A proposed amendment to our Constitution

Todd Henderson —  24 March 2010

Ask any conservative what the problem with America is today, and the answer you will get is government spending. But ask that same conservative, or any conservative for that matter, what to do about it, and the shoulders will inevitably shrug. Politicians, including conservatives, simply cannot be trusted when they get control of the purse strings. The problem is a familiar one in law and elsewhere — it is called the pre-commitment problem. Political leaders can promise to cut spending, but can’t resist reneging on the promise when in power; governments can promise not to bail out banks, but know that they must when the manure hits the fan. (For instance, Fannie Mae bonds explicitly disclaimed  any government guarantee, but the bail out of Fannie Mae continues to cost us tens of billions of dollars.)

There are solutions. The most famous is when Odysseus lashed himself to the mast of his ship to resist the temptation to steer toward the Siren’s songs. What Odysseus did was raise the costs for any future action, therefore making it less likely. So how can we raise the cost for congressional profligacy?

We cannot just hold ourselves to the commitment to vote the bums out of office. This just moves the pre-commitment problem back one step and puts it squarely in our lap. Sitting here today, I might want to reduce the size of future government, but when the choice is to cut my benefits, it may be harder to vote that way. In addition, we might all collectively lament the growth in government (rising from less than 10 percent of GDP 100 years ago to over 40 percent today), but we might also all individually value the pork our representatives bring home to our district.

So what about a constitutional amendment setting a limit on the size of government? Our founders tried to do this, but instead of setting a dollar or percentage limit, they used enumerated powers. They thought telling the government what it could do (and what it implicitly could not do) would constrain the Leviathan. But this didn’t work. It worked for a time, but it was an imperfect pre-commitment device, as it has been eroded by hundreds of years of court rulings cutting the other way. Instead of telling the government what it can and cannot do, what about telling the government how big it can be.

I propose a new amendment to the Constitution:

“Spending by the federal government shall not exceed 25 percent of the Gross Domestic Product in that year, except in cases where Congress has declared war against another sovereign nation and such additional spending is essential to the defense of the Homeland.”

According to constitution expert Tom Ginsburg, this sort of constitutional provision would be unique in the world, which is odd since the growth of government is a universal problem. (Switzerland has a balanced-budget provision and a limit on tax rates that comes close.) But this wouldn’t be the first time that America has blazed a trail for solving an age-old problem.

7 responses to A proposed amendment to our Constitution

  1. 

    It strikes me that your proposal leads to a hike in the regulatory state. If the government pays for seat belts to be installed in cars, government spending rises, but not if the government simply mandates them. The regulatory state allows the government to control our lives and simply bypass your proposed “share of GDP” constraint. As a constraint on transfers, that can be evaded by simply hiking nominal GDP through redefinition. Redefine Medicare from being a transfer (not part of GDP) to a purchase of self-provided health care (which is part of GDP), and GDP handily rises, raising the limit on government spending. If you think that over the top, think the Italian army, which is mostly a way of managing Italian dole queues without breaking the eurozone debt/gdp limits. Similarly, the Italians simply inflated their GDP by adding an adjustment of about 16% for the grey market. I don’t buy that a GDP share limit on government spending helps much more than the first amendment stopping McCain-Feingold.

  2. 

    Todd, aside from the completely arbitrary level of 25% (or pick your point) of GDP, such a limit would guarantee that federal expenditures will increase proportionally with GDP; not because they need to, but because they can. I see no compelling reason why that should be the case.

    By having the decision to tax be a more intentional or deliberate process–and having it a step removed from Congress’s ability to impose–I think there is greater hope that incentives to tax will be more constrained. There would be competitive pressure among the States to maintain more favorable tax codes (as we have even now). The race to the bottom will be balanced, however, since States could not rely on money from the Federal government to pay for programs for which States are not willing to tax themselves. The “common pool” would not be perceived as a potentially endless supply of Federal funds, as now often seems to be the case in some States.

  3. 

    SMD, the idea is to limit exceptions to when “war” has been officially declared. In addition, the courts are not the only source of constitutional interpretation.

    M.S., why is the Shipman plan, which sounds reasonable, superior?

  4. 

    William Shipman over at CATO suggests a different route: Repeal the 16th Amendment (which grants the Feds the right to lay and collect taxes) and replace it with an amendment that required states to remit a certain percentage of the taxes they collect to the Federal government. That way Congress would not be able to directly control its own revenue by imposing taxes. Its ability to borrow would be disciplined by the market and the market’s understanding that cash flow for debt service is constrained.

    If the percentage were, say, 1/3 of State collections, the cost to the State of providing services would be 150% (in terms of tax revenue needed), thereby creating greater incentive for private provision of services.

    May not be a perfect solution, but I think it’s not a bad starting point for discussion. I also think it would be superior to limiting federal expenditures to a percentage of GDP.

    Shipman’s full op-ed is available at:
    http://www.washingtontimes.com/news/2010/mar/23/changing-the-health-care-game/

  5. 

    Unfortunately, I think the practical result of the amendment is that Congress would end up playing chicken with the courts over the military budget every year. One budget, the non-military budget, would be passed, and then all the defense spending would come later. No court is ever going to say that the military budget is not essential to defense and thus unallowable.

    It is also likely to merely get certain projects thus cast as military for the purposes of the second budget, such as infrastructure. It won’t provide an out for entitlements, but it’ll mostly defeat the intent of the amendment.

  6. 

    Sounds great, right up until terrorists unleash a smallpox outbreak, or a meteor lands in the Midwest, or we have a Depression and unemployment is double where it stands today, or we have a demographics meltdown and have boatloads of senior citizens watching their retirement payments get cut. It’s a simple solution to a complex world, and they rarely endure or work.

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