Financial Stability and the Federal Debt

On July 27, 2020, the Congressional Budget Office released a report titled “Federal Debt and the Risk of Financial Crisis.” This report notes that the Federal debt has risen from 36% of GDP in 2007 to 62% of GDP in 2010. Taking into account obligations recently passed by Congress (such as health care reform), the CBO predicts the debt to GDP ratio will rise to 80% by 2035. This ratio assumes that the Bush tax cuts will not be extended. If they were extended, the ratio would rise to 180% by 2035. The report goes on to recommend that an austerity program of budget cuts and tax increases (which I don’t support) be put into place to avoid the types of crises found in Greece and elsewhere.

On August 10, 2010, Bloomberg published a report by Boston University economist Laurence Kotlikoff that discussed the International Monetary Fund’s annual review of U. S. economic policy. Basically, the IMF considers us bankrupt. They recommend a doubling of taxes (which I do not support) to regain a sound economic foundation.

In 1976, the South Carolina General Assembly passed Joint Resolution 775 that called for a Constitutional Convention to adopt a Balanced Budget Amendment. Eventually, South Carolina was one of 32 States that passed this type of Resolution. The required number of states needed to enact a Constitutional Convention is 34. With so many States joining in the call, Congress passed the Gramm-Rudman-Hollings Act in 1985 in an attempt to reign in Federal spending. This Act was later ruled unconstitutional by the United States Supreme Court. However, the passage of the Act slowed the drive toward the Constitutional Convention and the South Carolina General Assembly later rescinded Joint Resolution 775. See SC Code Sect. 1-1-1510 

 The current Federal debt crisis must be addressed by the individual States. Should the U. S. economy be hit with another major financial crisis, the debt will become unsustainable (if not already). As the majority party controlling the legislature of a sovereign State, we have a duty to our citizens to ensure the viability of the Federal Republic. If the U. S. Constitution had been amended in the 1980’s to require a balanced budget, Congress would never have passed the health reform bill, TARP or countless other spending bills that have driven us into bankruptcy.

 The South Carolina House gave a symbolic nod toward state sovereignty by passing our 10th Amendment resolution last Session. We need to send Congress a more substantial warning shot with a Balanced Budget Amendment Resolution.

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