(00:00:00) Amendments to the US Constitution can begin in two ways. Only one has ever been used and that occurs when Congress passes an amendment by two-thirds vote and then submits it to the states 3/4 of the state legislatures must ratify the amendment before it becomes part of the Constitution. This is the process currently underway for the Equal Rights Amendment and for the District of Columbia voting rights amendment the second procedure provided by the Constitution allows the states to petition Congress for a constitutional convention two-thirds of the states must adopt resolutions before the convention can be called and any amendments approved by that convention must be ratified by three-fourths of the states. So far close to 30 states have passed resolutions asking for a convention to draft a constitutional amendment requiring a balanced federal budget 34 states are needed. Independent Republican House member Ken McDonald from Watertown wants Minnesota to be among the 34 supporters of his resolution testified before the Judiciary subcommittee about two weeks ago among the proponents were second district GOP congressmen Tom Hagedorn and his immediate predecessor. Anchor Nelson. The supporters say that the federal budget deficit fuels inflation by creating more money than the economy can handle they argue that Federal borrowing uses up much of the money available in private money markets driving up interest rates and they say the only way to bring an end to this deficit spending is by Constitutional Amendment since the members of Congress simply cannot say no to all the special interests and worthy causes that want Federal programs this week. The opponents have their turn Chief among them was University of Minnesota Economist. Dr. Walter Heller former economic adviser to presidents Kennedy and Johnson Heller's views are still widely sought in National circles and As a matter of fact would be testifying this coming Monday on the balanced budget amendment before Senator Edward muskies budget committee here now are the key excerpts from Heller's remarks before the Minnesota house panel (00:02:03) in an era of dissatisfaction with big government and with high taxes and with high inflation. It's not too surprising that the Gallup poll shows a six to one majority favoring such an amendment and it must be a strong Temptation for an elected official especially if he or she wants to be re-elected to vote for such a proposal. But this is one case where the majority is simply wrong not in seeking some reasonable curbs on government and on inflation for thats their inherent right in a democracy but in seeking to do so by putting the federal government in a fiscal straitjacket In other words, this is a case where responsible political leadership it seems to me consists in leading voters out of the valley of error and supporting better and Sounder ways to achieve their goals of discipline in government and efficiency in government and lower inflation. Let me address myself to four fallacies that appeared to underlie the popular enthusiasm for a rigidly balanced federal budget and then spend a little time on the economic case against the proposal itself. Now fallacy number one. Let me just quote it in terms of what so often said individuals families households have to run a balanced budget. So why shouldn't Uncle Sam well people simply fail to realize that typically when Buy a car or a boat or most obviously a house they're doing anything but running a balanced budget families at times have to incur deficits often huge deficits relative to their current income. So they're asking Uncle Sam to adhere to a rigid and austere standard of prudence that they don't observe themselves prudent budgeting and balanced budget simply aren't the same thing often rigidly balanced budget would be the imprudent thing to do just like I wouldn't tell a person, you know, you shouldn't buy a house because he ought to keep your budget balanced every year. There's some years you ought to unbalanced it fallacy number two again, a quote state and local governments have to live by the balanced budget standard. So why shouldn't Uncle Sam? Unquote. Well, it's true that states and localities have to balance their budgets each year except for capital outlays for which they can borrow but I think we should remember that federal budget area counting throws both current and capital expenditures into the same pot and balancing the federal budget. Therefore means matching total outlays capital and current outlays with current tax revenues unlike state or locality which puts its capital outlays on a borrowing basis. So that's quite different from the balanced budget concept for state and local governments. And not only is this state local analogy off base, but States would be the first or at least one of the first to feel the sting of a balanced budget mandate. In the Federal Constitution, there's already serious talk in Congress of cutting Revenue sharing and other grants to State and local governments as the most natural targets if the state's force a year in year out balanced budget on Uncle Sam and don't for a minute think that's an idle threat the axe would fall now, let me underscore another decisive difference between state and federal budget impacts a state or local budget can be balanced by tax hikes or spending cuts without jarring the whole US economy the federal budget can't if the national economy starts to slide and workers are thrown out of their jobs and incomes and profits fall. Then the federal budget automatically goes into deficit if you try to balance it by forcing Cuts in spending or forcing tax boosts on the economy. The result will be simply to draw that much more purchasing power out of all and already soft and sluggish economy throw that many more people out of work and cut the flow of tax revenues that much further trying to balance the budget would send the economy into a deeper and deeper downward spiral into a tailspin there by throwing as I say more people out of work cutting tax revenues still further boosting unemployment compensation and food stamps and Medicare and Medicaid expenditures and throwing the budget further and further out of whack the the Holy Grail of a balanced budget would simply move farther and farther away as you move deeper and deeper into depression. It's like a dog chasing its own tail. Well that brings me to fallacy number 3 in effect. The people who are advocating the balanced budget say that all were asking is that Uncle Sam balances books each year. It's as simple as that simple. I must say my eye technically no one has figured out carry out how to carry out in practice a balanced budget mandate in the federal budget. It's quite different from State budgets being subject to wide swings of revenues and expenditures and particularly when the economy softens more than expected and as we noted a moment ago where there by shrinks revenues and and pumps up expenditures and both liberal and conservative observers agree on this point another Economist. And this may surprise you with well-known views on limiting government spending is Milton Friedman, and he also descents from the balanced budget amendment. He says it's impossible to define a balanced budget on the federal level and it is not desirable. That's Milton Friedman. I always quote impeccably conservative sources when they support my position and Friedman is with me on this one and then in case that's not enough conservative opinion on my side. Let me quote representative John Jay roads whom you all recognize as the minority Republican leader of the United States House of Representatives. He said an amendment calling for a balanced federal budget would be unworkable because there's difficulty in defining what the budget is. He sighted off budget expenditures money spent by the government that does not appear as a regular budget item such as subsidies for the postal service or financing for federal Housing Programs. It would be so easy to end run it to end run it said roads of a balanced budget amendment and He has made clear his opposition just on grounds. The sheer grounds that it's unworkable (00:09:52) now (00:09:53) add 2 to that the point that I made a few moments ago that for a national government of a huge country like the u.s. There's just no way that a balanced budget rule can in fact be carried out. Do we really want to put into the Constitution a mandate that can't can't possibly be observed technically or substantively such an amendment would just make a mockery of the Federal Constitution now fallacy number four house file 43 bases its call for a balanced budget in large part on federal deficits as a source of inflation. But except when those deficits mean pumping more purchasing power into an already prosperous or overheated economy. They simply aren't inflationary when the economy is slack or in a recession or when there are idle workers and idle plant and Machinery to be activated by the added purchasing power that's generated by deficit the deficits help the economy get back on its feet and they actually avoid the waste of human and material resources waste that can run into the hundreds of billions of dollars and the of course much greater than the waste in government itself. So there are both destructive government deficits and constructive government deficits. What we should seek is not All deficits we should seek fiscal discipline the avoidance of waste the avoidance of inefficiency and Bun dog Ling and the cutting off of unnecessary government programs, but not at the cost of strangling the federal government in its attempts to serve as a balance wheel for the national economy and an instrument for avoiding that greatest of all waste as I say the idling of millions of human beings and the idling of machines and factories again in in recession and slack. Well, that's the nub of the economic case against the balanced budget amendment. It really would cripple the government's ability to be an economic balance wheel as I say to fight recession or depression and I can't believe that the American people if they were confronted with and understood the true dangers of the federal government is kind of helpless giant hobbled and and handcuffed and straitjacket. By a balanced budget amendment would tell George Gallup or Lew Harris to majority of 78% that they favored a balanced budget what they're expressing. Is there frustration about the size of government about what they regard as waste in government and about the height of their taxes and all of that complicated by inflation and I don't blame them for that frustration of that expression, but this is just the dead wrong way to go about it. Let me just end with really two thoughts one is I think that economic discipline in government spending is already on the way we've put into place a very good responsible budget procedure at the federal level. It has taken hold and with people like representative Jim own the house and Ed Muskie in the Senate riding Herd on it. The the whole mood in the Congress has already changed and I had an opportunity to three weeks ago to talk with various people in the administration and Congress including the budget director and the vice president and the president and the the mood of really fiscal discipline and fiscal conservatism just suffuses that whole White House and I think that the mood is also prevalent in Congress. So that what I'm suggesting is that I think we're on the way more than at any time in the past quarter-century any times that I've observed since World War II to a much more fiscally conservative Administration in Washington Democratic or Republican and more fiscally conservative house. I'm not saying whether I approve of that or not as in terms of my own druthers, this is just as an observer and I don't think I think the Constitutional Amendment would Simply lock us into something that would be damaging and would hurt the economy and hurt the country and a final comment is that I think that locking that kind of thing firmly into the Constitution really is undercuts responsible self-government. I think it's an affront to democracy to assume that we can't have by legislative means and by The Ballot Box responsible means of responding to the citizens needs and when the citizen is he now is and he and she now our I should put it is calling for smaller government for economy and government for efficiency in government. They can best exercise that desire that purpose Through The Ballot Box in the legislative process. Says without shackling the government with a balanced budget amendment. Thank you (00:15:37) University of Minnesota economists. Dr. Walter Heller testifying before a Minnesota house Judiciary subcommittee the chief author of the balanced budget resolution representative. KJ MacDonald had a brief response. I was pleased that. Mr. Heller was able to appear before a committee because He's able to I think pinpoint more than almost anyone else who would be in opposition to the idea of a balanced federal budget pinpoint those arguments that come from those who oppose such a solution to our national economic problems. I'd like to suggest however on the onset that most of what mr. Heller had to say in my opinion were compost. In that those arguments have been given to us for at least since the end of the second world war and we have continued to go deeper and deeper and deeper into federal debt, which is strangling the nation. So when mr. Haller talks about the nation being a strangulated and no flexibility because of some type of balance budget do would bring about you know, we meet we need to and I hope maybe in the next meeting look at the other side of the coin how the nation is being strangulated and economic growth and development by horrendous National debts, and we'll be looking at some of those details other Witnesses included representatives from common cause the League of Women Voters Minnesota AFL-CIO and the Minnesota Federation of teachers many of these groups concerns were over the Constitutional Convention itself. They question whether such a convention could be limited solely to consideration of the budget amendment. They warned that a runaway convention could rewrite the entire Constitution and could even put the Bill of Rights in Jeopardy one witness observed that the nation's only Constitutional Convention held in 1787 was called to amend the Articles of Confederation but subsequently went on to write our present. Constitution representative McDonald quoted from a report by the American Bar Association and other authorities that the convention could be held to the one topic and so in answer to the question of the fear why we would need to fear I think we have to dwell upon the proposition that has been addressed a couple times since that 38 states have to ratify that the constitution is not in danger when a convention is held no greater than the danger. It is in when Congress continues to convene now, for example, we have Congress over a say here on my right hand and let's say in 1981. We have Congress meeting on my left hand and Philadelphia. The two bodies are now convened both elected by the people both with 500 and some members. Representing the various congressional districts at that point. They are both equal in their Authority or lack of it to change the constitution in any way whatsoever. They are both equal in that they can only recommend to the people a possible Amendment. So wherein lies the danger Congress can at any time prepare and present to us a raft of amendments concerning busing segregation abortion right to life national debt, whatever they can do it at any time and at all times under the authority of the constant Constitution and present those for ratification by the states. So in a sense, they are a constitutional convention standing continuously with the authority to offer amendments to the Constitution in a raft of items by the same token it convention now being held by the citizens has the same Authority they can come up with one item a constitutional amendment to balance the federal budget or theoretically they could offer to us ten amendments on various subjects. It is desirable however by and by most authorities who have studied this we suggest it is desirable. However that the Constitutional Convention be limited to one subject so that it is something that the citizens can get their hands on so to speak to get a handle. It would not be desirable. I suggest for a convention to have a raft of subjects before it according to representative McDonald legislation is now under consideration in Congress to govern the operation of any Constitutional Convention dates use the same procedure for adopting convention act application as they use for the passage of statutes by with but without the approval of the governor and these answer now these various aspects of proposals that are in the Jesse Helms bill will answer some of the concerns that were brought up today by the opponent's number two receipt of an application by Congress is to be announced on the floor both houses and copy sent to each member of Congress and State Legislature. Number three each application is to remain in effect for seven years unless rescinded by the state legislature. For applications may be rescinded by the state legislatures until-- two-thirds of the states have submitted application then applications remain all applications than remain in effect. Five after Congress determines the validity of applications. It shall pass a concurrent resolution calling for a convention. So you see it doesn't have to call a convention until it's absolutely convinced that all the resolutions are valid. Six the convention must be convened within one year after adoption of the concurrent resolution by Congress. I don't number seven in this bill if passed by Congress before a convention delegates to the convention shall be popularly elected one delegate from each congressional district and two additional at-large delegates from each state. So any eligible citizen would be available. I would be eligible to run as a delegate number eight the convention shall elect its own officers 9 each delegate May cast one vote 10. Each delegate vote must be recorded and a Verbatim record kept 11 amendments shall be proposed by majority vote of the delegates 12 the convention shall be limited to subjects named in the concurrent resolution and that the delegates subscribe to an oath to refrain from proposing or voting in favor of any proposed amendment not so named. 13 the convention shall be terminated one year after date of its first meeting unless Congress extends its life that answers those who did fear that the convention could sit in convention for year after year and be an unending process. This bill is when if adopted would not allow that 14 questions arising as to Convention procedures shall be determined solely by Congress. So Congress would retain its authority to control procedures while the convention is in session 15 Congress, May disapprove a proposed amendment on the ground that unsubstantial / rather on the substantial procedure irregularities occurred at the convention for that the amendment pertains to his subject different from the described in the resolution. So Congress will also then under this law retain its power to throw out any Amendment. It isn't in fact in line with that call 16 Congress may not disapprove a proposed amendment on the ground that it disagrees with the substance of the amendment. However and 17 Congress must transmit the proposed amendment to the states for ratification and 18. The proposed amendment must be ratified by three-fourths of all the states and 19. Each state shall adopt its own rules of procedure for ratifying proposed amendments accept that any state ratifying action shall be valid without the ascent of the governor that legislation has not yet passed the Congress, but is under consideration and the Minnesota house Judiciary subcommittee has scheduled a meeting for this coming Monday at noon to act on Lee proposed resolution calling for a constitutional convention. This is Bob Potter.