The American deficit - 3 March 1995

If Mark Twain's remark is true, that a journalist's job is to attract people to something they're not interested in, then journalism is about to face its finest test. Or perhaps I'm wrong. Perhaps everybody on earth except the homeless has to take an interest – whether they like it or not – in the monthly or annual business of spending no more than you have in the bank.

For 99 per cent of us, Mr Micawber spoke the truth once, for all. The young David Copperfield: "Annual income £20, annual expenditure nineteen, nineteen, six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and sixpence, result, misery." The maddening simplicity of this truth is exactly what has been roiling, peeving and nettling, chafing mercilessly, obsessing the Congress of the United States for the past month. Not only is the government of the United States – which for many happy decades was the credit to the nation of the world – not only is it appallingly in debt, but it can see no way out of a bankruptcy by, they calculate, about 2010.

Everybody in Congress, in both houses, is agreed on the disease. They've been fighting about the cure on and off for 23 years. So long ago as 1972, the government – the federal budget – was 245 billion dollars and the deficit was a horrifying 15 billion. This so alarmed the Chairman of the House Ways and Means Committee that he bullied the house into passing a bill that gave the president the power to cut the budget on his own initiative, even though the sacred founding fathers gave the taxing and spending power exclusively to the Congress. Well the Senate, reminding the house of the Constitution said, whoa Dobbin, they said, no, the president can't have such power.

Seven years later with the national deficit still mounting, the Senate passed a law of splendid Micawber like simplicity. It said, in effect, from 1981 on, the federal government shall not spend more than it takes in. But by 1981, a new man, Ronald Reagan, was in the White House, promising and delivering a big income tax cut – lots of other taxes went on under the guise of synonymies (??), user fees, revenue enhancers. The deficit now went soaring beyond the arithmetical powers of most people to take in. In the middle of Mr Reagan's term, two frustrated Republican senators pushed through the Senate, a bill simply declaring that from then on, the federal budget could not be approved unless it was balanced. Nobody played the slightest attention.

Today, the proposed Clinton budget is something like three trillion dollars and the deficit is over 200 billions. In simple domestic terms, the United States is spending 200 billion dollars more than it's taking in. And one other point on which everybody reluctantly agrees: the deficit will grow and grow as the population ages and ages, which is it doing at a remarkable rate thanks to the patching up capability of modern medicine. Add to the deficit, 800 billion dollars the United States owes to other nations, and we find that the interest on the national debt now costs more than the cost of the national defence.

Why is the deficit running so dramatically out of control? There's no argument about the answer to that one, the grim word "entitlements." Benefits is the older word, benefits already written into law for the middle class, plus the cost of healthcare for the very poor and for the old, rich or poor. Three fifths of all government spending is on benefits and of that great slice of the pie, the biggest bites by far are taken by Medicaid and Medicare. Medicaid is the care given to the very poor and it can spend the whole gamut of high tech, i.e. the most expensive medicine, same procedures and equipment and nursing costs available also to everybody over 65 whatever their income.

As you may know, the Republicans – who now control both houses for the first time in 40 years – have given a special pledge to the voters with something they call, "A contract with America." It's no more but no less than the Republicans' policy list and they've already passed some drastic new bills making enormous cuts, which we'll go into another time. But what the speaker of the house, the Republican leader Mr Gingrich calls "the core" the centre of the contract, the one obligation he deems sacred for the Congress to fulfil, is a balanced budget. So, finally, both houses came this week to vote on a proposed amendment to the Constitution, laying down as a constitutional duty, the balancing of the budget.

Amending the Constitution of the United States is a move that even the most skittish Congress would think three times about. Let me remind you first that in 2008, only 27 amendments have been adopted, including the ten original amendments to the so-called Bill of Rights that went into effect in 1790. So in 2004, there have been only 17 additions. The last one is an interesting case. The 27th amendment said that the salaries of senators and congressmen could be changed only after a new congressional election. It was proposed by the Congress in September 1789 and ratified by the states in May 1992. So there is the second essential step to an amendment becoming law: ratification by three quarters of the legislators of the 50 States. First then, a constitutional amendment must be passed by two thirds of both houses. Then it goes to each state, and to go into effect, three quarters – which would now be 38 of the states – must approve, ratify, and that can take between one to four years or in the absurd cases of congressional pay, 203 years.

In the past month, the arguments pro and con the balance budget amendment, inflamed the days and thickened the night air. Very briefly these were the opposing views for the amendment: all previous attempts to balance the budget have failed, nothing in the administration's plans suggests even a new attempt. President Clinton's proposed budget, projects another trillion dollars of debt. The interest the government pays on the debt will increase and increase till the taxes of the next generation will be consumed by paying the interest on today's deficit, leaving nothing for the exercise of their own good life. They will, in effect, have no representative say in how their taxes are to be used. And if there was one principle more than any other on which this nation was founded, it was no taxation without representation. More than 70 per cent of the people say they want the amendment to pass and to go to their states to ratify.

The main argument against it is true: that increasing deficits siphon savings away from productive investment. But the proposed amendment would, in effect, prohibit borrowing, an absurd and unworkable prohibition, just as it would be if a new house had to be paid for always in cash, and college tuition and all the other devices that help a family stay afloat. Our children yes will certainly have to pay interest on the debt with their taxes, but those taxes will flow back to them as owners of government bonds.

By last Tuesday, all the talking had been done. To pass the amendment would need a two thirds vote that's to say of the 100 senators, 67 votes. By Tuesday, Senator Dole, the Republican majority leader, could guarantee only 66. He moved the Senate, going to recess till Thursday, grudgingly the Democrats agreed, and in the next 24 hours the leaders and their lieutenants worked furiously at twisting arms. But by then, an influential senator had said that if the budget eventually was not balanced, then the decision to tax and/or to spend, would go to the courts and the Constitution itself had placed the taxing spending power exclusively in the Congress.

The Republicans rushed to add a clause forbidding the courts to play that part. The plot was getting more tangled every day and by Thursday morning, the Republicans didn't have that 67th vote, a sticky a senator from South Dakota said, wait a minute, the way this amendment stands, you can balance the budget by raiding Social Security, the prime benefit, which has a separate trust fund and half a trillion dollar surplus. This would be like balancing your own home budget by looting your neighbour's bank account.

However, Thursday two p.m. was the deadline for the vote, now was the moment of fate. The role was called. There'd been no sign that the Republicans could muster more than 66, one short of passage. In the result, they got only 65, some unidentified traitor had gone over to vote against the amendment. It was, surprise surprise, none other than Senator Dole himself, the leader, the inspirer of the amendment. By the rules of the Senate, only somebody on the winning side of a defeated bill or resolution can bring the thing up again for reconsideration and that parliamentary move is what Senator Dole had just done: he hopes to bring it up again sometime, maybe.

For the moment it's dead, but nobody should crow a victory song, though Mr Dole has suffered a momentary blow to his leadership. Many Republicans were rejoicing at the thought of 1996, a presidential year, when they'll be able to mourn in public that it was the Democrats who killed off the last chance of balancing the budget and saving the next generations from crippling taxes. The central problem has still to be solved. Why are the budget and the national debt out of control? The answer is known to everybody, but very few serving politicians dare spell it out. During the past 40, 50 years in this country – and in any country, which has or is going to have the same problem – the voters have become hooked on a full range of social services, which they don't want to pay for in taxes.

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