The supply-side Balanced Budget Amendment

With 27 states down and only eight to go, the campaign for an Article V Balanced Budget Amendment (BBA) is entering the home stretch.  Next year, or the year after, the first Amendment Convention in our history may be held.  The delegates to the Convention will be the sole judges of what can or cannot be included within a BBA proposal.

Budgets can be balanced by cutting spending or increasing revenue.  So the Convention will be free to include supply-side measures, which have not traditionally been thought of as part of a BBA.

The Competitive Enterprise Institute recently estimated the cost of federal regulation at $1.8 trillion a year.  Constitutional regulatory reform would cause a huge expansion of economic activity and tax revenue, and thus fits within the call for a balanced budget.  Any new regulation would have to be approved by Congress, and current regs could be repealed by a simple majority in each House of Congress, not subject to veto.

The IRS and the Internal Revenue Code are the greatest obstacles to the sustained 4% economic growth we need to generate the revenue to balance the budget.  Tax reform, such as a consumption tax or a flat tax, would unleash a bonanza of economic growth to put the Roaring ’20s to shame.  The 16th Amendment could be repealed as part of the package.  So tax reform could be included in the amendment as well.

The transfer of BLM and Forest Service land from the federal government to the states would also increase revenue, particularly if a portion of the proceeds of development on this land is reserved to the Treasury.  So, for instance, if the 69% of Alaska owned by the feds were transferred to the state (excluding national parks, Indian reservations, and active military installations), you can be sure that part of the Arctic National Wildlife Reserve would be leased for oil and gas development.  If half the proceeds were shared with the federal government, it would have an immediate impact on the deficit.  All across the west, resources are locked up in federal ownership.  Putting this land in the hands of the states could, in fact, double the fracking revolution.

Regulatory reform, tax reform, and land transfers to the states may not be politically feasible in Congress.  But at an Amendment Convention it will be one state, one vote, and there are 31 state legislatures totally controlled by Republicans.  They are, almost without exception, led by strong conservatives.  If 26 of these red states can agree on a supply-side BBA, it will go out for ratification.

If it wants to see this proposal ratified, Congress could choose to have the ratification votes take place in State Ratification Conventions, as was done with the 21st Amendment repealing Prohibition.  If the election of delegates to these Ratification Conventions were done at a special election, low-information and low-motivation voters would vote in lower numbers, easing ratification.

The current balance of political forces in the states hasn’t been this good for Republicans in almost a hundred years.  Congress is incapable of enacting the reforms we need.  National bankruptcy looms if nothing is done.  The opportunity represented by a supply-side BBA comes but once a century.  We should seize the moment.

It may never come again.

Fritz Pettyjohn is a lawyer, former Alaska state legislator, and a co-founder of the Balanced Budget Amendment Task Force.  He blogs at ReaganProject.com

With 27 states down and only eight to go, the campaign for an Article V Balanced Budget Amendment (BBA) is entering the home stretch.  Next year, or the year after, the first Amendment Convention in our history may be held.  The delegates to the Convention will be the sole judges of what can or cannot be included within a BBA proposal.

Budgets can be balanced by cutting spending or increasing revenue.  So the Convention will be free to include supply-side measures, which have not traditionally been thought of as part of a BBA.

The Competitive Enterprise Institute recently estimated the cost of federal regulation at $1.8 trillion a year.  Constitutional regulatory reform would cause a huge expansion of economic activity and tax revenue, and thus fits within the call for a balanced budget.  Any new regulation would have to be approved by Congress, and current regs could be repealed by a simple majority in each House of Congress, not subject to veto.

The IRS and the Internal Revenue Code are the greatest obstacles to the sustained 4% economic growth we need to generate the revenue to balance the budget.  Tax reform, such as a consumption tax or a flat tax, would unleash a bonanza of economic growth to put the Roaring ’20s to shame.  The 16th Amendment could be repealed as part of the package.  So tax reform could be included in the amendment as well.

The transfer of BLM and Forest Service land from the federal government to the states would also increase revenue, particularly if a portion of the proceeds of development on this land is reserved to the Treasury.  So, for instance, if the 69% of Alaska owned by the feds were transferred to the state (excluding national parks, Indian reservations, and active military installations), you can be sure that part of the Arctic National Wildlife Reserve would be leased for oil and gas development.  If half the proceeds were shared with the federal government, it would have an immediate impact on the deficit.  All across the west, resources are locked up in federal ownership.  Putting this land in the hands of the states could, in fact, double the fracking revolution.

Regulatory reform, tax reform, and land transfers to the states may not be politically feasible in Congress.  But at an Amendment Convention it will be one state, one vote, and there are 31 state legislatures totally controlled by Republicans.  They are, almost without exception, led by strong conservatives.  If 26 of these red states can agree on a supply-side BBA, it will go out for ratification.

If it wants to see this proposal ratified, Congress could choose to have the ratification votes take place in State Ratification Conventions, as was done with the 21st Amendment repealing Prohibition.  If the election of delegates to these Ratification Conventions were done at a special election, low-information and low-motivation voters would vote in lower numbers, easing ratification.

The current balance of political forces in the states hasn’t been this good for Republicans in almost a hundred years.  Congress is incapable of enacting the reforms we need.  National bankruptcy looms if nothing is done.  The opportunity represented by a supply-side BBA comes but once a century.  We should seize the moment.

It may never come again.

Fritz Pettyjohn is a lawyer, former Alaska state legislator, and a co-founder of the Balanced Budget Amendment Task Force.  He blogs at ReaganProject.com