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States Can Fix the National Debt: Reforming Washington with the Compact for America Balanced Budget Amendment

November 14, 2014

Read the full report: States Can Fix the National Debt (PDF)

Executive Summary

America is at a crossroads. Unlike any prudent household, Washington simply refuses to balance its budget. Washington has become so addicted to borrowing money that the outstanding national debt exceeds $16.5 trillion. The national debt now exceeds 100 percent of the Gross Domestic Product, a figure not seen since World War II. The 2012 federal fiscal year operating deficit was approximately $1.1 trillion. For the fourth fiscal year running, Congress has failed to pass an annual federal budget under which to operate our country. It is now clear the solution to our national debt problem is unlikely to be found in Washington. To save the nation from bankruptcy, the American people, acting through the states, can intervene and save our future. The Compact for America gives us the vehicle to do that.
The Compact for America proposes that state legislatures use an interstate compact, which is a cooperative agreement among the states, to advance a Balanced Budget Amendment. The Balanced Budget Amendment (BBA) requires a majority of state legislatures to approve any increase above an initial debt limit. Essentially, 26 state legislatures would be required to cosign on the federal government’s credit card. But unlike the status quo of national debt brinkmanship, the BBA is designed to force Washington to prepare a budget to make the case for more debt long before the midnight hour arrives. It requires the president to start designating spending cuts when spending exceeds 98 percent of the debt limit. If Congress disagrees with the cuts, it must then override those cuts within 30 days. By forcing both the executive and legislative branches to show their cards long in advance of hitting a constitutional debt limit, the BBA would ensure no game of “chicken” can hold the country’s credit rating hostage.
An interstate compact provides the vehicle for this reform because it vastly simplifies the otherwise burdensome process of states originating constitutional amendments under Article V of the U.S. Constitution. In fact, the Compact for America will cut the time and resources needed for successfully advancing this crucial reform by more than 60 percent. For the first time ever, the state origination of a powerful BBA will be feasible.



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