The First Step toward a Post-Trump World

Way back in 2016 I wrote my first book about public policy. Even back then I was very concerned about the mountain of debt being created by an undisciplined Congress. I had read Kenneth Rogoff and Carmen Reinhart’s book, This Time Is Different, Eight Centuries of Financial Folly that described the pain and misery of countries with unsustainable levels of debt.

At that time we were just approaching the end of eight years of Democratic led government under President Obama that had seen public debt double from $10.7 trillion at the end of 2008 to $19.3 trillion when I published my book, rising from 73% of GDP to over 100% of GDP. In my book, I described  a range of reforms that would have, hopefully, staunched the flood of indebtedness. None of those reforms were implemented and our public debt now stands at $36.2 trillion. That is equivalent to over 120% of GDP. Reinhart and Rogoff wrote that there is a point of no return where the debt trap becomes impossible to escape. The United States in nearing that point of no return. The desperate attempt to promote ever more economic growth at all costs only increases the fragility of the economy and our exposure to a debt crisis.

The reforms described in my book were pointed at the Congress. The Congress is the seat of sovereignty because only Congress can make law. But Congress has ceded much of its sovereignty to the Executive Branch leaving only the Supreme Court to check the imbalance of power in our government. But because any law made by Congress to reform Congress can be unmade by Congress, these reforms should probably be in the form of amendments to the Constitution. This could be in the form of several amendments or in a single amendment (perhaps a big, beautiful amendment). This will make passage of the reforms more difficult but also more permanent.

The most important reform, but one I am reluctant to recommend, is a Balanced Budget Amendment. I am reluctant to propose such an amendment because it is essentially a rebuke to our elected officials that they cannot be trusted to do the right thing for the American people. The Founders assumed our elected officials would be statesmen and patriots and not avaricious careerists only thinking about their reelection. But the Founders were wrong and so we need a balanced budget amendment to force elected officials to do the right thing.

Such an amendment would require that the operating budget be balanced with the exception in the case of a war declared by Congress (not the wars announced by presidents to justify actions not authorized by law). An exception might also be included in the case of a recession although the methodology for declaring a recession must be very clear and limited (similar to the Swiss Debt Brake). Any debt incurred under these exceptions must include a plan for the prompt repayment of the debt. A separate capital budget could be included allowing indebtedness from investments in infrastructure projects or the capital assets of the government. Any entitlement program must include a plan to fully finance the entitlement in the year any benefit is to be disbursed and payment of the entitlement must be conditioned upon the amount of funding received under the plan. Providing a benefit to a person in the present  to be paid for by a person in the future without their consent is immoral and unethical.

A second amendment would be a line item veto. While a line item veto might have a modest budgetary impact by limiting the use of “earmarks” (what we use to call pork barrel), the main benefit would be its limitation of the power of lobbyists to affect legislation in their private interest as opposed to the public interest and which cost much more than earmarks. To the lobbyist, the money they spend in campaign donations and other benefits to legislators and their families are investments. And the lobbyists will continue to make these payments because they have a very high return on investment in the form of favorable legislation. Trying to control money in politics through various campaign finance laws has been ineffective because those laws do not affect the incentives motivating those payments. So long as those incentives remain in place lobbyists and politicians will find ways to circumvent or modify laws that limit these payments (sort of like the Soviets trying to stamp out black markets). But a line-item veto would be effective because it would reduce the return on investment of the lobbyists (veto should be written so as to avoid the Frankenstein veto and the Vanna White veto).

Currently lobbyists need only one legislator to put one clause into a large piece of legislation to achieve their aim. With lots of lobbyists and lots of legislators those big bills get even larger and more complex. Because the core of the underlying legislation is important (such as medical benefits for veterans) presidents are reluctant to veto an important bill even if it is loaded with many additional clauses that are more in a private interest than in the public interest. But the high ROI of lobbyist investments is undermined by the line item veto. To override such a veto the lobbyist would have to spend more money (a lot more money) because more legislators would need to be convinced to back the bill (especially if each veto had to be voted on separately). The more the lobbyist must spend the lower their ROI and those of their patrons. The line item veto may not eliminate the entire problem of lobbyist money affecting our legislation but it would be far more effective in controlling that problem than all campaign finance law I have seen.

A related amendment would be to impose clear accounting standards on the Federal government (most state governments are already subject to these requirements). The Federal government has resisted this reform for decades and for good reason: a less transparent (and more obscure) budget process gives Congress the freedom to act based on politics rather than sound financial principles. Congress and the government need to be held responsible and a positive step would be to impose strict accounting standards on our government. I recommend that the US adopt the International Public Sector Accounting Standards as developed by the International Public Sector Accounting Standards Board (IPSASB) based on the International Financial Reporting Standards. Many people will immediately respond that such action endangers our national sovereignty but many of the loudest complainers will be those with the most to hide. The days when the US could chart its own course and be oblivious to the international standards while we try to hold the rest of the world accountable (do what I say, not what I do) are almost gone. Such a move would be welcomed by the rest of the world, including those nations that are our largest creditors as well as the credit rating agencies that are warning us of future downgrades (oops) if action is not taken soon.

These standards must also be made to apply to contingent liabilities. The US has enormous contingent liabilities arising from the unfunded benefits promised under Social Security, Medicare/Medicaid, veterans' benefits etc. Valuing contingent liabilities is always tricky because you have to make a lot of assumptions about the future such as future inflation and interest rates. But this uncertainty is compounded when no estimate is made at all or is made by someone who has an interest in skewing the result (whether higher or lower). Implementing the International Public Sector Accounting Standards would be an enormous task, but one well worth the effort.

Additional reforms could also be included in any reform package. Those could include term limits, restriction on potential conflicts of interest and insider trading  and a prohibition on unfunded mandates. You can probably think of others better than I can. Congress also needs to reassert its role as a co-equal partner in the government although this does not require constitutional changes as this power already exists.

Of course, it will be almost impossible to get the avaricious careerist politicians in Congress to get the two-thirds majority (in both houses) to propose amendments to reform themselves. Both Democrats and Republicans have struck an evil bargain that governs how Congress operates. Republican cut taxes and Democrats spend money creating huge deficits that must be repaid by citizens in the future (many of whom have not been born yet and will receive no benefit from the tax cuts or the spending).  The Founders knew such activity was unethical and such evil was unknown in Washington until relatively recently.

Citizens lack the ability to propose amendments and we have little leverage over our representatives in Washington, except the vote. Reelection is the primary goal of our representatives in Washington so we need to make their reelection contingent upon reforming how Congress operates. You may think that there are more important issues on which to base your vote, but you are wrong. Without reform your doom is certain.

A quick Internet search showed no group actively working to pass a balanced budget amendment or other reforms of actions. Two Congressmen, Jay Obernolte and Zach Nunn, have recently introduced resolutions to propose such an amendment but with little support from other members of the House. Without a tidal wave of grass roots support for such an amendment, no action in Washington is likely. That is where you come in. I have prepared a message that you can send to your representatives in Washington asking if they support these reforms of Congress. We will need a central registry to tabulate responses from Washington. If we can get enough people demanding that their representatives support such reform, maybe we can get the attention of those politicians.

The inability of Congress to fulfill its constitutional duties is not a consequence of our divisive politics but one of its principal causes. Partisan politics prefers gridlock to compromise which has resulted in our current Trump world. If we want to create a post-Trump world we will need a Congress that works. This is not a left or right thing. This is not a Republican or Democrat thing. This is an American thing and we need to get it right.