RANCHO SANTA FE, Ca., October 30, 2014 – Recently, China quietly overtook the United States to become the world’s largest economy on the basis of purchasing power (according to the International Monetary Fund). The President didn’t call a press conference to announce the accomplishment because it’s not exactly a favorable reflection of his Administration. It’s also an election year, so expect it to be blamed upon a spontaneous response to an Internet video.
In reality, it occurred because China actually has an economic policy whereas the United States does not. Our Nation’s financial behavior in recent years has been somewhat less than “strategic” and the concept of “fiscal responsibility” never seems to have been contemplated.
We have had successive Administrations whose attitudes can best be described as “borrow-and-spend,” “tax-and-spend,” or a blend of both. They apparently never saw a war or constituent-placating program they didn’t like. As a result, we are rapidly approaching $18 trillion in debt.
Let’s put that in perspective.
If you had $18 trillion dollars, lived to be 79.8 years of age (the current overall life expectancy in the United States) and spent $1 billion a day every day of your life while the balance earned 5 percent compound annual interest, you would still have roughly $18 trillion dollars when you died.
If that debt were “redistributed” among us, every American would have to write a check for more than $56,000 to cover it. Of course, if we only burdened those who actually contribute money to the government’s coffers, the number soars to more than $153,000 per taxpayer.
Is that easy enough to understand?
Of course, the real problem is much bigger. Our unfunded liabilities now exceed $115 trillion, which dwarfs our national debt. (See the U.S. Debt Clock.)
Now, we have potential candidates pandering to the lowest common denominators of their Parties by arguing over “who built what.” Only one axiom remains in tack: “Don’t let anybody tell you it’s government and politicians that create solutions” because “trickle-down truth” hasn’t been part of our political reality for quite a long time.
In the absence of a cogent economic policy, we need to develop one. We also need to recognize that it is the most critical component of our national policies because it impacts every other element. That is why it is represented by the middle “E” in The FREEDOM Process™.
As we have with the Foreign, Resource, and Education policies in the articles that precede this one, we need to approach the development of an Economic policy from a pragmatic perspective rather than a political one. It truly is the policy that sets us “FREE” since it is intertwined in every policy decision that must be made.
Our economic policy must be constitutionally based, and it must establish a fiscally responsible vision that can be clearly articulated, viably executed, and consistently applied; one that reflects the values of our Republic and assures our ability to compete in a global economy.
The Education Policy statement of The FREEDOM PROCESS™
“The United States economic policy shall conform to the two most fundamental parameters prescribed by Article I, Section 8 of the Constitution that restrict Congress’ “Power To lay and collect Taxes, Imposts and Excises to pay the Debts… of the United States.” In that regard, Congress shall pass no law that is not directly tied to providing for “the common Defence (sic) and general Welfare of the United States.” All related legislative actions at the federal level shall require a demonstration of fiscal responsibility, and to the degree that they may also require a reasonable level of temporary debt to be absorbed, they shall also provide for a specific schedule and methodology of repayment. Accordingly, barring any exception associated with a national emergency, the federal budget shall be tied and restricted to an agreed percentage of the Nation’s prior-year Gross Domestic Product, and the definition of GDP shall be prohibited from changing absent a full debate and vote to so amend within the House of Representatives. All other economic decisions that influence the economic health of our Nation shall be reserved to the People or to the States under the Ninth and Tenth Amendments, respectively.”
What does this simple statement accomplish?
First: It establishes a discernible metric against which legislative actions can be measured. If a bill does not clearly and specifically provide for “the common Defence (sic)” or the “general Welfare” of the United States, it does not even make it to the floor of a Chamber for a vote. The federal government is not otherwise authorized to create debts for which it may “lay and collect Taxes, Imposts and Excises.”
This mitigates the influence of lobbyist money and eliminates the political practice of creating federal programs that only inure to the benefit of narrow constituencies in the hope that such constituencies will remain loyal to a particular Party (i.e., the creation of legislation that is favorable to factions that may represent a particular industry, demographic, or socio-economic group that traditionally votes along a specific Party line). The Constitution does not provide for such favoritism and every official who is elected to federal office is required to “defend the Constitution of the United States.”
Next: Let’s consider what happens if “all related legislative actions at the federal level shall require a demonstration of fiscal responsibility, and to the degree that they may also require a reasonable level of temporary debt to be absorbed, they shall also provide for a specific schedule and methodology of repayment.”
This mandates that bills presented to Congress shall first be vetted upon grounds that demonstrate their fiscal responsibility. The CBO needs to independently test bill-related assumptions rather than simply accept them. This precludes false assumptions from driving advantageous cost projections for major programs just to facilitate their passage only to later determine that the actual application of such laws will come at a much higher price.
It also permits the intelligent assumption of debt. It is naïve to suggest that all debt is “bad.” In fact, it is difficult to imagine a scenario in which a country of the size of the United States would operate without debt.
Conversely, the federal government needs to operate on a fiscally sound basis. When it enters into debt, it must have a plan to retire that debt in a timely manner. Allowing it to be built on a generational basis is irresponsible.
Thomas Paine once said, “If there must be trouble, let it be in my day, that my children may have peace.” We should apply the same sentiment to debt. Before our Nation enters into debt, it must have “a specific schedule and methodology of repayment” incorporated into any associated legislation.
Sunset provisions should also be utilized to preclude programs, which are otherwise necessary and proper, from becoming perpetual. Much of our Nation’s debt is associated with programs that have outlived their purpose and damaged our society by creating a dependent sense of entitlement. As a result, we deepen our commitment to a status quo that no longer is relevant to our reality or that inhibits us from escaping it.
Moving on: “…barring any exception associated with a national emergency, the federal budget shall be tied and restricted to an agreed percentage of the Nation’s prior-year Gross Domestic Product, and the definition of GDP shall be prohibited from changing absent a full debate and vote to so amend within the House of Representatives.”
The previous command for the federal government to operate with “fiscal responsibility” requires that it be structured to manage its affairs within the context of a budget. Congress has become too accustomed to using Continuing Resolutions to circumvent its responsibility to pass a budget, so let’s take that option away by creating a formulaic approach.
To accomplish this, we need to settle upon a relatively fixed definition of Gross Domestic Product; not one that can be tweaked by any given Administration to produce favorable results, but rather one that is cast in stone unless fully debated by the Representatives of the People and amended by vote.
Next: We need to establish a percentage of prior-year GDP that represents a reasonable level of funding for our federal government. The use of prior-year GDP is a concession to the fact that we cannot accurately predict the current year’s GDP.
In any event, it ties the budget to the rising or falling tides of our Nation’s fortunes. If the federal government wants more operating capital, it needs to craft legislation that inures to the benefit of our Country’s economy and, correspondingly, to each of us as citizens.
Given the annually fixed nature of the budgetary restriction, our elected officials will have to begin to engineer a government that operates more efficiently and effectively. If it wants to create new programs, it must retire or restructure existing ones. This will force the federal government to intelligently assess its priorities.
While our new economic policy provides an “escape value” in the form of any “national emergency,” such exceptions shall be limited to catastrophic circumstances such as wars or cataclysmic natural disasters. Programs, which are necessary to maintain a particular Party’s power by keeping it in the good graces of a funding or voting block that historically favors it, may constitute an emergency for the Party but not one for the Nation.
There is also no need to demand that the budget be balanced because there is already a relatively obscure law that mandates it (see Public Law 95-435 as it amends 22 USC 286). Congress is either ignorant of this or has simply chosen to ignore it. By capping the budget, we force the issue.
For those who fear that all the “do good” policies that Congress has been keen to fund in the past will go away: They may; then again, they may not. However, it will be more directly within the purview of the People as those programs will necessarily have to be vetted by the States or addressed directly by the People within the context of the private sector.
That is why “All other economic decisions that influence the economic health of our Nation shall be reserved to the People or to the States under the Ninth and Tenth Amendments, respectively.”
This economic policy does not take away any constitutionally based authority that Congress has to pass laws nor does it emasculate the Executive Branch’s authority or diminish its responsibility to administer such laws. It merely accentuates the responsibilities and authorities that the Constitution provides for each Branch and defines parameters that prevent an ongoing abuse of discretion. Doesn’t that sound like a better approach; one that is worthy of the United States; one that might allow us to announce that we once again are the world’s largest economy? Think about it.
(Part 2 of this series will provide some specific actions that can be taken to revive our economy and restore integrity to it.)
T.J. O’Hara is an internationally recognized author, speaker, and strategic consultant in the private and public sectors. In 2012, he emerged as the leading independent candidate for the Office of President of the United States and the first nominee of the Whig Party in over 150 years.
This article first appeared in T.J. O’Hara’s recurring column, A Civil Assessment, in the Communities Digital News (CDN).
The FREEDOM Process™ is the trademark of T.J. O’Hara. The Freedom Process™ and its acronym components are made available for public use subject only to proper attribution. All rights are otherwise reserved.