“The Case for a New Fiscal Constitution” presents a modified version of a plan first devised 20 years ago by the late Dr. William A. Niskanen, who served as a member and acting Chairman of President Reagan’s Council of Economic Advisors, and was a founding policy-board member of the Carleson Center for Welfare Reform.
Running a mere 125 words, the plan is elegant in its simplicity. It requires a two-thirds supermajority in each house of Congress to increase the debt limit and a two-thirds supermajority to raise taxes. It prohibits passing costs along to the states by requiring federal reimbursement for federal mandates. The only circumstance under which these limitations would be suspended would be a war formally declared by Congress.
Dr. Hunter notes. “It never mentions deficits nor does it mandate a balanced budget; it simply requires a supermajority vote of the Congress to raise the debt limit. Done! Deficits are eradicated unless Congress consciously and explicitly votes to run them by raising the debt limit….”
“Niskanen constructed two jaws of a fiscal vice on spending (one on debt, one on taxes) with the default position set at ‘closed’ — i.e., no room for deficits.”
In order for the plan to work, implementing legislation similar to the proposed Full Faith and Credit Act of 2011 would be needed. That bill, which passed the House but failed in the Senate, directed the U.S. Treasury, in the event of a confrontation over raising the debt ceiling, to prioritize the use of revenues to make all interest payments on the national debt and also ensured that the Social Security Administration could access its own trust fund to pay Social Security benefits and disability payments on time.
According to Dr. Hunter, “Holding the debt ceiling in place no longer would pose a risk of default on the national debt, and it no longer would be possible to hold Social Security and disability payments hostage to raising the debt ceiling.”