I much prefer returning to what Bill White has called America's Fiscal Constitution. Here are excerpts from my review of his book as it appeared on page 38 of the fall edition 2014 of Financial History:
Every policymaker,
politician, and pundit in America should read this book even though author Bill
White, a long-time Democratic mayor of Houston turned investment banker, might
seem at first blush an unlikely policy hero. White’s weighty tome (500+ pps.)
would qualify as a doctoral dissertation at any university on the planet
because it contains 40+ pages of notes, almost 40 pages of bibliographic
entries, and almost 40 pages of statistical appendices reconstructed from
original sources. Most impressively of all, the end result is not a partisan
political screed but a highly readable and well-balanced account of the rise
and demise of America’s unwritten fiscal constitution, the set of budgetary
rules that made the United States one of the world’s most creditworthy nations
in the nineteenth and twentieth centuries.
White shows that U.S. lawmakers
long countenanced only four acceptable use of debt: preservation of the union;
expansion of the nation’s borders; waging of war; and keeping the government
afloat during recessions. After each war, expansion, and recession, the federal
government stopped borrowing and sometimes even ran surpluses. That, combined
with robust economic growth, prevented the national debt from ballooning out of
control and kept the country’s credit strong, ready for use during the next
emergency or opportunity.
...
White suggests that
America’s fiscal constitution could be reconstituted through a few,
simple-to-implement reforms. First and foremost, the budget needs to be made,
in Jefferson’s words, “clear and intelligible” to “any man of any mind” (p.
363). That means producing a tax-financed budget based on good faith revenue
estimates updated monthly. Any appropriations above the tax-financed budget
need to be clearly distinguished as such and voted on separately so that voters
can readily identify politicians who want to borrow and spend instead of make difficult
choices about tradeoffs. Second, the debt ceiling system needs to be dismantled
because Congress votes on the ceiling only after it has voted to spend more
than its tax revenues. Third, bond issue votes, like the thousands held
annually at the state and municipal levels, should be held at the federal level
as well. “Nothing,” White argues, “prevents Congress from holding a national referendum
on whether to incur federal debt for specific purposes and amounts” (p. 369).
Since 1970, he notes, state and local debt levels have grown at only half the
federal rate.
...
