September 30, 2025 • 33 mins
Roger welcomes Kurt Couchman, senior fellow in fiscal policy at Americans for Prosperity, for a conversation on the risks of the nation’s growing debt and his proposal for a balanced budget amendment to restore sound governance.
They discuss why fiscal insolvency threatens future generations, how intergenerational debt burdens undermine prosperity, and why Congress struggles to act despite bipartisan public support for reform. Couchman explains “fiscal democracy,” outlines his balanced budget amendment, and shares lessons from countries like Switzerland and Sweden. The discussion also touches on the politics of government shutdowns, Social Security’s unsustainable path, and how institutional reforms could improve Congress’ ability to govern responsibly.
Kurt Couchman is the author of “Fiscal Democracy in America: How a Balanced Budget Amendment Can Restore Sound Governance.” He has worked on Capitol Hill as a congressional staffer, at leading budget policy organizations, and is a frequent commentator in national media on fiscal issues. A TFAS alumnus, Couchman received the 2023 Kevin Burkett Alumni Service Award for his contributions to the TFAS community.
The Liberty + Leadership Podcast is hosted by TFAS president Roger Ream and produced by Podville Media. If you have a comment or question for the show, please email us at podcast@TFAS.org. To support TFAS and its mission, please visit TFAS.org/support.
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Episode Transcript
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SPEAKER_01 (00:01):
Welcome to the Liberty and Leadership Podcast,
a conversation with TFAS alumni,faculty, and friends who are
making an impact today.
I'm your host, Roger Reen.
My guest today is someone I'vehad on our podcast previously.
Kurt Couchman is Senior Fellowin Fiscal Policy at Americans
(00:22):
for Prosperity.
He's the author of a great newbook, Fiscal Democracy in
America (00:27):
How a Balanced Budget Amendment Can Restore Sound
Governance.
That will be the topic of mostof our conversation today.
Kurt is an expert on federalbudget policy, having worked for
several members of Congress andfor several organizations that
work on budget priorities.
He's regularly called on frommajor television and radio to
(00:47):
comment on the budget and haswritten pieces for a number of
national publications.
Kurt is also a TFAS alum, havingattended our undergraduate
program one summer when he wasin college, and also having done
our public policy fellowsprogram.
In 2003, we recognize Kurt withour Kevin Burkett Alumni Service
(01:08):
Award.
Kurt, thanks for joining me onthe Liberty and Leadership
Podcast today.
SPEAKER_00 (01:11):
Thank you so much for having me.
I'm really excited to be hereand to talk about fiscal
democracy in America.
SPEAKER_01 (01:16):
I was thinking as I read it that young people today
are taught in school that thereis an existential threat that
mankind faces, and it tends tobe environmental policy, climate
change, things like that.
And I'm not a scientist, so Ican't comment on those.
But it seems to me theexistential threat that you talk
about is a real one, and that isfiscal insolvency and the
(01:39):
problems we have with growingnational debt being over 100% of
GDP, plus all the promises we'vemade.
Could you talk a little bitabout the situation that led you
to consider supporting abalanced budget amendment or
fiscal situation?
SPEAKER_00 (01:54):
Yeah, absolutely.
The story goes back to 2010,during the heyday of the Tea
Party times, when the debtburden was already high and
rising.
And I had been in grad school atGeorge Mason University studying
economics, took a class withPete Betke in constitutional
economics about the rules of thegame.
And I got interested in, youknow, how do we get the budget
(02:15):
under control?
And I happened to be in aconversation between David
Malpus, who was then running forthe U.S.
Senate, and Bill Niskanon, whowas then one of the board
members and senior fellow at theCato Institute.
I was doing government affairsthere.
And Bill responded to a questionfrom Malpus about balanced
budget amendments, and that kindof set me down a road about like
(02:36):
how do you design them and allof that.
But it was something that was inthe air.
The question of we have thespending growing faster than the
economy or the debt growingfaster than the economy.
And at some point there's goingto be a problem.
We thought the problem was goingto arrive at a much lower level
of debt than it has, but justlike Peter and the wolf, at the
end of the story, the wolf doescome.
And so we do need to get controlof this, or we face some pretty
(02:59):
dramatic negative consequences.
SPEAKER_01 (03:02):
There's the problem of the debt, of course.
And you talk about how that canimpact economic growth and is
impacting economic growth.
There's also the problem of thetotal burden of government
spending, whether it's collectedthrough borrowing or taxes.
So I think the debate in thepast from Milton Friedman and
other experts has been do we aimto limit the total amount of
(03:23):
spending, say as a percentage ofGDP, or do we aim to push for a
balanced budget that could bebalanced through higher taxes?
SPEAKER_00 (03:30):
Yeah, the way that I approached this book project was
to focus on the things that canappeal broadly to both
Republicans and Democrats andindependents.
Because if you're going tochange the system, whether
through a constitutionalamendment or the statutory
pieces, you need to have a broaddegree of consensus.
And then once we've fixed theincentives that are inherent in
the system, then it's possibleto fight over the actual policy
(03:53):
levers that you want to change.
I'm a constitutionalconservative.
I'm very much in favor ofreducing the size and scope of
the federal government,something much closer to the
enumerated powers in theconstitution.
But in order to have any chanceof getting toward that, we have
to have a budget system and aCongress that works.
And so this book is mostly aboutbalancing the budget and the
institutions that will allowthose conversations to take
(04:16):
place.
It's not as much about thesubstance of how do you change
this or that program.
SPEAKER_01 (04:21):
There's something you talk about that's
particularly harmful with theborrowing we're doing, and that
is this idea ofintergenerational theft.
Obviously, these problems arenot just intergenerational.
They're going to impact peopleliving today, but they're going
to be particularly difficult forthe future.
SPEAKER_00 (04:36):
That's right.
And there's a moral component aswell as a practical component.
The moral component is what yousay, the intergenerational
theft.
One of the things that happensin a political system like ours
is that those who are wellorganized to lobby for their
interests, what are often calledthe concentrated beneficiaries
of whatever policy intervention,they pursue it and they're very
(04:57):
aggressive and they're veryskilled.
And they more often than not getit when they're up against the
diffuse public interest.
I talk about the sugar programvery briefly in there about how
that costs every American about$10 per year.
But of course, that's many, manybillions of dollars for the
relative handful of people whoproduce and refine sugar in this
country.
When you think about that asapplied to an intergenerational
(05:20):
context, you're talking aboutmoving some of the costs of
today's government services intothe future who are less
organized, less able to pushback on that.
Some of those people aren't evenold enough to vote.
Some of them are, but youngergenerations tend to vote in
lower proportions than oldergenerations.
So we really do need to have aninstitutional fix to this.
(05:41):
On the more practical side,yeah, we've already seen what
happens when the Federal Reservegets dominated by Congress and
the executive branch in terms ofspending and borrowing too much.
We saw that, you know, duringthe later part of the pandemic.
And so we have higher inflationand higher interest rates
because of that.
We're also experiencing uhslower economic growth, less
opportunity, less prosperity,because that government debt,
(06:04):
just the service of it, iscrowding out.
Funds that otherwise could beused to invest in things that
make people more productive andraise our standard of living.
It makes our politics worse.
A lot of the fighting that we'reseeing now is because of this
clash over relatively scarceresources to be able to do new
things with.
And then, of course, the risk ofa debt crisis is a pretty big
factor as well.
(06:24):
And the higher the debt burdengoes, the greater the risk is.
SPEAKER_01 (06:27):
Well, let's talk about that.
You quote Paul Winfrey of theEconomic Policy Innovation
Center's warning that we onlyhave a decade until we pass the
event horizon and debt crisisbecomes inevitable.
Another source you quote givesus only about two years until a
quote fiscal crisis andinsolvency and ultimately
default a short time later.
(06:48):
Why doesn't this situation getmore attention, either from the
president, the Congress, or themedia?
It seems like it's just brushedunder the rug and ignored.
SPEAKER_00 (06:58):
When I spend time on Capitol Hill, you wouldn't
believe the number of timeswhere people say, I care about
this, my boss cares about this,but no one else does.
And I tell them, well, I hearthat a lot from folks on Capitol
Hill, so why don't you all gettogether and, you know, do
something about it?
And there is some of that that'sbeen going on in both this
position at Americans forProsperity and my previous one
(07:18):
at Committee for a ResponsibleFederal Budget, getting members
connected with each other thatcare about these things and want
to fix them is an important partof the job.
The thing is, though, that a lotof members do want to address
this.
They just don't know how to doit and make it be politically
survivable.
Social Security is known as thethird rail of American politics.
A lot of times when peoplepropose some big Social Security
(07:41):
reform plan, it's when they'vealready decided to retire.
So they don't really facepolitical consequences for it.
And there are things thatmembers have said that have been
twisted oftentimes to make itsound like they just want to
shut all these programs downwithout any consideration of
costs and benefits.
So it is tough.
And the challenge is how do youmake it possible for Congress to
(08:01):
do the things that they knowthey need to do that is tough
but necessary, but also make itpossible to keep coming back as
members of Congress?
Because if they don't, thenobviously someone who is less
capable will take their place,right?
In their minds.
Right.
That's how they think.
SPEAKER_01 (08:16):
I know that Social Security is on a trajectory that
will lead, may lead to acrossthe board cuts and benefits
under current law at least.
Medicare, Medicaid arefinancially unable to meet their
obligations in the future.
So what does default orinsolvency look like if we reach
that point?
SPEAKER_00 (08:35):
Well, we don't know exactly what it would look like,
but we have clues looking fromother countries that have had
troubles.
So a lot of people think thatthe first sign of trouble would
be a bad bond auction.
The Treasury Department isalways putting up auctions for
this amount for this term, thisyield of debt.
The primary dealers or the 24, Ithink, market makers for federal
(08:57):
government debt, they'll comeand buy that.
I think you can buy directlyfrom the Treasury as well.
But if they have a low, what'scalled bid-to-cover ratio, so
that means the amount of bidsrelative to the amount that is
available for auction.
If that's lower than what it'straditionally seen to be a
healthy number, then peoplemight start to get skittish.
The next round of bids mightcome in for a higher interest
(09:18):
rate for that or a similar lotof auctions, and then things
would start to unravel fromthere.
It could come about becausewe're already in a recession,
the primary dealers and otherfinancial institutions are under
pressure, and then we start tosee confidence eroding in the
system.
And this can happen incrediblyfast.
It's not something that wouldtake place over a number of
years or even months.
It could be a couple of days.
(09:39):
Silicon Valley Bank failed, justsort of like a flash thing that
happened, or the 2008 financialcrisis.
That kind of simmered for alittle while and then kind of
went off the deep end inSeptember of 2008.
So it could be we'd have alittle bit more time, but when
you're thinking about policychanges, oftentimes they need to
start small and phase in.
And so the fallout from thatcould be that we would see
(10:02):
massive tax increases, majorindiscriminate spending cuts.
And some of those cuts would bejustified if phased in, but some
of them could actually lead tosignificant security vacuums
abroad if we end up pulling ourtroops out of places in order to
save money.
We've seen that times ofeconomic distress give rise to
unhealthy politics sometimes.
And so we might even seechallenges either from the left
(10:23):
or the right to the establishedway of, you know, doing our
democratic governance system.
SPEAKER_01 (10:28):
Aaron Powell You advocate in here a balanced
budget amendment, but you'veshown here as well that support
for a balanced budget amendmentis pretty strong among the
public.
Polls show both Democrats andRepublicans and independents
overwhelmingly support some sortof constitutional amendment to
balance the budget.
They've been introduced quiteoften over the last fifty years
by members of Congress,occasionally get a vote.
(10:50):
In fact, I think once or twiceit's passed with enough of a
threshold, at least in one bodyof Congress.
States have called for aconstitutional convention on it.
But yet fifty years of verylittle progress after 150 years
of practice where we paid offdebts during peacetime when we
occurred them.
So what do you think has changedthat might help push along this
(11:12):
amendment?
SPEAKER_00 (11:13):
Or back to unpleasant fiscal circumstances.
We've got the interest cost as ashare of revenue.
SPEAKER_01 (11:18):
Which is what now?
SPEAKER_00 (11:20):
It's about 18%, which is about where it was
during the bipartisan freakoutduring the 1980s and 1990s,
where we actually did see abalanced budget amendment passed
the Senate for the first andonly time in 82, I believe,
1982, and then the House in1995, first and only time.
So that has changed.
Our position in the world haschanged.
(11:41):
We were a unipolar world afterthe end of the Cold War, and now
we're in multipolar competition,especially with China, but also
with some regional powers likeRussia and Iran.
The biggest thing is that we'veseen how they have spread and
worked in so many countries.
We've had that experience in thestates as well.
In the 1840s and 1870s, inparticular, U.S.
(12:02):
states got balanced budgetrequirements of some sort, but
they weren't as widespreadaround the world until maybe the
last 30 years.
They went from being relativelyrare to being pretty ubiquitous.
In fact, the US is one of ahandful of prosperous countries
that does not have aconstitutional balance rule.
And we have better versions ofthose at this point.
(12:24):
The old model was to do annualbalance, and that's a problem
because revenue is just sovolatile from year to year that
if you try to match spending upwith that, you create a lot of
policy instability.
The answer is to smooth it outand just balance over the medium
term, balance over the businesscycle, balance on a structural
basis like Switzerland is doingand Indiana and lots of other
places.
So there are different versionsnow that either prescribe that
(12:46):
or uh would allow that.
SPEAKER_01 (12:48):
You call the version you favor a principles-based
balanced budget amendment.
Explain the outlines of that.
SPEAKER_00 (12:54):
That was the second balanced budget amendment
proposal that I drafted when Iwas a congressional staffer.
The first one was the businesscycle balance budget amendment.
Both are very good.
They avoid the annual balanceproblem and a number of other
ones with the BBAs that havebeen introduced otherwise.
And the principles-based balancebudget amendment, I do favor
that, but only a little bit overthe business cycle balance
budget amendment.
(13:15):
The core of it is that it is aset of principles, much like
what you find in theConstitution already, that leave
broad scope for implementinglegislation.
Most of the Constitution ispretty vague.
You've got this provision thatCongress shall have power to
raise and support armies.
And then Congress has passedoodles and noodles of statutes
to fill in the gaps.
And that's the same sort ofthing with fiscal rules.
(13:36):
We have the appropriationspower, not really spelled out in
the Constitution, but we've gota lot of law and case law on
that now that clarify what thatis.
So the principles-based BBA, thebasic idea is that revenues and
expenditures shall be balanced,which may occur over more than
one year.
There's a definitional thingthat lets that balance be either
full balance or primary balance,which doesn't count interest
(13:58):
expense, and it's about half asmuch deficit reduction as
getting to full balance.
And then there's two-thirds ofCongress can spend for
emergencies.
And then after the 38th statewould ratify the amendment, then
Congress would have 10 years toreach balance, however defined.
There's a lot of questions thatraises, and that's what
implementing legislation is for.
SPEAKER_01 (14:17):
And that implementing legislation is very
important, right?
Oh, yes, absolutely.
How they go about doing it.
SPEAKER_00 (14:22):
Chapter nine in the book is all about implementing
legislation.
Definitions and terms are a lessinteresting but important part
of that.
But then the mechanics are partof that as well, as well as
automatic enforcement, becauseyou can't just rely on Congress
to do what the Swiss do, whichis just follow the law because
it's the law.
SPEAKER_01 (14:39):
How do you get Congress not to ignore it?
SPEAKER_00 (14:41):
You have to make it in their interest.
Right now we have a budgetprocess that members don't
really like to do.
It doesn't really include themthat much, and they're not
successful in completing it ontime, just the 12 appropriations
bills.
But Chapter 10 talks about apiece of legislation called the
Comprehensive CongressionalBudget Act, which will get all
of the committees involved inmanaging their piece of the
(15:02):
budget.
So it'd not just be theappropriated spending, the
discretionary spending, which isabout a quarter of spending.
It'd be 100% of spending, 100%of revenue, tax expenditures,
all the committees would beinvolved.
And that's the sort of thingthat we've seen in a number of
states where members actuallywant to do that process because
they have things that they canchampion and build coalitions
on.
(15:22):
People don't come here to berubber stamps.
They come to DC to belegislators and to like advance
ideas that they care about.
SPEAKER_01 (15:28):
Has anyone introduced this legislation,
either amendment this term?
SPEAKER_00 (15:33):
The principles-based balance budget amendment has
been reintroduced by CongressmanNathaniel Moran from East Texas.
Last Congress it was introducedby him as well as then Senator,
now governor, Mike Braun.
And before that, it wasintroduced by Representative
Dave Bratt from Virginia.
I was his legislative directorwhen we put it together.
SPEAKER_01 (15:51):
And in the past, you've had some bipartisan
support for it.
Yep.
You have some now?
SPEAKER_00 (15:56):
Not currently.
You know, these things take timeto rebuild.
We actually haven't had thedegree of bipartisanship on
balanced budget amendments andfiscal policy changes that we
used to have.
It used to be broadly bipartisanfrom the first introductions in
1935 and 1936 all the waythrough.
It started to change with thecontract for America in 94.
(16:17):
And I guess after that energywaned, it became something that
didn't get a whole lot ofattention and was rebooted
during the Tea Party era,something that Republicans are
more keen on than Democrats.
But this is something thatshould appeal to everyone.
And so we need to get in thebusiness of rejuvenating that
bipartisan interest.
SPEAKER_01 (16:34):
And the fact that you give Congress 10 years to
comply if the balanced budgetamendment is adopted by the 38th
state, does that mean that wedon't address this problem until
after this fiscal crisis is uponus?
SPEAKER_00 (16:46):
Well, hopefully we can avoid the fiscal crisis.
If we do have one, thenhopefully there's enough pieces
here and in other places thatthings are on the shelf and
ready to go to help us recoverfrom it as quickly as possible.
But the core of the implementinglegislation that I talk about is
a bill introduced again by thenSenator Mike Braun and House
Majority whip Tom Emmer.
(17:07):
It's called the ResponsibleBudget Targets Act.
That would set up a glide pathor a glide slope to gradually
transition from where we are nowto a primary balance over the
10-year window.
And you don't have to wait forthe 38th state to ratify.
You can get started on thisright away.
And then that makes the 10 yearsthat much easier.
But when you have that crediblecommitment that you're getting
your house in order, it's goingto take time.
(17:29):
And maybe you even enact most ofthe policies on the front end so
people can see that they willadd up to accomplishing that
goal by the end of the 10-yearwindow, that that will calm the
nerves of the markets and helpus avoid the debt crisis.
SPEAKER_01 (17:41):
And I think I read in your book that all 50 states,
with the exception of Vermont,have some sort of either
statutory or constitutionalrequirement of a balanced
budget.
SPEAKER_00 (17:50):
Or a combination.
Yeah.
And a lot of them came frommistakes that the states made
over time.
The 1820s and 1830s, northernstates did a lot of canal
building and they issued a lotof debt to accomplish that.
You know the Erie Canal, ofcourse, but they were all
throughout the northern states.
And then in the South, theyborrowed a lot to capitalize
banks.
Now, banks in those times wereunit banks, just one location
(18:13):
for banks.
And so that made them incrediblyvulnerable to local economic
disruptions.
And then when the panic of 1837happened, a lot of problems all
throughout the country.
Eight states and the territoryof Florida defaulted on their
debts, at least partly by 1841.
And then the bond buyers arelike, if we're going to lend to
you again, you need to putsomething in place so that never
happens again.
(18:33):
Nobody likes to lose theirshirt.
And even the states that didn'tdefault went through a really
rough time.
A lot of them decided that wasthe appropriate time to do that.
And then also during thepost-Civil War reconstruction
era, that was another wave, morewhen local governments got over
their skis, but also some stategovernments at that time.
SPEAKER_01 (18:58):
And then of course the convention would have to
adopt something and it wouldhave to go through Congress.
A number of states have calledfor a constitutional amendment
to pass a balanced budgetamendment, right?
SPEAKER_00 (19:07):
Absolutely.
SPEAKER_01 (19:08):
Can they limit it to just looking at a balanced
budget amendment if they havesuch a convention?
SPEAKER_00 (19:12):
Well, we don't know from precedent, but there are
some precedents that seem toapply.
SPEAKER_01 (19:17):
Well, I guess we had one precedent and they threw out
the Articles of Confederationand rewrote a new constitution.
SPEAKER_00 (19:23):
Aaron Powell So that's often claimed, right?
But that was not under thecurrent constitutional
structure.
I think one of the keyprotections is that it would
take 38 states to ratifysomething.
So if the convention went wayoff the rails, unless you had
that many state legislatures belike, hey, we're willing to go
there too, then you're unlikelyto have it.
There are a bunch of states thathave put restrictions on what
(19:44):
their commissioners, the namesof the people that would be
attending the convention, whatthe commissioners would be
allowed to discuss.
And in fact, with the conventionthat gave us the constitution,
there was one state, I think itwas Rhode Island, that didn't
send anyone because there was astate law, I believe, that
wouldn't let them do somethingas voluminous as what ended up
happening.
(20:04):
There are some likelyrestraints.
Are they sufficient?
I mean, we won't really knowuntil we find out.
One thing that's interesting isthat there's a group of people
that have been doing historicalresearch and they claim that by
1979, the requisite number ofstates, actually more than that,
had applied for a convention andCongress didn't call it.
(20:26):
And then they just publishedsome new research recently
saying that more recently thatthreshold has been exceeded as
well.
And the claim that they make isthat you can combine plenary
convention calls, so not foranything in particular, with
those for, you know, a fiscalresponsibility amendment or
something like that.
And for a long time I thought,no, it had to be, you know, for
a particular thing.
(20:47):
But going back and readingArticle V of the Constitution,
it doesn't specify that in anyway.
It just says when two-thirds ofstate legislatures have applied
for a convention, then Congresshas to call one.
So there's some potentiallitigation that we could see on
this topic that these folks aretrying to organize.
And well, we'll see whathappens.
I haven't given up hope onCongress, but there's this other
thing moving as well.
SPEAKER_01 (21:08):
And if the other thing's moving, it might get
Congress to act on this balancedbudget amendment.
Yep.
You also in here, of course,quote several of the founding
fathers, James Madison andThomas Jefferson, who speak out
against debt, against governmentborrowing and for keeping the
budget in balance.
Why do you think they neglectedto put something like that in
(21:28):
the Constitution?
You have any speculation there?
Did they just never imagine thegovernment would?
But we had debt at the time.
SPEAKER_00 (21:34):
We did have a lot of debt at the time, and it was a
and a really important deal in1790, so soon after the
Constitution was adopted, forthe federal government to absorb
states' revolutionary war debtin exchange for that was for
Hamilton, and what he got forJefferson and Madison was
putting DC on the Potomac,because of course they were
Virginians.
They were familiar with thecrippling nature of debt.
(21:55):
They'd seen it with England andFrance.
They had borrowed so much that50 to 60% of their revenue was
going just to debt service.
So they didn't want that here.
But I think they expected thatthe federal government would be
one of limited and enumeratedpowers, and they didn't imagine
that it could do this.
Plus, the norm was strong thatduring good times you pay down
(22:16):
the debt, you grow the economy.
As long as the economy isgrowing faster than the debt,
you're reducing the debt burden.
And we didn't actually seem toneed one until the 1930s.
So Jefferson, you know, one timeopined in a letter that he
wished there could be anamendment to the Constitution
prohibiting the ability toborrow.
And then, of course, when hebecame president, he bought the
Louisiana Purchase, right?
(22:36):
It was a good deal.
And borrowed money to borrow forthat.
It doesn't actually make senseto prohibit the federal
government from borrowing.
Not being able to directly raisefunds either from taxes or from
borrowing, was a key problemwith the Articles of
Confederation.
The challenge is to limit theamount and kind of debt that can
(22:56):
be accumulated and then have anidea to repay it as soon as
practicable.
It's kind of like that 38special song, Hold on loosely,
but don't let go.
If you cling too tightly, you'regoing to lose control.
It's kind of like that.
Like if you try to like defineeverything super, super tightly,
then that doesn't really leaveroom for the politics to work.
And you need politics in apolitical system.
SPEAKER_01 (23:16):
As we record this, Congress is again facing a
possibility of a shutdown of thegovernment because it can't
reach an agreement.
And I guess Democrats areholding out from what the
Republicans want.
There was a piece today in theWall Street Journal by Ron
Johnson, Senator from Wisconsin,about legislation he's proposed
to avoid shutdowns.
Did you get a chance to see thatand have any thoughts about
(23:36):
that?
SPEAKER_00 (23:37):
Yeah, I did.
Totally agree with him thatshutdowns should not be a thing
that are possible.
And in fact, the Carteradministration created
shutdowns.
They unilaterally reinterpreteda law from the 1800s that for 90
years Congress was totally finewith appropriations continuing
until they got newappropriations done.
And so it's time for Congress tojust reverse that.
(23:58):
And Senator Johnson has a bill,it's a good bill.
There's also the PreventGovernment Shutdowns Act by
Senator Langford from Oklahomaand House Budget Committee
Chairman Jody Arrington fromTexas.
Both are really good options.
One thing that I really likeabout the Prevent Government
Shutdowns Act is that it wouldkeep members of Congress, their
staff, and the White Housebudget office staff in DC until
(24:20):
new appropriations got doneevery year.
One of the things that SenatorLangford has talked about is
that members are different whenit comes to compensation.
Like some of them are verywell-to-do and some of them are
not, but they're all equal whenit comes to time.
So if they're stuck here,focused on getting the process
done, then you know that hitsall of them pretty much equally.
(25:14):
And it sort of strikes me asbeing the reverse of the 2013
fight over Obamacare and led tothat shutdown that year.
I was actually a congressionalstaffer working on budget
issues, and I got furloughedbecause they're like, oh, it's a
political decision.
I told my boss then that we werenot going to defund Obamacare.
Obama was still the president.
We weren't going to get 60 votesin the Senate for that.
(25:36):
I think Harry Reid was still amajority leader at that point.
These shutdown fights, you know,they don't actually give anybody
leverage.
It's just a lot of brinksmanshipthat ends in something that's
pretty close to the status quo.
Nobody really walks away from ashutdown fight saying, haha, we
got everything we wanted,because that's just not how this
works.
SPEAKER_01 (25:52):
What are some things you wish the American people
knew that perhaps they don'twhen it relates to government
spending, the tremendousborrowing, the need for the
balanced budget amendment?
Or are Americans very wellinformed on this?
SPEAKER_00 (26:06):
I think people think that Congress is more set up for
success than it is.
We have the shutdownbrinksmanship that we were just
talking about.
That's not something that shouldexist.
And that's something that weactually think could get fixed
this fall because of the fightsthat are going on.
But we talked before about thefact that Congress doesn't
actually do a budget.
Oftentimes people will say,well, when's the last time that
(26:29):
Congress, you know, did a budgeton time?
I said, on time or a budget?
Like Congress doesn't do abudget.
It never has.
And I think that is sort of likeinertia.
We have these points in ourhistory where problems emerge
and then we try to fixsomething, but unless you've
really thought through it foryears in advance, the solutions
that you have on hand when themoment of opportunity comes
(26:50):
aren't really going to sufficefor fixing the long-term
problem.
So this is what we experiencedwhen I was a new staffer on
Capitol Hill in 2011.
We had all this incredible TeaParty energy.
Democrats were willing to workwith Republicans on fixing some
of this, but we didn't reallyhave anything that was sketched
out that made a lot of sense.
So thankfully, this time around,we've seen a lot of people,
(27:11):
myself included, that have beenworking with lots of folks to
try to build the pieces thatwill fix these problems and wait
for the window of opportunity toopen so that we can just sort of
plug them in where they need togo.
One really important one is theComprehensive Congressional
Budget Act that we talked about.
We do not have the kind of smallD Democratic Congress that we
should have.
It's not as bottom-up as itshould be.
(27:33):
Members don't have the equalrights to offer their ideas and
see if their colleagues agreewith them.
And so there's just like so fewopportunities to really be a
legislator.
So if we were able to have abetter budget process and a
better authorizing process, thenwe could have so much more room
for members of Congress to comefrom wherever they're from and
represent the interests of thepeople they represent before
(27:54):
their colleagues and see, youknow, where they can find
agreement.
There's not enough democracy inCongress.
Of course, Congress hasauthorized doing way too many
things at much too greatexpense.
That all needs to shrink.
But you know, there's just notan opportunity for that to
happen right now.
SPEAKER_01 (28:10):
Your book includes two pairs of words that I think
are important.
Fiscal democracy is one of them,and the other is sound
governance.
Your proposal really is builtaround the fact that if we could
get a balanced budget amendment,like the principles-based one,
into the Constitution, it wouldlead more toward fiscal
democracy and sound governance.
So I think a good note to endthis conversation on would be to
(28:34):
talk a little bit about whatthat looks like.
If a balanced budget amendmentis adopted, does it improve the
way we're governed and howCongress operates?
SPEAKER_00 (28:43):
I very much believe so.
We have basically two goals witha balanced budget amendment.
One is fiscal responsibility.
That's the obvious one.
The other one is catalyzingCongress to think deeply about
how it's set up and how it couldbe better.
Some of that's fiscal.
But the truth is that mostmembers of Congress are
interested in controllingdeficits and debt, but they're
(29:05):
more interested in lots of otherthings.
They're most interested in beingrelevant as a member of
Congress, as a legislator,someone who can bring solutions,
bring ideas, and the currentprocess shuts that down.
If we were to adopt some ofthese budget best practices,
comprehensive budget, noshutdowns, heck, don't let the
president give the State of theUnion until you get the
(29:25):
president's budget request andthe national security strategy
from him.
Those are all good things thatwould help Congress succeed in
their job of representing themany, many interests,
geographic, ideological,whatever else, of the American
people.
Because the point of alegislature is to discover
better ways of mutuallyaccommodating each other.
(29:45):
We have a problem in thiscountry right now of political
violence, or the normalizationof it as well.
If we were to see legislatorswho disagree deeply on so many
things coming together to agreeon this piece here, that piece
there.
This overall budget, then thatshows that we see things
differently, but we can worktogether for our mutual benefit,
(30:08):
move the country forward, addvalue for the people.
That just brings the temperaturedown.
There will always be crazies outthere.
But the hope is that there willbe less radicalization and more
of a coming back together whereeven if you see the world
differently from someone else,you still recognize their
inherent dignity and worth as ahuman being, and you're more
(30:29):
willing to have conversationswith them.
SPEAKER_01 (30:31):
Are you optimistic that you'll see a balanced
budget amendment in theConstitution in your lifetime?
SPEAKER_00 (30:36):
Oh, absolutely.
My lifetime?
Yes.
SPEAKER_01 (30:38):
Well, I mean, uh, for those who are not watching
this on video but listening, uhKurt's probably about 50, late
40s.
Okay.
Yeah, yeah.
Mid-40s.
Mid forties.
Okay.
So his lifetime is at leastanother 40 years.
We hope.
SPEAKER_00 (30:52):
So yeah, I think we will almost certainly have one
in that period of time.
I mean, you mentioned back atthe beginning that Paul Winfrey
thinks we've got a decade to getour house in order.
Ray Dalio, who is a big timeinvestor, recently published a
book as well, um, how countriesgo broke.
He thinks we've got three yearsto turn it around.
We've got a clock, we've got toget our house in order.
Hopefully, we can avoid the debtcrisis and all the pain that
(31:14):
that would cause.
But if we can't, we have some ofthe pieces that we need to
recover from that.
Historically, states and othercountries, when they've gotten
themselves into trouble, they'vedone a serious policy or reform
package, and they've alsoupgraded their budget
institutions, including throughbalanced budget or other rules.
So I think that's coming our wayprobably in the next decade.
SPEAKER_01 (31:36):
Well, and you have a section in this book on
Switzerland and what they did torectify the problems they were
having.
And you talk about the EU andother areas where this has been
successful.
SPEAKER_00 (31:45):
So Yeah, Switzerland was in a tough place in the 90s,
and then through a package ofpolicy reforms and institutional
reforms, the Swiss debt break isthe the biggest part of that.
They turned it around.
Same with Sweden.
Sweden got into a lot of troublein the early 1990s, and they are
one of the best governing statesin the world today.
A little bit more expansive thanwould be my preference, but you
(32:07):
know, they they make it work.
SPEAKER_01 (32:08):
Yeah.
Well, Kurt, thank you very muchfor joining me today on the
Liberty and Leadership Podcast.
Thank you for writing this greatbook.
Thank you and for devoting somuch of your time and talent to
trying to bring about fiscalsolvency and uh balanced budget
amendment in this country.
SPEAKER_00 (32:23):
Well, thank you so much for having me.
It's a joy to get the word out,and I appreciate you uh hearing
me out.
SPEAKER_01 (32:28):
Well, we're proud to call you a TFAS alum.
Thank you.
Thanks so much.
It was a great program.
Thank you for listening to theLiberty and Leadership Podcast.
If you have a comment orquestion, please drop us an
email at podcast at tfas.org.
And be sure to subscribe to theshow on your favorite podcast
app and leave a five starreview.
(32:50):
Liberty and Leadership isproduced at Podville Media.
I'm your host, Roger Reim, anduntil next time, show courage in
things large and small.
Welcome to the Liberty and Leadership Podcast,
a conversation with TFAS alumni,faculty, and friends who are
making an impact today.
I'm your host, Roger Reen.
My guest today is someone I'vehad on our podcast previously.
Kurt Couchman is Senior Fellowin Fiscal Policy at Americans
(00:22):
for Prosperity.
He's the author of a great newbook, Fiscal Democracy in
America (00:27):
How a Balanced Budget Amendment Can Restore Sound
Governance.
That will be the topic of mostof our conversation today.
Kurt is an expert on federalbudget policy, having worked for
several members of Congress andfor several organizations that
work on budget priorities.
He's regularly called on frommajor television and radio to
(00:47):
comment on the budget and haswritten pieces for a number of
national publications.
Kurt is also a TFAS alum, havingattended our undergraduate
program one summer when he wasin college, and also having done
our public policy fellowsprogram.
In 2003, we recognize Kurt withour Kevin Burkett Alumni Service
(01:08):
Award.
Kurt, thanks for joining me onthe Liberty and Leadership
Podcast today.
SPEAKER_00 (01:11):
Thank you so much for having me.
I'm really excited to be hereand to talk about fiscal
democracy in America.
SPEAKER_01 (01:16):
I was thinking as I read it that young people today
are taught in school that thereis an existential threat that
mankind faces, and it tends tobe environmental policy, climate
change, things like that.
And I'm not a scientist, so Ican't comment on those.
But it seems to me theexistential threat that you talk
about is a real one, and that isfiscal insolvency and the
(01:39):
problems we have with growingnational debt being over 100% of
GDP, plus all the promises we'vemade.
Could you talk a little bitabout the situation that led you
to consider supporting abalanced budget amendment or
fiscal situation?
SPEAKER_00 (01:54):
Yeah, absolutely.
The story goes back to 2010,during the heyday of the Tea
Party times, when the debtburden was already high and
rising.
And I had been in grad school atGeorge Mason University studying
economics, took a class withPete Betke in constitutional
economics about the rules of thegame.
And I got interested in, youknow, how do we get the budget
(02:15):
under control?
And I happened to be in aconversation between David
Malpus, who was then running forthe U.S.
Senate, and Bill Niskanon, whowas then one of the board
members and senior fellow at theCato Institute.
I was doing government affairsthere.
And Bill responded to a questionfrom Malpus about balanced
budget amendments, and that kindof set me down a road about like
(02:36):
how do you design them and allof that.
But it was something that was inthe air.
The question of we have thespending growing faster than the
economy or the debt growingfaster than the economy.
And at some point there's goingto be a problem.
We thought the problem was goingto arrive at a much lower level
of debt than it has, but justlike Peter and the wolf, at the
end of the story, the wolf doescome.
And so we do need to get controlof this, or we face some pretty
(02:59):
dramatic negative consequences.
SPEAKER_01 (03:02):
There's the problem of the debt, of course.
And you talk about how that canimpact economic growth and is
impacting economic growth.
There's also the problem of thetotal burden of government
spending, whether it's collectedthrough borrowing or taxes.
So I think the debate in thepast from Milton Friedman and
other experts has been do we aimto limit the total amount of
(03:23):
spending, say as a percentage ofGDP, or do we aim to push for a
balanced budget that could bebalanced through higher taxes?
SPEAKER_00 (03:30):
Yeah, the way that I approached this book project was
to focus on the things that canappeal broadly to both
Republicans and Democrats andindependents.
Because if you're going tochange the system, whether
through a constitutionalamendment or the statutory
pieces, you need to have a broaddegree of consensus.
And then once we've fixed theincentives that are inherent in
the system, then it's possibleto fight over the actual policy
(03:53):
levers that you want to change.
I'm a constitutionalconservative.
I'm very much in favor ofreducing the size and scope of
the federal government,something much closer to the
enumerated powers in theconstitution.
But in order to have any chanceof getting toward that, we have
to have a budget system and aCongress that works.
And so this book is mostly aboutbalancing the budget and the
institutions that will allowthose conversations to take
(04:16):
place.
It's not as much about thesubstance of how do you change
this or that program.
SPEAKER_01 (04:21):
There's something you talk about that's
particularly harmful with theborrowing we're doing, and that
is this idea ofintergenerational theft.
Obviously, these problems arenot just intergenerational.
They're going to impact peopleliving today, but they're going
to be particularly difficult forthe future.
SPEAKER_00 (04:36):
That's right.
And there's a moral component aswell as a practical component.
The moral component is what yousay, the intergenerational
theft.
One of the things that happensin a political system like ours
is that those who are wellorganized to lobby for their
interests, what are often calledthe concentrated beneficiaries
of whatever policy intervention,they pursue it and they're very
(04:57):
aggressive and they're veryskilled.
And they more often than not getit when they're up against the
diffuse public interest.
I talk about the sugar programvery briefly in there about how
that costs every American about$10 per year.
But of course, that's many, manybillions of dollars for the
relative handful of people whoproduce and refine sugar in this
country.
When you think about that asapplied to an intergenerational
(05:20):
context, you're talking aboutmoving some of the costs of
today's government services intothe future who are less
organized, less able to pushback on that.
Some of those people aren't evenold enough to vote.
Some of them are, but youngergenerations tend to vote in
lower proportions than oldergenerations.
So we really do need to have aninstitutional fix to this.
(05:41):
On the more practical side,yeah, we've already seen what
happens when the Federal Reservegets dominated by Congress and
the executive branch in terms ofspending and borrowing too much.
We saw that, you know, duringthe later part of the pandemic.
And so we have higher inflationand higher interest rates
because of that.
We're also experiencing uhslower economic growth, less
opportunity, less prosperity,because that government debt,
(06:04):
just the service of it, iscrowding out.
Funds that otherwise could beused to invest in things that
make people more productive andraise our standard of living.
It makes our politics worse.
A lot of the fighting that we'reseeing now is because of this
clash over relatively scarceresources to be able to do new
things with.
And then, of course, the risk ofa debt crisis is a pretty big
factor as well.
(06:24):
And the higher the debt burdengoes, the greater the risk is.
SPEAKER_01 (06:27):
Well, let's talk about that.
You quote Paul Winfrey of theEconomic Policy Innovation
Center's warning that we onlyhave a decade until we pass the
event horizon and debt crisisbecomes inevitable.
Another source you quote givesus only about two years until a
quote fiscal crisis andinsolvency and ultimately
default a short time later.
(06:48):
Why doesn't this situation getmore attention, either from the
president, the Congress, or themedia?
It seems like it's just brushedunder the rug and ignored.
SPEAKER_00 (06:58):
When I spend time on Capitol Hill, you wouldn't
believe the number of timeswhere people say, I care about
this, my boss cares about this,but no one else does.
And I tell them, well, I hearthat a lot from folks on Capitol
Hill, so why don't you all gettogether and, you know, do
something about it?
And there is some of that that'sbeen going on in both this
position at Americans forProsperity and my previous one
(07:18):
at Committee for a ResponsibleFederal Budget, getting members
connected with each other thatcare about these things and want
to fix them is an important partof the job.
The thing is, though, that a lotof members do want to address
this.
They just don't know how to doit and make it be politically
survivable.
Social Security is known as thethird rail of American politics.
A lot of times when peoplepropose some big Social Security
(07:41):
reform plan, it's when they'vealready decided to retire.
So they don't really facepolitical consequences for it.
And there are things thatmembers have said that have been
twisted oftentimes to make itsound like they just want to
shut all these programs downwithout any consideration of
costs and benefits.
So it is tough.
And the challenge is how do youmake it possible for Congress to
(08:01):
do the things that they knowthey need to do that is tough
but necessary, but also make itpossible to keep coming back as
members of Congress?
Because if they don't, thenobviously someone who is less
capable will take their place,right?
In their minds.
Right.
That's how they think.
SPEAKER_01 (08:16):
I know that Social Security is on a trajectory that
will lead, may lead to acrossthe board cuts and benefits
under current law at least.
Medicare, Medicaid arefinancially unable to meet their
obligations in the future.
So what does default orinsolvency look like if we reach
that point?
SPEAKER_00 (08:35):
Well, we don't know exactly what it would look like,
but we have clues looking fromother countries that have had
troubles.
So a lot of people think thatthe first sign of trouble would
be a bad bond auction.
The Treasury Department isalways putting up auctions for
this amount for this term, thisyield of debt.
The primary dealers or the 24, Ithink, market makers for federal
(08:57):
government debt, they'll comeand buy that.
I think you can buy directlyfrom the Treasury as well.
But if they have a low, what'scalled bid-to-cover ratio, so
that means the amount of bidsrelative to the amount that is
available for auction.
If that's lower than what it'straditionally seen to be a
healthy number, then peoplemight start to get skittish.
The next round of bids mightcome in for a higher interest
(09:18):
rate for that or a similar lotof auctions, and then things
would start to unravel fromthere.
It could come about becausewe're already in a recession,
the primary dealers and otherfinancial institutions are under
pressure, and then we start tosee confidence eroding in the
system.
And this can happen incrediblyfast.
It's not something that wouldtake place over a number of
years or even months.
It could be a couple of days.
(09:39):
Silicon Valley Bank failed, justsort of like a flash thing that
happened, or the 2008 financialcrisis.
That kind of simmered for alittle while and then kind of
went off the deep end inSeptember of 2008.
So it could be we'd have alittle bit more time, but when
you're thinking about policychanges, oftentimes they need to
start small and phase in.
And so the fallout from thatcould be that we would see
(10:02):
massive tax increases, majorindiscriminate spending cuts.
And some of those cuts would bejustified if phased in, but some
of them could actually lead tosignificant security vacuums
abroad if we end up pulling ourtroops out of places in order to
save money.
We've seen that times ofeconomic distress give rise to
unhealthy politics sometimes.
And so we might even seechallenges either from the left
(10:23):
or the right to the establishedway of, you know, doing our
democratic governance system.
SPEAKER_01 (10:28):
Aaron Powell You advocate in here a balanced
budget amendment, but you'veshown here as well that support
for a balanced budget amendmentis pretty strong among the
public.
Polls show both Democrats andRepublicans and independents
overwhelmingly support some sortof constitutional amendment to
balance the budget.
They've been introduced quiteoften over the last fifty years
by members of Congress,occasionally get a vote.
(10:50):
In fact, I think once or twiceit's passed with enough of a
threshold, at least in one bodyof Congress.
States have called for aconstitutional convention on it.
But yet fifty years of verylittle progress after 150 years
of practice where we paid offdebts during peacetime when we
occurred them.
So what do you think has changedthat might help push along this
(11:12):
amendment?
SPEAKER_00 (11:13):
Or back to unpleasant fiscal circumstances.
We've got the interest cost as ashare of revenue.
SPEAKER_01 (11:18):
Which is what now?
SPEAKER_00 (11:20):
It's about 18%, which is about where it was
during the bipartisan freakoutduring the 1980s and 1990s,
where we actually did see abalanced budget amendment passed
the Senate for the first andonly time in 82, I believe,
1982, and then the House in1995, first and only time.
So that has changed.
Our position in the world haschanged.
(11:41):
We were a unipolar world afterthe end of the Cold War, and now
we're in multipolar competition,especially with China, but also
with some regional powers likeRussia and Iran.
The biggest thing is that we'veseen how they have spread and
worked in so many countries.
We've had that experience in thestates as well.
In the 1840s and 1870s, inparticular, U.S.
(12:02):
states got balanced budgetrequirements of some sort, but
they weren't as widespreadaround the world until maybe the
last 30 years.
They went from being relativelyrare to being pretty ubiquitous.
In fact, the US is one of ahandful of prosperous countries
that does not have aconstitutional balance rule.
And we have better versions ofthose at this point.
(12:24):
The old model was to do annualbalance, and that's a problem
because revenue is just sovolatile from year to year that
if you try to match spending upwith that, you create a lot of
policy instability.
The answer is to smooth it outand just balance over the medium
term, balance over the businesscycle, balance on a structural
basis like Switzerland is doingand Indiana and lots of other
places.
So there are different versionsnow that either prescribe that
(12:46):
or uh would allow that.
SPEAKER_01 (12:48):
You call the version you favor a principles-based
balanced budget amendment.
Explain the outlines of that.
SPEAKER_00 (12:54):
That was the second balanced budget amendment
proposal that I drafted when Iwas a congressional staffer.
The first one was the businesscycle balance budget amendment.
Both are very good.
They avoid the annual balanceproblem and a number of other
ones with the BBAs that havebeen introduced otherwise.
And the principles-based balancebudget amendment, I do favor
that, but only a little bit overthe business cycle balance
budget amendment.
(13:15):
The core of it is that it is aset of principles, much like
what you find in theConstitution already, that leave
broad scope for implementinglegislation.
Most of the Constitution ispretty vague.
You've got this provision thatCongress shall have power to
raise and support armies.
And then Congress has passedoodles and noodles of statutes
to fill in the gaps.
And that's the same sort ofthing with fiscal rules.
(13:36):
We have the appropriationspower, not really spelled out in
the Constitution, but we've gota lot of law and case law on
that now that clarify what thatis.
So the principles-based BBA, thebasic idea is that revenues and
expenditures shall be balanced,which may occur over more than
one year.
There's a definitional thingthat lets that balance be either
full balance or primary balance,which doesn't count interest
(13:58):
expense, and it's about half asmuch deficit reduction as
getting to full balance.
And then there's two-thirds ofCongress can spend for
emergencies.
And then after the 38th statewould ratify the amendment, then
Congress would have 10 years toreach balance, however defined.
There's a lot of questions thatraises, and that's what
implementing legislation is for.
SPEAKER_01 (14:17):
And that implementing legislation is very
important, right?
Oh, yes, absolutely.
How they go about doing it.
SPEAKER_00 (14:22):
Chapter nine in the book is all about implementing
legislation.
Definitions and terms are a lessinteresting but important part
of that.
But then the mechanics are partof that as well, as well as
automatic enforcement, becauseyou can't just rely on Congress
to do what the Swiss do, whichis just follow the law because
it's the law.
SPEAKER_01 (14:39):
How do you get Congress not to ignore it?
SPEAKER_00 (14:41):
You have to make it in their interest.
Right now we have a budgetprocess that members don't
really like to do.
It doesn't really include themthat much, and they're not
successful in completing it ontime, just the 12 appropriations
bills.
But Chapter 10 talks about apiece of legislation called the
Comprehensive CongressionalBudget Act, which will get all
of the committees involved inmanaging their piece of the
(15:02):
budget.
So it'd not just be theappropriated spending, the
discretionary spending, which isabout a quarter of spending.
It'd be 100% of spending, 100%of revenue, tax expenditures,
all the committees would beinvolved.
And that's the sort of thingthat we've seen in a number of
states where members actuallywant to do that process because
they have things that they canchampion and build coalitions
on.
(15:22):
People don't come here to berubber stamps.
They come to DC to belegislators and to like advance
ideas that they care about.
SPEAKER_01 (15:28):
Has anyone introduced this legislation,
either amendment this term?
SPEAKER_00 (15:33):
The principles-based balance budget amendment has
been reintroduced by CongressmanNathaniel Moran from East Texas.
Last Congress it was introducedby him as well as then Senator,
now governor, Mike Braun.
And before that, it wasintroduced by Representative
Dave Bratt from Virginia.
I was his legislative directorwhen we put it together.
SPEAKER_01 (15:51):
And in the past, you've had some bipartisan
support for it.
Yep.
You have some now?
SPEAKER_00 (15:56):
Not currently.
You know, these things take timeto rebuild.
We actually haven't had thedegree of bipartisanship on
balanced budget amendments andfiscal policy changes that we
used to have.
It used to be broadly bipartisanfrom the first introductions in
1935 and 1936 all the waythrough.
It started to change with thecontract for America in 94.
(16:17):
And I guess after that energywaned, it became something that
didn't get a whole lot ofattention and was rebooted
during the Tea Party era,something that Republicans are
more keen on than Democrats.
But this is something thatshould appeal to everyone.
And so we need to get in thebusiness of rejuvenating that
bipartisan interest.
SPEAKER_01 (16:34):
And the fact that you give Congress 10 years to
comply if the balanced budgetamendment is adopted by the 38th
state, does that mean that wedon't address this problem until
after this fiscal crisis is uponus?
SPEAKER_00 (16:46):
Well, hopefully we can avoid the fiscal crisis.
If we do have one, thenhopefully there's enough pieces
here and in other places thatthings are on the shelf and
ready to go to help us recoverfrom it as quickly as possible.
But the core of the implementinglegislation that I talk about is
a bill introduced again by thenSenator Mike Braun and House
Majority whip Tom Emmer.
(17:07):
It's called the ResponsibleBudget Targets Act.
That would set up a glide pathor a glide slope to gradually
transition from where we are nowto a primary balance over the
10-year window.
And you don't have to wait forthe 38th state to ratify.
You can get started on thisright away.
And then that makes the 10 yearsthat much easier.
But when you have that crediblecommitment that you're getting
your house in order, it's goingto take time.
(17:29):
And maybe you even enact most ofthe policies on the front end so
people can see that they willadd up to accomplishing that
goal by the end of the 10-yearwindow, that that will calm the
nerves of the markets and helpus avoid the debt crisis.
SPEAKER_01 (17:41):
And I think I read in your book that all 50 states,
with the exception of Vermont,have some sort of either
statutory or constitutionalrequirement of a balanced
budget.
SPEAKER_00 (17:50):
Or a combination.
Yeah.
And a lot of them came frommistakes that the states made
over time.
The 1820s and 1830s, northernstates did a lot of canal
building and they issued a lotof debt to accomplish that.
You know the Erie Canal, ofcourse, but they were all
throughout the northern states.
And then in the South, theyborrowed a lot to capitalize
banks.
Now, banks in those times wereunit banks, just one location
(18:13):
for banks.
And so that made them incrediblyvulnerable to local economic
disruptions.
And then when the panic of 1837happened, a lot of problems all
throughout the country.
Eight states and the territoryof Florida defaulted on their
debts, at least partly by 1841.
And then the bond buyers arelike, if we're going to lend to
you again, you need to putsomething in place so that never
happens again.
(18:33):
Nobody likes to lose theirshirt.
And even the states that didn'tdefault went through a really
rough time.
A lot of them decided that wasthe appropriate time to do that.
And then also during thepost-Civil War reconstruction
era, that was another wave, morewhen local governments got over
their skis, but also some stategovernments at that time.
SPEAKER_01 (18:58):
And then of course the convention would have to
adopt something and it wouldhave to go through Congress.
A number of states have calledfor a constitutional amendment
to pass a balanced budgetamendment, right?
SPEAKER_00 (19:07):
Absolutely.
SPEAKER_01 (19:08):
Can they limit it to just looking at a balanced
budget amendment if they havesuch a convention?
SPEAKER_00 (19:12):
Well, we don't know from precedent, but there are
some precedents that seem toapply.
SPEAKER_01 (19:17):
Well, I guess we had one precedent and they threw out
the Articles of Confederationand rewrote a new constitution.
SPEAKER_00 (19:23):
Aaron Powell So that's often claimed, right?
But that was not under thecurrent constitutional
structure.
I think one of the keyprotections is that it would
take 38 states to ratifysomething.
So if the convention went wayoff the rails, unless you had
that many state legislatures belike, hey, we're willing to go
there too, then you're unlikelyto have it.
There are a bunch of states thathave put restrictions on what
(19:44):
their commissioners, the namesof the people that would be
attending the convention, whatthe commissioners would be
allowed to discuss.
And in fact, with the conventionthat gave us the constitution,
there was one state, I think itwas Rhode Island, that didn't
send anyone because there was astate law, I believe, that
wouldn't let them do somethingas voluminous as what ended up
happening.
(20:04):
There are some likelyrestraints.
Are they sufficient?
I mean, we won't really knowuntil we find out.
One thing that's interesting isthat there's a group of people
that have been doing historicalresearch and they claim that by
1979, the requisite number ofstates, actually more than that,
had applied for a convention andCongress didn't call it.
(20:26):
And then they just publishedsome new research recently
saying that more recently thatthreshold has been exceeded as
well.
And the claim that they make isthat you can combine plenary
convention calls, so not foranything in particular, with
those for, you know, a fiscalresponsibility amendment or
something like that.
And for a long time I thought,no, it had to be, you know, for
a particular thing.
(20:47):
But going back and readingArticle V of the Constitution,
it doesn't specify that in anyway.
It just says when two-thirds ofstate legislatures have applied
for a convention, then Congresshas to call one.
So there's some potentiallitigation that we could see on
this topic that these folks aretrying to organize.
And well, we'll see whathappens.
I haven't given up hope onCongress, but there's this other
thing moving as well.
SPEAKER_01 (21:08):
And if the other thing's moving, it might get
Congress to act on this balancedbudget amendment.
Yep.
You also in here, of course,quote several of the founding
fathers, James Madison andThomas Jefferson, who speak out
against debt, against governmentborrowing and for keeping the
budget in balance.
Why do you think they neglectedto put something like that in
(21:28):
the Constitution?
You have any speculation there?
Did they just never imagine thegovernment would?
But we had debt at the time.
SPEAKER_00 (21:34):
We did have a lot of debt at the time, and it was a
and a really important deal in1790, so soon after the
Constitution was adopted, forthe federal government to absorb
states' revolutionary war debtin exchange for that was for
Hamilton, and what he got forJefferson and Madison was
putting DC on the Potomac,because of course they were
Virginians.
They were familiar with thecrippling nature of debt.
(21:55):
They'd seen it with England andFrance.
They had borrowed so much that50 to 60% of their revenue was
going just to debt service.
So they didn't want that here.
But I think they expected thatthe federal government would be
one of limited and enumeratedpowers, and they didn't imagine
that it could do this.
Plus, the norm was strong thatduring good times you pay down
(22:16):
the debt, you grow the economy.
As long as the economy isgrowing faster than the debt,
you're reducing the debt burden.
And we didn't actually seem toneed one until the 1930s.
So Jefferson, you know, one timeopined in a letter that he
wished there could be anamendment to the Constitution
prohibiting the ability toborrow.
And then, of course, when hebecame president, he bought the
Louisiana Purchase, right?
(22:36):
It was a good deal.
And borrowed money to borrow forthat.
It doesn't actually make senseto prohibit the federal
government from borrowing.
Not being able to directly raisefunds either from taxes or from
borrowing, was a key problemwith the Articles of
Confederation.
The challenge is to limit theamount and kind of debt that can
(22:56):
be accumulated and then have anidea to repay it as soon as
practicable.
It's kind of like that 38special song, Hold on loosely,
but don't let go.
If you cling too tightly, you'regoing to lose control.
It's kind of like that.
Like if you try to like defineeverything super, super tightly,
then that doesn't really leaveroom for the politics to work.
And you need politics in apolitical system.
SPEAKER_01 (23:16):
As we record this, Congress is again facing a
possibility of a shutdown of thegovernment because it can't
reach an agreement.
And I guess Democrats areholding out from what the
Republicans want.
There was a piece today in theWall Street Journal by Ron
Johnson, Senator from Wisconsin,about legislation he's proposed
to avoid shutdowns.
Did you get a chance to see thatand have any thoughts about
(23:36):
that?
SPEAKER_00 (23:37):
Yeah, I did.
Totally agree with him thatshutdowns should not be a thing
that are possible.
And in fact, the Carteradministration created
shutdowns.
They unilaterally reinterpreteda law from the 1800s that for 90
years Congress was totally finewith appropriations continuing
until they got newappropriations done.
And so it's time for Congress tojust reverse that.
(23:58):
And Senator Johnson has a bill,it's a good bill.
There's also the PreventGovernment Shutdowns Act by
Senator Langford from Oklahomaand House Budget Committee
Chairman Jody Arrington fromTexas.
Both are really good options.
One thing that I really likeabout the Prevent Government
Shutdowns Act is that it wouldkeep members of Congress, their
staff, and the White Housebudget office staff in DC until
(24:20):
new appropriations got doneevery year.
One of the things that SenatorLangford has talked about is
that members are different whenit comes to compensation.
Like some of them are verywell-to-do and some of them are
not, but they're all equal whenit comes to time.
So if they're stuck here,focused on getting the process
done, then you know that hitsall of them pretty much equally.
(25:14):
And it sort of strikes me asbeing the reverse of the 2013
fight over Obamacare and led tothat shutdown that year.
I was actually a congressionalstaffer working on budget
issues, and I got furloughedbecause they're like, oh, it's a
political decision.
I told my boss then that we werenot going to defund Obamacare.
Obama was still the president.
We weren't going to get 60 votesin the Senate for that.
(25:36):
I think Harry Reid was still amajority leader at that point.
These shutdown fights, you know,they don't actually give anybody
leverage.
It's just a lot of brinksmanshipthat ends in something that's
pretty close to the status quo.
Nobody really walks away from ashutdown fight saying, haha, we
got everything we wanted,because that's just not how this
works.
SPEAKER_01 (25:52):
What are some things you wish the American people
knew that perhaps they don'twhen it relates to government
spending, the tremendousborrowing, the need for the
balanced budget amendment?
Or are Americans very wellinformed on this?
SPEAKER_00 (26:06):
I think people think that Congress is more set up for
success than it is.
We have the shutdownbrinksmanship that we were just
talking about.
That's not something that shouldexist.
And that's something that weactually think could get fixed
this fall because of the fightsthat are going on.
But we talked before about thefact that Congress doesn't
actually do a budget.
Oftentimes people will say,well, when's the last time that
(26:29):
Congress, you know, did a budgeton time?
I said, on time or a budget?
Like Congress doesn't do abudget.
It never has.
And I think that is sort of likeinertia.
We have these points in ourhistory where problems emerge
and then we try to fixsomething, but unless you've
really thought through it foryears in advance, the solutions
that you have on hand when themoment of opportunity comes
(26:50):
aren't really going to sufficefor fixing the long-term
problem.
So this is what we experiencedwhen I was a new staffer on
Capitol Hill in 2011.
We had all this incredible TeaParty energy.
Democrats were willing to workwith Republicans on fixing some
of this, but we didn't reallyhave anything that was sketched
out that made a lot of sense.
So thankfully, this time around,we've seen a lot of people,
(27:11):
myself included, that have beenworking with lots of folks to
try to build the pieces thatwill fix these problems and wait
for the window of opportunity toopen so that we can just sort of
plug them in where they need togo.
One really important one is theComprehensive Congressional
Budget Act that we talked about.
We do not have the kind of smallD Democratic Congress that we
should have.
It's not as bottom-up as itshould be.
(27:33):
Members don't have the equalrights to offer their ideas and
see if their colleagues agreewith them.
And so there's just like so fewopportunities to really be a
legislator.
So if we were able to have abetter budget process and a
better authorizing process, thenwe could have so much more room
for members of Congress to comefrom wherever they're from and
represent the interests of thepeople they represent before
(27:54):
their colleagues and see, youknow, where they can find
agreement.
There's not enough democracy inCongress.
Of course, Congress hasauthorized doing way too many
things at much too greatexpense.
That all needs to shrink.
But you know, there's just notan opportunity for that to
happen right now.
SPEAKER_01 (28:10):
Your book includes two pairs of words that I think
are important.
Fiscal democracy is one of them,and the other is sound
governance.
Your proposal really is builtaround the fact that if we could
get a balanced budget amendment,like the principles-based one,
into the Constitution, it wouldlead more toward fiscal
democracy and sound governance.
So I think a good note to endthis conversation on would be to
(28:34):
talk a little bit about whatthat looks like.
If a balanced budget amendmentis adopted, does it improve the
way we're governed and howCongress operates?
SPEAKER_00 (28:43):
I very much believe so.
We have basically two goals witha balanced budget amendment.
One is fiscal responsibility.
That's the obvious one.
The other one is catalyzingCongress to think deeply about
how it's set up and how it couldbe better.
Some of that's fiscal.
But the truth is that mostmembers of Congress are
interested in controllingdeficits and debt, but they're
(29:05):
more interested in lots of otherthings.
They're most interested in beingrelevant as a member of
Congress, as a legislator,someone who can bring solutions,
bring ideas, and the currentprocess shuts that down.
If we were to adopt some ofthese budget best practices,
comprehensive budget, noshutdowns, heck, don't let the
president give the State of theUnion until you get the
(29:25):
president's budget request andthe national security strategy
from him.
Those are all good things thatwould help Congress succeed in
their job of representing themany, many interests,
geographic, ideological,whatever else, of the American
people.
Because the point of alegislature is to discover
better ways of mutuallyaccommodating each other.
(29:45):
We have a problem in thiscountry right now of political
violence, or the normalizationof it as well.
If we were to see legislatorswho disagree deeply on so many
things coming together to agreeon this piece here, that piece
there.
This overall budget, then thatshows that we see things
differently, but we can worktogether for our mutual benefit,
(30:08):
move the country forward, addvalue for the people.
That just brings the temperaturedown.
There will always be crazies outthere.
But the hope is that there willbe less radicalization and more
of a coming back together whereeven if you see the world
differently from someone else,you still recognize their
inherent dignity and worth as ahuman being, and you're more
(30:29):
willing to have conversationswith them.
SPEAKER_01 (30:31):
Are you optimistic that you'll see a balanced
budget amendment in theConstitution in your lifetime?
SPEAKER_00 (30:36):
Oh, absolutely.
My lifetime?
Yes.
SPEAKER_01 (30:38):
Well, I mean, uh, for those who are not watching
this on video but listening, uhKurt's probably about 50, late
40s.
Okay.
Yeah, yeah.
Mid-40s.
Mid forties.
Okay.
So his lifetime is at leastanother 40 years.
We hope.
SPEAKER_00 (30:52):
So yeah, I think we will almost certainly have one
in that period of time.
I mean, you mentioned back atthe beginning that Paul Winfrey
thinks we've got a decade to getour house in order.
Ray Dalio, who is a big timeinvestor, recently published a
book as well, um, how countriesgo broke.
He thinks we've got three yearsto turn it around.
We've got a clock, we've got toget our house in order.
Hopefully, we can avoid the debtcrisis and all the pain that
(31:14):
that would cause.
But if we can't, we have some ofthe pieces that we need to
recover from that.
Historically, states and othercountries, when they've gotten
themselves into trouble, they'vedone a serious policy or reform
package, and they've alsoupgraded their budget
institutions, including throughbalanced budget or other rules.
So I think that's coming our wayprobably in the next decade.
SPEAKER_01 (31:36):
Well, and you have a section in this book on
Switzerland and what they did torectify the problems they were
having.
And you talk about the EU andother areas where this has been
successful.
SPEAKER_00 (31:45):
So Yeah, Switzerland was in a tough place in the 90s,
and then through a package ofpolicy reforms and institutional
reforms, the Swiss debt break isthe the biggest part of that.
They turned it around.
Same with Sweden.
Sweden got into a lot of troublein the early 1990s, and they are
one of the best governing statesin the world today.
A little bit more expansive thanwould be my preference, but you
(32:07):
know, they they make it work.
SPEAKER_01 (32:08):
Yeah.
Well, Kurt, thank you very muchfor joining me today on the
Liberty and Leadership Podcast.
Thank you for writing this greatbook.
Thank you and for devoting somuch of your time and talent to
trying to bring about fiscalsolvency and uh balanced budget
amendment in this country.
SPEAKER_00 (32:23):
Well, thank you so much for having me.
It's a joy to get the word out,and I appreciate you uh hearing
me out.
SPEAKER_01 (32:28):
Well, we're proud to call you a TFAS alum.
Thank you.
Thanks so much.
It was a great program.
Thank you for listening to theLiberty and Leadership Podcast.
If you have a comment orquestion, please drop us an
email at podcast at tfas.org.
And be sure to subscribe to theshow on your favorite podcast
app and leave a five starreview.
(32:50):
Liberty and Leadership isproduced at Podville Media.
I'm your host, Roger Reim, anduntil next time, show courage in
things large and small.
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