if we end up pulling our troops out of places in order to save money.
• 10:15
  SPEAKER_00: We've seen that times of economic distress give rise to unhealthy politics sometimes.
• 10:20
  SPEAKER_00: And so we might even see challenges either from the left or the right to the established way of, you know, doing our democratic governance system.
• 10:28
  SPEAKER_01: Aaron Powell You advocate in here a balanced budget amendment, but you've shown here as well that support for a balanced budget amendment is pretty strong among the public.
• 10:36
  SPEAKER_01: Polls show both Democrats and Republicans and independents overwhelmingly support some sort of constitutional amendment to balance the budget.
• 10:44
  SPEAKER_01: They've been introduced quite often over the last fifty years by members of Congress, occasionally get a vote.
• 10:50
  SPEAKER_01: In fact, I think once or twice it's passed with enough of a threshold, at least in one body of Congress.
• 10:55
  SPEAKER_01: States have called for a constitutional convention on it.
• 10:58
  SPEAKER_01: But yet fifty years of very little progress after 150 years of practice where we paid off debts during peacetime when we occurred them.
• 11:07
  SPEAKER_01: So what do you think has changed that might help push along this amendment?
• 11:13
  SPEAKER_00: Or back to unpleasant fiscal circumstances.
• 11:16
  SPEAKER_00: We've got the interest cost as a share of revenue.
• 11:18
  SPEAKER_01: Which is what now?
• 11:20
  SPEAKER_00: It's about 18%, which is about where it was during the bipartisan freakout during the 1980s and 1990s, where we actually did see a balanced budget amendment passed the Senate for the first and only time in 82, I believe, 1982, and then the House in 1995, first and only time.
• 11:37
  SPEAKER_00: So that has changed.
• 11:39
  SPEAKER_00: Our position in the world has changed.
• 11:41
  SPEAKER_00: We were a unipolar world after the end of the Cold War, and now we're in multipolar competition, especially with China, but also with some regional powers like Russia and Iran.
• 11:52
  SPEAKER_00: The biggest thing is that we've seen how they have spread and worked in so many countries.
• 11:57
  SPEAKER_00: We've had that experience in the states as well.
• 11:59
  SPEAKER_00: In the 1840s and 1870s, in particular, U.S.
• 12:02
  SPEAKER_00: states got balanced budget requirements of some sort, but they weren't as widespread around the world until maybe the last 30 years.
• 12:10
  SPEAKER_00: They went from being relatively rare to being pretty ubiquitous.
• 12:14
  SPEAKER_00: In fact, the US is one of a handful of prosperous countries that does not have a constitutional balance rule.
• 12:20
  SPEAKER_00: And we have better versions of those at this point.
• 12:24
  SPEAKER_00: The old model was to do annual balance, and that's a problem because revenue is just so volatile from year to year that if you try to match spending up with that, you create a lot of policy instability.
• 12:33
  SPEAKER_00: The answer is to smooth it out and just balance over the medium term, balance over the business cycle, balance on a structural basis like Switzerland is doing and Indiana and lots of other places.
• 12:43
  SPEAKER_00: So there are different versions now that either prescribe that or uh would allow that.
• 12:48
  SPEAKER_01: You call the version you favor a principles-based balanced budget amendment.
• 12:52
  SPEAKER_01: Explain the outlines of that.
• 12:54
  SPEAKER_00: That was the second balanced budget amendment proposal that I drafted when I was a congressional staffer.
• 12:59
  SPEAKER_00: The first one was the business cycle balance budget amendment.
• 13:02
  SPEAKER_00: Both are very good.
• 13:02
  SPEAKER_00: They avoid the annual balance problem and a number of other ones with the BBAs that have been introduced otherwise.
• 13:08
  SPEAKER_00: And the principles-based balance budget amendment, I do favor that, but only a little bit over the business cycle balance budget amendment.
• 13:15
  SPEAKER_00: The core of it is that it is a set of principles, much like what you find in the Constitution already, that leave broad scope for implementing legislation.
• 13:24
  SPEAKER_00: Most of the Constitution is pretty vague.
• 13:26
  SPEAKER_00: You've got this provision that Congress shall have power to raise and support armies.
• 13:29
  SPEAKER_00: And then Congress has passed oodles and noodles of statutes to fill in the gaps.
• 13:34
  SPEAKER_00: And that's the same sort of thing with fiscal rules.
• 13:36
  SPEAKER_00: We have the appropriations power, not really spelled out in the Constitution, but we've got a lot of law and case law on that now that clarify what that is.
• 13:43
  SPEAKER_00: So the principles-based BBA, the basic idea is that revenues and expenditures shall be balanced, which may occur over more than one year.
• 13:51
  SPEAKER_00: There's a definitional thing that lets that balance be either full balance or primary balance, which doesn't count interest expense, and it's about half as much deficit reduction as getting to full balance.
• 14:02
  SPEAKER_00: And then there's two-thirds of Congress can spend for emergencies.
• 14:05
  SPEAKER_00: And then after the 38th state would ratify the amendment, then Congress would have 10 years to reach balance, however defined.
• 14:13
  SPEAKER_00: There's a lot of questions that raises, and that's what implementing legislation is for.
• 14:17
  SPEAKER_01: And that implementing legislation is very important, right?
• 14:20
  SPEAKER_01: Oh, yes, absolutely.
• 14:21
  SPEAKER_01: How they go about doing it.
• 14:22
  SPEAKER_00: Chapter nine in the book is all about implementing legislation.
• 14:26
  SPEAKER_00: Definitions and terms are a less interesting but important part of that.
• 14:30
  SPEAKER_00: But then the mechanics are part of that as well, as well as automatic enforcement, because you can't just rely on Congress to do what the Swiss do, which is just follow the law because it's the law.
• 14:39
  SPEAKER_01: How do you get Congress not to ignore it?
• 14:41
  SPEAKER_00: You have to make it in their interest.
• 14:43
  SPEAKER_00: Right now we have a budget process that members don't really like to do.
• 14:47
  SPEAKER_00: It doesn't really include them that much, and they're not successful in completing it on time, just the 12 appropriations bills.
• 14:54
  SPEAKER_00: But Chapter 10 talks about a piece of legislation called the Comprehensive Congressional Budget Act, which will get all of the committees involved in managing their piece of the budget.
• 15:02
  SPEAKER_00: So it'd not just be the appropriated spending, the discretionary spending, which is about a quarter of spending.
• 15:07
  SPEAKER_00: It'd be 100% of spending, 100% of revenue, tax expenditures, all the committees would be involved.
• 15:13
  SPEAKER_00: And that's the sort of thing that we've seen in a number of states where members actually want to do that process because they have things that they can champion and build coalitions on.
• 15:22
  SPEAKER_00: People don't come here to be rubber stamps.
• 15:24
  SPEAKER_00: They come to DC to be legislators and to like advance ideas that they care about.
• 15:28
  SPEAKER_01: Has anyone introduced this legislation, either amendment this term?
• 15:33
  SPEAKER_00: The principles-based balance budget amendment has been reintroduced by Congressman Nathaniel Moran from East Texas.
• 15:40
  SPEAKER_00: Last Congress it was introduced by him as well as then Senator, now governor, Mike Braun.
• 15:45
  SPEAKER_00: And before that, it was introduced by Representative Dave Bratt from Virginia.
• 15:49
  SPEAKER_00: I was his legislative director when we put it together.
• 15:51
  SPEAKER_01: And in the past, you've had some bipartisan support for it.
• 15:54
  SPEAKER_01: Yep.
• 15:55
  SPEAKER_01: You have some now?
• 15:56
  SPEAKER_00: Not currently.
• 15:57
  SPEAKER_00: You know, these things take time to rebuild.
• 15:59
  SPEAKER_00: We actually haven't had the degree of bipartisanship on balanced budget amendments and fiscal policy changes that we used to have.
• 16:07
  SPEAKER_00: It used to be broadly bipartisan from the first introductions in 1935 and 1936 all the way through.
• 16:13
  SPEAKER_00: It started to change with the contract for America in 94.
• 16:17
  SPEAKER_00: And I guess after that energy waned, it became something that didn't get a whole lot of attention and was rebooted during the Tea Party era, something that Republicans are more keen on than Democrats.
• 16:26
  SPEAKER_00: But this is something that should appeal to everyone.
• 16:29
  SPEAKER_00: And so we need to get in the business of rejuvenating that bipartisan interest.
• 16:34
  SPEAKER_01: And the fact that you give Congress 10 years to comply if the balanced budget amendment is adopted by the 38th state, does that mean that we don't address this problem until after this fiscal crisis is upon us?
• 16:46
  SPEAKER_00: Well, hopefully we can avoid the fiscal crisis.
• 16:49
  SPEAKER_00: If we do have one, then hopefully there's enough pieces here and in other places that things are on the shelf and ready to go to help us recover from it as quickly as possible.
• 16:57
  SPEAKER_00: But the core of the implementing legislation that I talk about is a bill introduced again by then Senator Mike Braun and House Majority whip Tom Emmer.
• 17:07
  SPEAKER_00: It's called the Responsible Budget Targets Act.
• 17:09
  SPEAKER_00: That would set up a glide path or a glide slope to gradually transition from where we are now to a primary balance over the 10-year window.
• 17:17
  SPEAKER_00: And you don't have to wait for the 38th state to ratify.
• 17:20
  SPEAKER_00: You can get started on this right away.
• 17:21
  SPEAKER_00: And then that makes the 10 years that much easier.
• 17:23
  SPEAKER_00: But when you have that credible commitment that you're getting your house in order, it's going to take time.
• 17:29
  SPEAKER_00: And maybe you even enact most of the policies on the front end so people can see that they will add up to accomplishing that goal by the end of the 10-year window, that that will calm the nerves of the markets and help us avoid the debt crisis.
• 17:41
  SPEAKER_01: And I think I read in your book that all 50 states, with the exception of Vermont, have some sort of either statutory or constitutional requirement of a balanced budget.
• 17:50
  SPEAKER_00: Or a combination.
• 17:50
  SPEAKER_00: Yeah.
• 17:51
  SPEAKER_00: And a lot of them came from mistakes that the states made over time.
• 17:55
  SPEAKER_00: The 1820s and 1830s, northern states did a lot of canal building and they issued a lot of debt to accomplish that.
• 18:02
  SPEAKER_00: You know the Erie Canal, of course, but they were all throughout the northern states.
• 18:06
  SPEAKER_00: And then in the South, they borrowed a lot to capitalize banks.
• 18:09
  SPEAKER_00: Now, banks in those times were unit banks, just one location for banks.
• 18:14
  SPEAKER_00: And so that made them incredibly vulnerable to local economic disruptions.
• 18:17
  SPEAKER_00: And then when the panic of 1837 happened, a lot of problems all throughout the country.
• 18:22
  SPEAKER_00: Eight states and the territory of Florida defaulted on their debts, at least partly by 1841.
• 18:28
  SPEAKER_00: And then the bond buyers are like, if we're going to lend to you again, you need to put something in place so that never happens again.
• 18:33
  SPEAKER_00: Nobody likes to lose their shirt.
• 18:35
  SPEAKER_00: And even the states that didn't default went through a really rough time.
• 18:38
  SPEAKER_00: A lot of them decided that was the appropriate time to do that.
• 18:41
  SPEAKER_00: And then also during the post-Civil War reconstruction era, that was another wave, more when local governments got over their skis, but also some state governments at that time.
• 18:58
  SPEAKER_01: And then of course the convention would have to adopt something and it would have to go through Congress.
• 19:02
  SPEAKER_01: A number of states have called for a constitutional amendment to pass a balanced budget amendment, right?
• 19:07
  SPEAKER_00: Absolutely.
• 19:08
  SPEAKER_01: Can they limit it to just looking at a balanced budget amendment if they have such a convention?
• 19:12
  SPEAKER_00: Well, we don't know from precedent, but there are some precedents that seem to apply.
• 19:17
  SPEAKER_01: Well, I guess we had one precedent and they threw out the Articles of Confederation and rewrote a new constitution.
• 19:23
  SPEAKER_00: Aaron Powell So that's often claimed, right?
• 19:26
  SPEAKER_00: But that was not under the current constitutional structure.
• 19:28
  SPEAKER_00: I think one of the key protections is that it would take 38 states to ratify something.
• 19:33
  SPEAKER_00: So if the convention went way off the rails, unless you had that many state legislatures be like, hey, we're willing to go there too, then you're unlikely to have it.
• 19:41
  SPEAKER_00: There are a bunch of states that have put restrictions on what their commissioners, the names of the people that would be attending the convention, what the commissioners would be allowed to discuss.
• 19:51
  SPEAKER_00: And in fact, with the convention that gave us the constitution, there was one state, I think it was Rhode Island, that didn't send anyone because there was a state law, I believe, that wouldn't let them do something as voluminous as what ended up happening.
• 20:04
  SPEAKER_00: There are some likely restraints.
• 20:07
  SPEAKER_00: Are they sufficient?
• 20:08
  SPEAKER_00: I mean, we won't really know until we find out.
• 20:11
  SPEAKER_00: One thing that's interesting is that there's a group of people that have been doing historical research and they claim that by 1979, the requisite number of states, actually more than that, had applied for a convention and Congress didn't call it.
• 20:26
  SPEAKER_00: And then they just published some new research recently saying that more recently that threshold has been exceeded as well.
• 20:33
  SPEAKER_00: And the claim that they make is that you can combine plenary convention calls, so not for anything in particular, with those for, you know, a fiscal responsibility amendment or something like that.
• 20:44
  SPEAKER_00: And for a long time I thought, no, it had to be, you know, for a particular thing.
• 20:47
  SPEAKER_00: But going back and reading Article V of the Constitution, it doesn't specify that in any way.
• 20:52
  SPEAKER_00: It just says when two-thirds of state legislatures have applied for a convention, then Congress has to call one.
• 20:57
  SPEAKER_00: So there's some potential litigation that we could see on this topic that these folks are trying to organize.
• 21:03
  SPEAKER_00: And well, we'll see what happens.
• 21:04
  SPEAKER_00: I haven't given up hope on Congress, but there's this other thing moving as well.
• 21:08
  SPEAKER_01: And if the other thing's moving, it might get Congress to act on this balanced budget amendment.
• 21:13
  SPEAKER_01: Yep.
• 21:13
  SPEAKER_01: You also in here, of course, quote several of the founding fathers, James Madison and Thomas Jefferson, who speak out against debt, against government borrowing and for keeping the budget in balance.
• 21:26
  SPEAKER_01: Why do you think they neglected to put something like that in the Constitution?
• 21:29
  SPEAKER_01: You have any speculation there?
• 21:30
  SPEAKER_01: Did they just never imagine the government would?
• 21:32
  SPEAKER_01: But we had debt at the time.
• 21:34
  SPEAKER_00: We did have a lot of debt at the time, and it was a and a really important deal in 1790, so soon after the Constitution was adopted, for the federal government to absorb states' revolutionary war debt in exchange for that was for Hamilton, and what he got for Jefferson and Madison was putting DC on the Potomac, because of course they were Virginians.
• 21:52
  SPEAKER_00: They were familiar with the crippling nature of debt.
• 21:55
  SPEAKER_00: They'd seen it with England and France.
• 21:57
  SPEAKER_00: They had borrowed so much that 50 to 60% of their revenue was going just to debt service.
• 22:03
  SPEAKER_00: So they didn't want that here.
• 22:04
  SPEAKER_00: But I think they expected that the federal government would be one of limited and enumerated powers, and they didn't imagine that it could do this.
• 22:13
  SPEAKER_00: Plus, the norm was strong that during good times you pay down the debt, you grow the economy.
• 22:18
  SPEAKER_00: As long as the economy is growing faster than the debt, you're reducing the debt burden.
• 22:21
  SPEAKER_00: And we didn't actually seem to need one until the 1930s.
• 22:25
  SPEAKER_00: So Jefferson, you know, one time opined in a letter that he wished there could be an amendment to the Constitution prohibiting the ability to borrow.
• 22:32
  SPEAKER_00: And then, of course, when he became president, he bought the Louisiana Purchase, right?
• 22:36
  SPEAKER_00: It was a good deal.
• 22:38
  SPEAKER_00: And borrowed money to borrow for that.
• 22:40
  SPEAKER_00: It doesn't actually make sense to prohibit the federal government from borrowing.
• 22:43
  SPEAKER_00: Not being able to directly raise funds either from taxes or from borrowing, was a key problem with the Articles of Confederation.
• 22:52
  SPEAKER_00: The challenge is to limit the amount and kind of debt that can be accumulated and then have an idea to repay it as soon as practicable.
• 23:00
  SPEAKER_00: It's kind of like that 38 special song, Hold on loosely, but don't let go.
• 23:04
  SPEAKER_00: If you cling too tightly, you're going to lose control.
• 23:06
  SPEAKER_00: It's kind of like that.
• 23:07
  SPEAKER_00: Like if you try to like define everything super, super tightly, then that doesn't really leave room for the politics to work.
• 23:13
  SPEAKER_00: And you need politics in a political system.
• 23:16
  SPEAKER_01: As we record this, Congress is again facing a possibility of a shutdown of the government because it can't reach an agreement.
• 23:22
  SPEAKER_01: And I guess Democrats are holding out from what the Republicans want.
• 23:26
  SPEAKER_01: There was a piece today in the Wall Street Journal by Ron Johnson, Senator from Wisconsin, about legislation he's proposed to avoid shutdowns.
• 23:34
  SPEAKER_01: Did you get a chance to see that and have any thoughts about that?
• 23:37
  SPEAKER_00: Yeah, I did.
• 23:37
  SPEAKER_00: Totally agree with him that shutdowns should not be a thing that are possible.
• 23:42
  SPEAKER_00: And in fact, the Carter administration created shutdowns.
• 23:45
  SPEAKER_00: They unilaterally reinterpreted a law from the 1800s that for 90 years Congress was totally fine with appropriations continuing until they got new appropriations done.
• 23:56
  SPEAKER_00: And so it's time for Congress to just reverse that.
• 23:58
  SPEAKER_00: And Senator Johnson has a bill, it's a good bill.
• 24:01
  SPEAKER_00: There's also the Prevent Government Shutdowns Act by Senator Langford from Oklahoma and House Budget Committee Chairman Jody Arrington from Texas.
• 24:09
  SPEAKER_00: Both are really good options.
• 24:10
  SPEAKER_00: One thing that I really like about the Prevent Government Shutdowns Act is that it would keep members of Congress, their staff, and the White House budget office staff in DC until new appropriations got done every year.
• 24:22
  SPEAKER_00: One of the things that Senator Langford has talked about is that members are different when it comes to compensation.
• 24:28
  SPEAKER_00: Like some of them are very well-to-do and some of them are not, but they're all equal when it comes to time.
• 24:33
  SPEAKER_00: So if they're stuck here, focused on getting the process done, then you know that hits all of them pretty much equally.
• 25:14
  SPEAKER_00: And it sort of strikes me as being the reverse of the 2013 fight over Obamacare and led to that shutdown that year.
• 25:23
  SPEAKER_00: I was actually a congressional staffer working on budget issues, and I got furloughed because they're like, oh, it's a political decision.
• 25:29
  SPEAKER_00: I told my boss then that we were not going to defund Obamacare.
• 25:32
  SPEAKER_00: Obama was still the president.
• 25:34
  SPEAKER_00: We weren't going to get 60 votes in the Senate for that.
• 25:36
  SPEAKER_00: I think Harry Reid was still a majority leader at that point.
• 25:39
  SPEAKER_00: These shutdown fights, you know, they don't actually give anybody leverage.
• 25:42
  SPEAKER_00: It's just a lot of brinksmanship that ends in something that's pretty close to the status quo.
• 25:46
  SPEAKER_00: Nobody really walks away from a shutdown fight saying, haha, we got everything we wanted, because that's just not how this works.
• 25:52
  SPEAKER_01: What are some things you wish the American people knew that perhaps they don't when it relates to government spending, the tremendous borrowing, the need for the balanced budget amendment?
• 26:03
  SPEAKER_01: Or are Americans very well informed on this?
• 26:06
  SPEAKER_00: I think people think that Congress is more set up for success than it is.
• 26:12
  SPEAKER_00: We have the shutdown brinksmanship that we were just talking about.
• 26:16
  SPEAKER_00: That's not something that should exist.
• 26:17
  SPEAKER_00: And that's something that we actually think could get fixed this fall because of the fights that are going on.
• 26:22
  SPEAKER_00: But we talked before about the fact that Congress doesn't actually do a budget.
• 26:26
  SPEAKER_00: Oftentimes people will say, well, when's the last time that Congress, you know, did a budget on time?
• 26:31
  SPEAKER_00: I said, on time or a budget?
• 26:34
  SPEAKER_00: Like Congress doesn't do a budget.
• 26:35
  SPEAKER_00: It never has.
• 26:36
  SPEAKER_00: And I think that is sort of like inertia.
• 26:38
  SPEAKER_00: We have these points in our history where problems emerge and then we try to fix something, but unless you've really thought through it for years in advance, the solutions that you have on hand when the moment of opportunity comes aren't really going to suffice for fixing the long-term problem.
• 26:54
  SPEAKER_00: So this is what we experienced when I was a new staffer on Capitol Hill in 2011.
• 26:58
  SPEAKER_00: We had all this incredible Tea Party energy.
• 27:00
  SPEAKER_00: Democrats were willing to work with Republicans on fixing some of this, but we didn't really have anything that was sketched out that made a lot of sense.
• 27:08
  SPEAKER_00: So thankfully, this time around, we've seen a lot of people, myself included, that have been working with lots of folks to try to build the pieces that will fix these problems and wait for the window of opportunity to open so that we can just sort of plug them in where they need to go.
• 27:21
  SPEAKER_00: One really important one is the Comprehensive Congressional Budget Act that we talked about.
• 27:25
  SPEAKER_00: We do not have the kind of small D Democratic Congress that we should have.
• 27:31
  SPEAKER_00: It's not as bottom-up as it should be.
• 27:33
  SPEAKER_00: Members don't have the equal rights to offer their ideas and see if their colleagues agree with them.
• 27:38
  SPEAKER_00: And so there's just like so few opportunities to really be a legislator.
• 27:42
  SPEAKER_00: So if we were able to have a better budget process and a better authorizing process, then we could have so much more room for members of Congress to come from wherever they're from and represent the interests of the people they represent before their colleagues and see, you know, where they can find agreement.
• 27:57
  SPEAKER_00: There's not enough democracy in Congress.
• 28:00
  SPEAKER_00: Of course, Congress has authorized doing way too many things at much too great expense.
• 28:05
  SPEAKER_00: That all needs to shrink.
• 28:07
  SPEAKER_00: But you know, there's just not an opportunity for that to happen right now.
• 28:10
  SPEAKER_01: Your book includes two pairs of words that I think are important.
• 28:14
  SPEAKER_01: Fiscal democracy is one of them, and the other is sound governance.
• 28:18
  SPEAKER_01: Your proposal really is built around the fact that if we could get a balanced budget amendment, like the principles-based one, into the Constitution, it would lead more toward fiscal democracy and sound governance.
• 28:30
  SPEAKER_01: So I think a good note to end this conversation on would be to talk a little bit about what that looks like.
• 28:36
  SPEAKER_01: If a balanced budget amendment is adopted, does it improve the way we're governed and how Congress operates?
• 28:43
  SPEAKER_00: I very much believe so.
• 28:44
  SPEAKER_00: We have basically two goals with a balanced budget amendment.
• 28:48
  SPEAKER_00: One is fiscal responsibility.
• 28:49
  SPEAKER_00: That's the obvious one.
• 28:51
  SPEAKER_00: The other one is catalyzing Congress to think deeply about how it's set up and how it could be better.
• 28:57
  SPEAKER_00: Some of that's fiscal.
• 28:58
  SPEAKER_00: But the truth is that most members of Congress are interested in controlling deficits and debt, but they're more interested in lots of other things.
• 29:07
  SPEAKER_00: They're most interested in being relevant as a member of Congress, as a legislator, someone who can bring solutions, bring ideas, and the current process shuts that down.
• 29:17
  SPEAKER_00: If we were to adopt some of these budget best practices, comprehensive budget, no shutdowns, heck, don't let the president give the State of the Union until you get the president's budget request and the national security strategy from him.
• 29:28
  SPEAKER_00: Those are all good things that would help Congress succeed in their job of representing the many, many interests, geographic, ideological, whatever else, of the American people.
• 29:39
  SPEAKER_00: Because the point of a legislature is to discover better ways of mutually accommodating each other.
• 29:45
  SPEAKER_00: We have a problem in this country right now of political violence, or the normalization of it as well.
• 29:52
  SPEAKER_00: If we were to see legislators who disagree deeply on so many things coming together to agree on this piece here, that piece there.
• 30:00
  SPEAKER_00: This overall budget, then that shows that we see things differently, but we can work together for our mutual benefit, move the country forward, add value for the people.
• 30:10
  SPEAKER_00: That just brings the temperature down.
• 30:12
  SPEAKER_00: There will always be crazies out there.
• 30:14
  SPEAKER_00: But the hope is that there will be less radicalization and more of a coming back together where even if you see the world differently from someone else, you still recognize their inherent dignity and worth as a human being, and you're more willing to have conversations with them.
• 30:31
  SPEAKER_01: Are you optimistic that you'll see a balanced budget amendment in the Constitution in your lifetime?
• 30:36
  SPEAKER_00: Oh, absolutely.
• 30:37
  SPEAKER_00: My lifetime?
• 30:38
  SPEAKER_00: Yes.
• 30:38
  SPEAKER_01: Well, I mean, uh, for those who are not watching this on video but listening, uh Kurt's probably about 50, late 40s.
• 30:46
  SPEAKER_01: Okay.
• 30:46
  SPEAKER_01: Yeah, yeah.
• 30:47
  SPEAKER_01: Mid-40s.
• 30:48
  SPEAKER_01: Mid forties.
• 30:48
  SPEAKER_01: Okay.
• 30:49
  SPEAKER_01: So his lifetime is at least another 40 years.
• 30:51
  SPEAKER_01: We hope.
• 30:52
  SPEAKER_00: So yeah, I think we will almost certainly have one in that period of time.
• 30:55
  SPEAKER_00: I mean, you mentioned back at the beginning that Paul Winfrey thinks we've got a decade to get our house in order.
• 31:00
  SPEAKER_00: Ray Dalio, who is a big time investor, recently published a book as well, um, how countries go broke.
• 31:05
  SPEAKER_00: He thinks we've got three years to turn it around.
• 31:08
  SPEAKER_00: We've got a clock, we've got to get our house in order.
• 31:11
  SPEAKER_00: Hopefully, we can avoid the debt crisis and all the pain that that would cause.
• 31:15
  SPEAKER_00: But if we can't, we have some of the pieces that we need to recover from that.
• 31:19
  SPEAKER_00: Historically, states and other countries, when they've gotten themselves into trouble, they've done a serious policy or reform package, and they've also upgraded their budget institutions, including through balanced budget or other rules.
• 31:33
  SPEAKER_00: So I think that's coming our way probably in the next decade.
• 31:36
  SPEAKER_01: Well, and you have a section in this book on Switzerland and what they did to rectify the problems they were having.
• 31:41
  SPEAKER_01: And you talk about the EU and other areas where this has been successful.
• 31:45
  SPEAKER_00: So Yeah, Switzerland was in a tough place in the 90s, and then through a package of policy reforms and institutional reforms, the Swiss debt break is the the biggest part of that.
• 31:55
  SPEAKER_00: They turned it around.
• 31:56
  SPEAKER_00: Same with Sweden.
• 31:57
  SPEAKER_00: Sweden got into a lot of trouble in the early 1990s, and they are one of the best governing states in the world today.
• 32:04
  SPEAKER_00: A little bit more expansive than would be my preference, but you know, they they make it work.
• 32:08
  SPEAKER_01: Yeah.
• 32:09
  SPEAKER_01: Well, Kurt, thank you very much for joining me today on the Liberty and Leadership Podcast.
• 32:13
  SPEAKER_01: Thank you for writing this great book.
• 32:14
  SPEAKER_01: Thank you and for devoting so much of your time and talent to trying to bring about fiscal solvency and uh balanced budget amendment in this country.
• 32:23
  SPEAKER_00: Well, thank you so much for having me.
• 32:24
  SPEAKER_00: It's a joy to get the word out, and I appreciate you uh hearing me out.
• 32:28
  SPEAKER_01: Well, we're proud to call you a TFAS alum.
• 32:30
  SPEAKER_01: Thank you.
• 32:30
  SPEAKER_01: Thanks so much.
• 32:31
  SPEAKER_01: It was a great program.
• 32:33
  SPEAKER_01: Thank you for listening to the Liberty and Leadership Podcast.
• 32:36
  SPEAKER_01: If you have a comment or question, please drop us an email at podcast at tfas.org.
• 32:43
  SPEAKER_01: And be sure to subscribe to the show on your favorite podcast app and leave a five star review.
• 32:50
  SPEAKER_01: Liberty and Leadership is produced at Podville Media.
• 32:53
  SPEAKER_01: I'm your host, Roger Reim, and until next time, show courage in things large and small.