America should not abandon Jeffersonian debt principles
Article by Barry Poulson and David M. Walker in The American Thinker
America should not abandon Jeffersonian debt principles
For Thomas Jefferson, having one generation passing on excessive debt to future generations was immoral and an unjust encumbrance on posterity. When Jefferson became president, he was successful in reducing federal debt until his last year in office when defense spending was increased in preparation for what would become the War of 1812. This Jeffersonian principle that debt could be incurred during wartime periods but in peacetime the government should reduce debt burdens (public debt to GDP), was practiced until the Great Depression in the early 20th century.
During World War II, the U.S. debt burden reached an all-time high, but in the postwar years it was reduced to prewar levels. The debt burden was increased again during the Cold War, exacerbated by increased spending associated with social insurance programs; but after the Cold War era (1998-2001), debt burdens were again reduced through bi-partisan legislative actions.
Over the past two decades, America appears to have abandoned Jeffersonian debt principles. The federal government has responded to major economic crises with massive increases in spending, social insurance program spending has continued to increase, thereby resulting in increased in debt burdens.
Indeed, the total debt burden now exceeds the size of the entire U.S. economy and is approaching an all-time record.
Even worse, in coming decades, the debt burden is projected to increase dramatically. By midcentury, the Congressional Budget Office (CBO) projects that the U.S. will have a debt burden approaching that of Japan, the most indebted nation in the world, which has experienced economic stagnation for several decades. This is not a desirable outcome for our country and future generations.
The longtime consensus supporting Jeffersonian debt principles appears to have disappeared. In addition, the subsequent principles espoused by British economist John Maynard Keynes have also been abandoned. For example, the Peter Peterson G. Foundation has periodically brought together leading policy organizations from across the political spectrum to propose plans to achieve long-term fiscal sustainability. The consensus of these organizations was that the nation should reduce the ratio of public debt to GDP well below 100 percent. In a survey conducted by the foundation this year, however, the consensus was that the government should seek to close the future gap between revenues and expenses, but not at the expense of meeting new fiscal challenges. What does this mean?
Before Congress fully abandons Jeffersonian debt principles, it should understand how European countries have addressed their debt challenges.
In a referendum, Swiss citizens, with an overwhelming majority, approved an amendment to their constitution that requires the government to bring expenditures into balance with revenues over an economic cycle. The government may incur deficits in some years, but must offset those deficits with surpluses in other years. Enabling legislation to satisfy this amendment constrained the growth in spending to the long-term growth of the economy. A “debt brake” was enacted, reducing the growth in spending required to balance expenditures and revenues. Switzerland cut the ratio of debt to national income in half. Today, it has the highest credit rating, and the second highest per capita income of any country. In short, the Swiss enacted new fiscal rules satisfying Jeffersonian debt principles even though Switzerland is a neutral country that has avoided participating in major wars.
Similar fiscal rules have been enacted in other European countries, and are incorporated in European Union fiscal rules. These new fiscal rules, which focus on limiting deficits and debt levels as a percentage of GDP, allowed European countries to respond to recent economic crises without massive accumulations of debt.
In the current political climate, it is clear Congress is not about to propose fiscal rules to address our mounting public debt/GDP challenge. But American citizens do not need to rely on Congress to decide whether or not to abandon Jeffersonian debt principles. The U.S. Constitution does not provide for a public referendum, but it does provide citizens with an alternative route to amending the Constitution. Article V provides that when two thirds of the state legislatures (34 states) approve a resolution calling for an amendment convention, Congress must call the convention. With a subsequent ratification of a proposed amendment by three quarters of the states (38 states), the proposal becomes an amendment to the Constitution.
Over the years, state legislatures have submitted many resolutions calling for an Article V Convention, but none of these has yet to reach the requisite two-thirds majority for Congress to call the convention. In December of this year, a disparate group of organizations proposing Article V amendments met at a conference in San Diego held by the American Legislative Exchange Council (ALEC). While these organizations proposed different Article V amendments, there was a consensus that the country needs to restore Jeffersonian debt principles to address our mounting debt challenge. It is time for American citizens, like their Swiss counterparts, to have a say in answering this question. We are committed to doing our part to make such an amendment a reality.
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