“Any time there's a deficit of more than three percent of GDP, all sitting members of Congress are ineligible for re-election.”
Warren Buffett described this scenario to Becky Quick in an interview on CNBC. [cnbc.com]
Also posted on CNBC’s website: “An attorney in St. Louis, Jarrad Holst, points out by email that there is a way to enact Buffett's idea without the cooperation of Congress. Under Article V of the U.S. Constitution, a ‘Convention for proposing Amendments’ is convened when called for by the legislatures of two-thirds of the states. A proposed amendment would then need to be ratified by the legislatures of three-quarters of the states.”
Why not? Imagine the courage Congress could show in a year where it was necessary to dip into the empty well and overspend. They could fall on their political swords, so to speak, for the good of the nation. It would make one’s heart fill with pride. Probably never happen.
Why should we listen to Warren Buffett? Because he is one of the most successful capitalists ever to roam the earth. He is also one of the greatest philanthropists to walk among us. He is an embodiment of a fiscal conservative and social liberal: A role model for the super wealthy. His idea doesn’t handcuff legislators on taxing or spending, it just gives them a great incentive to do their jobs.
This is leadership—the kind that comes from the founder of a successful corporation. Such leadership is the goal of aGREATER.US—to crowd-source the adaptive leadership of the people. Congress, a national corporation with the People as a sort-of Board of Directors. It engages the politics of “what and how,” not of “who and when?”
Steadfast fiscal conservatives who won’t raise taxes and staunch social liberals who won’t cut services have not just come to gridlock, they’re now at deadlock. There are not enough cuts that could possibly be made in a reasonable society, or enough taxes that could possibly be raised without stalling out the economy, or money that can be borrowed to cover the check. Compromise we must. That is the work Congress must do.
The Bipartisan Policy Center’s Restoring America’s Future, is also an interesting solution. We are on an increasingly unsustainable path.
Federal Budgeting Should Learn From Family Budgeting
One of the most pervasive problems faced by the Federal government in recent decades has been the budget deficit. The quest for an annually balanced budget has been one of the main pathways toward decreasing the deficit. Some administrations have had greater success than others in reaching a balanced budget, but even in these cases, the national debt has loomed large.
Of the many deficiencies in our nation's budgeting process that have led to the gargantuan increase in our deficit, one stands out as a gross departure from common sense. Our government does not have a "rainy day fund". It does not utilize a reserve fund by which it should set aside funds for unforeseeable disasters or emergencies. Instead, the budget is established first by spending more than we have, and even then with the assumption that nothing bad will ever happen to upset projected forecasts.
If a family or an individual were to budget their own money according to this behavior, they would be viewed as entirely irresponsible. Our national culture emphasizes the need to put aside money from each paycheck for general savings and investment, as well as to pay for unforeseen circumstances. The national savings rate is an important economic indicator because of what it means to the financial health of families.
Individual spending beyond one's means leads to major credit problems and triggers heated debate over the role of government in helping those without savings. Even the debate over 2005's new bankruptcy law showed little remorse for such irresponsible behavior.
Yet, the Federal government continues to willfully and wantonly violate this basic precept. Anyone who asserts that there is no need for a reserve fund, or that appropriations for these circumstances should be made on an as-needed basis, need only look to the past few years for stark evidence to the contrary.
Following September 11th, billions were allocated to compensate victims and rebuild structures. The Iraq War has cost, by many estimates, more than $80 billion per year that were not budgeted for defense prior to its onset, and which still evades inclusion in annual budgets. Aiding the victims of the Asian tsunami had a high, but necessary, price tag for humanitarian, as well as geopolitical, purposes. The hurricanes of 2005, especially Katrina, provided perhaps the quintessential argument for a reserve fund, as the Federal government still has not found a way to fund the rebuilding effort. It goes to the heart of the role of the Federal government as a safety net for Americans who are victimized by natural disasters.
Ideas / Solutions
The Federal government can learn much from the common sense practices of most American families and individuals. First, a balanced budget is essential, as it is unconscionable to spend beyond our means. Overspending translates to the US diving further into the depths of debt, which is usually financed by other countries, making the US perilously vulnerable to the caprices of other countries in the years to come. Expenditures, other than emergencies, which go beyond our national annual budget, are luxuries. It is as if a family that could not afford rent or food were to buy a 52-inch LCD television on credit.
We must start with a definition of "emergency" spending, and adhere to the distinction between emergencies and other purposes. Emergency spending that goes beyond a balanced budget should be permissible only upon approval of a "super-majority" of each chamber of Congress, e.g., a two-thirds majority, or at least a 60% majority. Although efforts were made during the 1990s to require a balanced budget, such a mandate must be made fully enforceable.
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