The Swiss adopt the Harold Black Solution

The Swiss adopt the Harold Black Solution

Over 30 years ago I started writing an article in the business pages of a local newspaper. Almost from the very beginning, I offered a solution to curtailing congress’ and the president’s spending excesses. It was to have total federal spending grow at no rate greater than the previous year’s growth in real GDP. This would constrain government spending since real GDP grows at an annual rate around 2.6% while government spending grows around 5.5% per year. Thus, the ever increasing deficits are a result of government spending growing at a rate faster than that of private sector growth. If my solution were adopted, if need be the president could declare a national emergency and ask the congress for a one year emergency appropriation that would have to be approved by a two thirds vote in both houses.

Republican presidents, starting with Ronald Reagan, would endorse a tax cut without a spending cut arguing that the resulting economic growth stemming from the tax cut would generate increased revenues to offset the fall in tax collections, thereby decreasing the deficit. That has worked on occasion but Reagan did not envision presidents like Donald Trump whose increase in spending would offset the tax cuts. Anyway, that’s a poor way to run an economy. It may ruin it instead.

The Swiss when faced with the same budgetary difficulties decided to adopt a variant of the Harold Black Solution. They passed a constitutional amendment to limit the rate of growth in federal government spending to a timeline average of tax revenues (as opposed to changes in GDP). The Swiss call this a “debt brake.” Adopted in 2001, government spending has fallen from an annual growth rate of 4.3% to 2.6%, The result is a reduction in the government’s debt burden from 34% of GDP to less than 20%. Mind you the US percentage is now over 100% and climbing. Enacting the Harold Black Solution is not a balanced budget amendment. There will still be a federal debt, albeit a shrinking one. But it will be a debt that is manageable rather than one that continues to grow unfettered.

The Swiss politicians like all national politicians found it hard to control spending. However, the Swiss people voted 85% to enact the debt brake. I suspect that something similar would happen here. All state legislatures balance their budgets. Voters grouse about having to balance their household budgets while the federal government keeps increasing the debt burden. I have little doubt that if put to a national plebiscite that we would have a vote similar to that of the Swiss. I also have little doubt that the state legislatures would endorse such an idea as well. Only the national politicians are forced to be gutless. It is the classic Prisoner’s Dilemma where doing the right thing will cost you your job. Again no one ever got voted out of office by wanting to spend more money.

So it is time to amend the Constitution. There is little chance that the congress and the administration will muster the will to stop out of control government spending. If republican control of both houses of congress and the presidency only add to spending, it is time to quit wishing that they will get a backbone. Anyway, even if this bunch did do something, it could be easily undone by a future congress and a future president. The only viable solution is a constitutional amendment. 

It would probably be difficult to get such an amendment initiated by the congress where it would take a two thirds vote of the House and the Senate. I doubt if the democrats would favor any cut in the growth in federal spending. It would likely be filibustered in the senate. Rather the proposal would have to come from the states where two thirds of the state legislatures (34 of 50) would have to endorse it. Then once proposed, three fourths (38 of 50) state legislatures would have to approve it. Note that the state legislature vote need only be simple majority and not two thirds. There would be a seven year time limit. I think that there is a high probability of adoption by the states, even those controlled by democrats. Since they have to have budget discipline at the state level it would be rather easy for them to demand the same at the national level. This would take the pressure off of the individual congressman or senator who would favor a reduction in spending but would not have the guts to propose it.

To be fair, several national politicians have proposed Swiss brake type legislation. Representatives Kevin Brady of Texas, Mike Braun (R-IN) and Rep. Tom Emmer (R-MN) have a various times introduced similar legislation. Of course it failed to pass. Anyway, the fatal flaw was that even if it had passed, it could have been repealed by a subsequent congress. However, a constitutional amendment cannot be easily repealed one enacted. Over the history of the United States there have been over 12,000 proposals to repeal a constitutional amendment. It has only succeeded in repeal of one – the 18^th Amendment (Prohibition).

Wouldn’t it be wonderful if the Tennessee initiated the proposed amendment and ratified it at the state level. At the federal level its delegation to Washington – only Steve Cohen would likely not sign on – could introduce the proposal to amend the constitution. Let’s get with it. Let us end this crisis by considering a 28^th Amendment – modestly called “The Harold Black Solution.”

BTW, in case you are wondering why I didn’t just endorse the Swiss debt brake it is because tax rates are enshrined in the Swiss constitution and are essentially invariant. Here in the US, the tax code changes every year given the whims of the congress which would allow it to render a Swiss type debt brake useless because congress could keep spending ever more by changing the tax code yearly.