Tuesday, August 15, 2017

U.S. Government Debt: A Constitutional Moment?

The Congressional Budget Office (CBO) issued a report in June 2011 indicating that the debt of the U.S. Government had reached a dangerous level—that is, one likely to trigger a financial crisis. This characterization ought to have garnished close attention by the American people, for the viability of the Union itself may have been at stake. I submit that such a condition, moreover, warrants a constitutional moment—that is, a time when the citizenry focus on solving a basic governmental problem. In other words, the matter of the publicly-held U.S. Government debt may have justified popular sovereignty stepping in. Of course, how this would have been done is itself a problem, particularly because government officials had no interest at the time in relinquishing their power as our agents. This may explain in part why the debt would go on to reach $20 trillion by 2017.

Here, in a nutshell, was the problem. According to The Wall Street Journal at the time, “Most analysts say the borrowing cap [of $14.29 trillion] would have to be raised by more than $2 trillion to carry the government through the 2012 election. . . . The Congressional Budget Office estimates the cumulative deficit for 2012-21 at $7 trillion. . . . Treasury Secretary Timothy Geithner, speaking at The Wall Street Journal's CFO Network conference in Washington, said there is broad agreement that the country needs $4 trillion to $5 trillion in deficit-reduction over 10 years, but budget negotiators haven't agreed on how those reductions should be structured. . . . Geithner said it would be politically impossible to reach a final agreement unless the package included some tax increases, though many Republicans have said they won't support such a plan.”

Given the basic disagreement concerning revenue, government officials involved in negotiations were considering using a chain-weighted CPI to adjust entitlement benefits. However, such a change would have resulted in only incremental change—a mere $300 billion over ten years saved out of a cumulative expected deficit of $7 trillion. In other words, the agents of the people, finding themselves in a basic disagreement, turned to incremental, rather than systemic, change. The magnitude of the problem warranted more than incremental changes. 

I contend that a basic or fundamental structural imbalance inheres in a debt that is 70% of GDP. That is, for a government’s debt to reach a level that could trigger a financial crisis, something rather basic must surely be wrong with the way that government handles money. Such a basic, or systemic, problem justifies, and indeed requires, a momentary return to popular sovereignty. To rely exclusively on agents gives them too much power as agents and essentially relegates the importance of the problem. That the U.S. debt could go on to reach $20 trillion by 2017 demonstrates that the incremental approach did not work years earlier. 

In the American context, popular sovereignty traditionally operates not only by electing candidates for office, but also through referendums and through holding constitutional conventions. The use of a Union-wide referendum could answer whether tax revenue increases should be part of the solution, as well as whether entitlements ought to be cut. Additionally, the people could be asked whether any major federal programs should be transferred both in revenue and spending to the states.

The use of constitutional conventions, albeit rarely invoked historically, could address a possible constitutional amendment mandating a balanced budget (the problem being any loopholes, which would inevitably be exploited by the agents). Moreover, conventions could address the question of whether the U.S. Government’s debt is a symptom of a more basic imbalance between the U.S. Government and those of the several states. In other words, the crisis may go beyond the fiscal kind—political consolidation itself needing to be addressed if the U.S. Government is simply doing too much. 

To be sure, some of the American states, such as California, Florida and Illinois, have been dealing with sovereign debt of their own, just as Greece, Spain and Ireland have as well. However, whereas the revenue capability of the E.U. states has not been crowded out by the E.U.’s revenue authority, the U.S. states have been hampered by the financial “needs” of the General Government.  

Redistributing competencies or domains toward a balance in terms of federalism could ironically unburden the state governments even as more is laid at their laps. This is a matter for the popular sovereign—the people—to decide, given the foundational nature of the question.

Lest the duty of the popular sovereign be ignored in favor of the more convenient agent-driven debates on a chain-weighted CPI (a “managerial”-level concern), the United States may inadvertently hit the consolidated iceberg ahead because the rudder of the consolidated ship of state is too small for the ship. If that ship were not relied on so much, smaller ships could go around the stolid floe. 


Janet Hook and Corey Boles, “House GOP Digs In on Debt Ceiling,” The Wall Street Journal, June 22, 2011.