By Bruce Poliquin
Maine State Treasurer
There’s been lots of talk lately about the forthcoming fiscal Armageddon. Surprisingly, it’s not about our elected officials in Washington spending us into oblivion. They’ve already done that.
Rather, it’s about their request to spend even more.
You’d think that a behemoth $14 trillion national debt is enough. Apparently it’s not for most of our U.S. Senators and Congressmen. They’re trying to gather enough votes among themselves to authorize borrowing another $2 trillion by selling more U.S. Government bonds. They want to “raise the debt ceiling” in part to feed their reckless spending addiction.
It stuns me that many politicians still haven’t figured out that spending what we don’t have is fiscal poison. The grotesque Washington spending binge has been funded primarily by foreign investors buying U.S. Government bonds that our nation’s Treasury Department sells. Another clever D.C. strategy is to print money to pay the bills. There aren’t many gimmicks left. At some point the credit card bills must be paid down in earnest—or face insolvency.
We taxpayers spend roughly $200 billion per year on the interest payments for the $14 trillion monster national debt. That’s approximately nine percent of total federal tax revenues. If our spendthrift politicians find the common sense to cut spending in other areas by this amount, we’ll have enough money to make the debt payments. Don’t be fooled by the proclamation that not raising the legal borrowing limit will cause by itself a financial meltdown.
However, the maddening other part of the story is that the 2011 federal budget deficit is another $1.4 trillion. Our irresponsible politicians have boxed us into either making crippling spending cuts or raising the debt ceiling to cover this shortfall. Not paying bondholders the interest and principal they are owed would send shock waves through the global financial system. Our sovereign debt would be downgraded. Interest rates paid by taxpayers on future borrowing would soar. Confidence in the U.S. economy would further erode, driving away business investment and jobs.
Again, that fiscal nightmare plays out only if Washington doesn’t have the spine to cut enough spending on programs and services to pay the interest and principal to those who have loaned us money by purchasing our government bonds.
Personally, I’ve seen enough fiscal imprudence in Washington during the past 30 years. There’s no way career politicians can control their appetite to spend taxpayer money. Too many promises; not enough statesmanship. During the 1990s, President Clinton and Congress hammered out a deficit reduction plan that included a spending cap. It lasted two years. Laws can be changed by the next group of politicians.
I’m convinced that the only way to ensure fiscal sanity in Washington is to amend our nation’s Constitution to mandate a balanced federal budget each year. (Except, of course, funding for national emergencies like war.) 49 states embrace such a discipline. Why shouldn’t we demand the same accountability with our federal taxes as we do with our state taxes?
There’s a movement to gather the necessary two-thirds votes in the U.S. Senate and House of Representatives to add such an amendment to the Constitution. That’s 67 Senators and 290 Representatives needed. So far, 47 Senators and more than 100 Representatives have signed on. I was pleased to read that both of our Maine Senators also support a balanced budget amendment to the U.S. Constitution.
Once through Congress, the amendment must be approved by 38 state legislatures; 29 states have already endorsed similar resolutions.
This is exciting stuff. Nothing would give consumers and businesses more confidence than getting our federal fiscal house in order. Limiting government borrowing; paying off our debt; reducing spending; reforming expensive entitlements; and balancing the federal budget—they’re all connected. They’ll all help attract private sector investment and create jobs. The resulting economic growth will generate more tax revenues so we can pay our bills.
An editorial in the New York Times on July 5 called this movement toward fiscal prudence “extreme.” I wonder what the editorial board calls racking up a $14 TRILLION debt with no idea how to pay it off? Or not reforming the huge Social Security, Medicare and Medicaid entitlements, which are bankrupting our country?
Finally, the time might have come for a balanced budget amendment to the U.S. Constitution. Our founding document has been amended 27 times. I bet our Founding Fathers would nod approvingly to an institutional tool to help take the politics out of spending hard-earned taxpayer dollars. I hope we all make them proud.