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A BALANCED BUDGET AMENDMENT TO 

THE CONSTITUTION 

HEARING 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

OCTOBER 4, 2011 

Serial No. 112–62 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

MARK AMODEI, Nevada 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

[Vacant] 

SEAN MCLAUGHLIN, Majority Chief of Staff and General Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

OCTOBER 4, 2011 

Page 

OPENING STATEMENTS 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Chairman, Committee on the Judiciary ..................................... 1 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Ranking Member, Committee on the Judiciary ......... 2 

The Honorable Trent Franks, a Representative in Congress from the State 

of Arizona, and Member, Committee on the Judiciary ..................................... 4 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Member, Committee on the Judiciary .................................... 4 

The Honorable Jerrold Nadler, a Representative in Congress from the State 

of New York, and Member, Committee on the Judiciary ................................. 6 

WITNESSES 

Honorable Richard Thornburgh, K&L Gates 

Oral Testimony ..................................................................................................... 8 

Prepared Statement ............................................................................................. 11 

Douglas Holtz-Eakin, American Action Forum 

Oral Testimony ..................................................................................................... 16 

Prepared Statement ............................................................................................. 18 

Philip G. Joyce, University of Maryland 

Oral Testimony ..................................................................................................... 29 

Prepared Statement ............................................................................................. 31 

Matthew Mitchell, Mercatus Center 

Oral Testimony ..................................................................................................... 43 

Prepared Statement ............................................................................................. 45 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Letter submitted by the Honorable John Conyers, Jr., a Representative in 

Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciary ................................................................................................... 92 

Article submitted by the Honorable John Conyers, Jr., a Representative in 

Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciary ................................................................................................... 94 

Letter from Gary R. Herbert, Governor, State of Utah; Rebecca Lockhart, 

Speaker, Utah House of Representatives; and Michael Waddoups, President, Utah State Senate ...................................................................................... 109 

(1) 

A BALANCED BUDGET AMENDMENT TO 

THE CONSTITUTION 

TUESDAY, OCTOBER 4, 2011 

HOUSE OF REPRESENTATIVES, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Committee met, pursuant to call, at 10:11 a.m., in room 

2141, Rayburn Office Building, the Honorable Lamar Smith (Chairman of the Committee) presiding. 

Present: Representatives Smith, Coble, Gallegly, Goodlatte, 

Forbes, King, Franks, Gohmert, Jordan, Poe, Griffin, Marino, 

Gowdy, Adams, Quayle, Conyers, Nadler, Scott, Watt, Jackson Lee, 

Waters, Pierluisi, Quigley, Chu, and Deutch. 

Staff present: (Majority) Zachary Somers, Counsel; Sarah Vance, 

Clerk; David Lazar, Clerk; (Minority) David Lachmann, Subcommittee Staff Director; and Veronica Eligan, Professional Staff 

Member. 

Mr. SMITH. The Judiciary Committee will come to order. 

Without objection, the Chair is authorized to declare recesses of 

the Committee at any time. 

We welcome you all, particularly our witnesses and those who 

are interested in this particular subject. 

I am going to recognize myself for an opening statement and 

then the Ranking Member and then introduce the witnesses here 

today. 

Americans want the Federal Government to curb excessive Government spending and erase the Federal deficit. 

Since 1970, the Federal budget has only been balanced during 

one 4-year period when my Republican colleagues and I on the 

Budget Committee were able to pass the first balanced budget in 

over 25 years. Meanwhile, the Federal deficit has climbed from less 

than $400 billion in 1970 to over $14 trillion today. And the national debt has increased 34 percent under President Obama. That 

is the fastest increase in national debt under any U.S. President 

in history. 

America cannot continue to run huge Federal budget deficits. Financing Federal overspending through continued borrowing threatens to drown Americans in high taxes and heavy debt. The Federal 

Government now borrows 42 cents on every dollar it spends. No 

family, no community, no business, no country can sustain that 

kind of excessive spending. That is the road to insolvency. 

We need a constitutional mandate to limit both the President 

and Congress to annual budgets that spend no more than the GovVerDate Aug 31 2005 12:54 Dec 05, 2011 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6601 H:\WORK\FULL\100411\70574.000 HJUD1 PsN: DOUGA
2 

ernment takes in. Only through a balanced budget constitutional 

amendment will we save future generations from unending Federal 

deficits. Just as both parties have joint responsibility for the deficit, 

we must jointly take responsibility for controlling the deficit by 

passing a balanced budget amendment. 

We came very close to passing a balanced budget amendment in 

1995 falling just one vote short in the Senate of the required twothirds majority. In that Congress, the amendment was supported 

by Minority Whip Hoyer, Assistant Democrat Leader Clyburn, and 

Vice President Biden, among others. As then Senator Biden stated 

in support of the balanced budget amendment, quote, in recent decades we have faced the problem that we do not seem to be able to 

solve. We cannot balance our budget or, more correctly, we will not. 

The decision to encumber future generations with financial obligations is one that can rightly be considered among the most fundamental choices addressed in the Constitution. End quote. 

It is once again time for Congress to attempt to pass a balanced 

budget amendment. Polls show that 74 percent of Americans are 

in favor of a balanced budget amendment. If we want to make permanent cuts to Federal spending, cuts that cannot be undone by 

future Congresses, a constitutional amendment is the only solution. 

It is our last line of defense against Congress’ unending desire to 

overspend and overtax. 

Amending the Constitution is not easy, nor is it a task that 

should be taken lightly. We have only amended the Constitution 27 

times, but America’s continued economic prosperity depends on 

changing our course on Federal spending and growing deficits. 

Thomas Jefferson believed that, quote, the public debt is the greatest of dangers to be feared. End quote. Jefferson wished, quote, if 

it were possible to obtain a single amendment to our Constitution, 

taking from the Federal Government the power of borrowing. End 

quote. 

It is time we listened to Thomas Jefferson and passed a constitutional amendment to end the Federal Government’s continuous deficit spending. We must solve our debt crisis to save our future. 

That concludes my remarks, and I will recognize the gentleman 

from Michigan, Mr. Conyers, the Ranking Member of the full Committee. 

Mr. CONYERS. Thank you, Chairman Smith, and good morning to 

my colleagues. 

I just want to let us all know that we are coming back to a debate that we have been in—I think it goes back to 1980 sometime. 

And I welcome all of the witnesses. 

Now, it is important that we address this deficit situation that 

has been talked about, and it is ongoing. I agree with a lot of the 

observations of Chairman Smith. The problem starts, though, when 

we look at what the financial crisis was 2 weeks before President 

Obama took over the debt, before he became President. Before 

President Obama became President, the debt was well over $1 trillion. 

Now, I have my staff researching to find out what every Member 

of this Committee, especially the chairman of the Republican Sudy 

Committee, Mr. Jordan, who advises the majority of the House on 

3 

this subject—I want to find out what all of you were saying about 

it then. And I think that will make something interesting. 

I think it would be also important, Chairman Smith, for us to 

understand the effect of the tax cuts for the wealthy that have gone 

on since we are concerned about the budget debt. Is there anything 

wrong with taking away the tax cuts to the wealthy? And I ask everybody on the Committee. And I will yield to Mr. Lungren. 

Mr. LUNGREN. If the gentleman would yield. Do you want to go 

all the way back to John Kennedy and take those tax cuts away? 

Mr. CONYERS. No. I am talking about—— 

Mr. LUNGREN. He had the highest income—— 

Mr. CONYERS. Well, wait a minute. 

Mr. LUNGREN [continuing]. More anybody else. 

Mr. CONYERS. I am talking about the Bush tax cuts. You asked 

me do I want to go back to the Kennedy tax cuts. Do you? I am 

talking to you. 

Mr. LUNGREN. Well, the only point I was trying to make is that 

both Democrat and Republican Presidents have recognized the 

positive impact of tax cuts on those who create jobs in this country. 

Mr. CONYERS. All right. Look, Dan, do you want to go back to the 

Bush tax cuts for the wealthy if you are talking about getting rid 

of this debt. Yes or no, Dan Lungren? 

Mr. LUNGREN. If the gentleman is asking me do I think we would 

have a positive impact on the economy—— 

Mr. CONYERS. Come on. Answer the question. 

Mr. LUNGREN. No. Raising taxes in the midst of a recession is 

the dumbest idea that even Congress could come up with. 

Mr. CONYERS. What about cutting spending? 

Mr. LUNGREN. Oh, I am absolutely for cutting spending. Absolutely. 

Mr. CONYERS. Okay. How about cutting the spending of mothers 

and children on assistance? 

Mr. LUNGREN. If the gentleman would yield. We are going to 

have to make some very difficult decisions coming up, as you know. 

We are waiting for the Super Committee to tell us how we are 

going to cut $1.5 trillion between now and Christmas, and the 

President has even suggested we ought to go to $2.5 trillion, but 

he has not given us any idea how to do it. 

Mr. CONYERS. Dan, I am asking you. I am not asking the Super 

Committee. 

Mr. LUNGREN. If the gentleman would yield. 

Mr. CONYERS. Of course, I yield. 

Mr. LUNGREN. We have an obligation to be responsible and to 

stop spending where we are spending 40 cents out of every dollar—— 

Mr. CONYERS. Yes or no? Yes or no? 

Mr. LUNGREN. We need to cut in many, many different areas. 

Mr. CONYERS. Well, of course, I understand why you won’t answer yes or no because you can’t afford, nor can any Member of the 

Congress afford, to go on record saying they are for cutting assistance to poor people, women and children, who are living in poverty 

uncontrovertibly. And I don’t blame you. 

I don’t yield. I would just like to conclude. 

4 

Do you know how many constitutional scholars are telling us 

that we are off the mark? And I will put it in the record, and I 

thank the Chairman for letting me speak this morning. 

Mr. SMITH. Thank you, Mr. Conyers. 

The gentleman from Arizona, the Chairman of the Constitution 

Subcommittee, Mr. Franks, is recognized for an opening statement. 

Mr. FRANKS. Well, thank you, Mr. Chairman. I am going to be 

brief. I am going to be yielding some of my time to Mr. Goodlatte. 

Mr. Chairman, now is the time for Congress to address the Federal deficit in a way that we have thus far not been able to do. The 

American people are awake and they realize the urgency of this 

issue. They understand that the deficit might eventually destroy us 

in a way that no military power on earth has ever been able to do. 

Even the recent retired Chairman of the Joint Chiefs of Staff, Admiral Mullen, has warned, ‘‘Our national debt is the biggest single 

threat to our national security.’’ 

The Federal Government is borrowing over 40 cents on every dollar that it spends. This massive borrowing is causing the Federal 

deficit to grow rapidly as a percentage of America’s economic output. If we continue on our current path, in 10 years 95 percent of 

all Federal revenues will be consumed by payments of interest on 

the national debt and mandatory programs like Social Security, 

Medicare, and Medicaid. This will leave only 5 percent of our annual tax revenue available for funding national defense and other 

essential functions of Government. 

Mr. Chairman, a balanced budget amendment to our Constitution would control government spending, restore capital confidence 

in America’s future in her economy, supercharge entrepreneurship, 

create new taxpayers—that is spelled jobs, Mr. Chairman—increase revenue to Government, drag investment from the four corners of the earth, and in general, turn loose the most productive 

nation on this planet to carry its people, rich and poor alike, to 

their greatest collective productivity and prosperity in history. 

And I am afraid that our President may have a different plan, 

Mr. Chairman, but I hope that we pass this balanced budget 

amendment. 

And I would like now to yield the balance of my time to Mr. 

Goodlatte, the lead sponsor of the balanced budget amendment. 

Mr. GOODLATTE. I thank Chairman Franks for yielding to me, 

and I thank Chairman Smith for holding this hearing and both of 

them for their leadership on this issue. 

And I would say that the fact that there are tough, tough, tough, 

tough decisions to be made by this Congress is exactly why we 

need a balanced budget amendment to the Constitution because it 

will force future Congresses to make those tough decisions. And fiscal responsibility, in my opinion, leads to economic growth and job 

creation, and that is what we are about here today. 

The recently enacted Budget Control Act, which received bipartisan support and was signed into law by President Obama, requires that the House and Senate vote on a balanced budget 

amendment to the Constitution before the end of the year in order 

to address the massive ongoing annual budget deficits and skyrocketing national debt. Because the Congress will have to vote on 

such an important piece of legislation, it is only right that the JudiVerDate Aug 31 2005 12:54 Dec 05, 2011 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6601 H:\WORK\FULL\100411\70574.000 HJUD1 PsN: DOUGA
5 

ciary Committee, the Committee with jurisdiction over constitutional amendments, hold this additional hearing to examine the 

merits of such a proposal. 

The States understand the gravity of this issue and have been 

weighing in for decades. Already 18 State legislatures have passed 

active calls for constitutional conventions to pass a balanced budget 

amendment. Now it is time for Congress to heed the call of the 

States and act ourselves. 

One thing that is certain is that this effort will need to be bipartisan. I am pleased to inform the Committee that one of my bills, 

House joint resolution 2, has the support of 243 bipartisan cosponsors, including 15 Democratic cosponsors. In addition, many other 

Democratic Members have indicated a willingness to support the 

measure if it comes to the floor for a vote. 

While more work needs to be done to garner the 290 votes necessary in the House, this bipartisan effort is promising. House joint 

resolution 2 is the same version of the balanced budget amendment 

that passed the House with 300 votes back in 1995 and fell one 

vote short in the Senate. If this legislation had been passed in 1995 

and ratified by the States, we would not be facing the skyrocketing 

debt we now face. Balancing the budget would have been the norm 

rather than the exception. 

This doesn’t solve the problems. It is not a panacea. But it forces 

Congress and Presidents to deal with this issue today rather than 

pass it on to our children. 

The good news is that the current Congress is again at a crossroads. Our actions now will impact the next generations of Americans, our children and grandchildren. And I look forward to hearing from our expert witnesses today about this historic effort. 

And I yield back. 

Mr. SMITH. Thank you, Mr. Franks. I also want to thank Mr. 

Goodlatte for having introduced this legislation as well. 

Mr. CONYERS. Mr. Chairman, could I ask Mr. Franks to have an 

additional minute so I could ask—— 

Mr. SMITH. Without objection, the gentleman from Arizona is 

granted an additional 1 minute. 

Mr. CONYERS. Would the gentleman yield to me for one question? 

Mr. FRANKS. Certainly. 

Mr. CONYERS. Would the distinguished gentleman from Virginia 

indicate which constitutional amendment he is bringing up since 

we couldn’t find out last night or this morning? Could I be advised 

which one he is using? 

Mr. GOODLATTE. Well, I thank the Ranking Member for yielding. 

But it is not my decision. It is the decision of the leadership in the 

Congress what balanced budget amendment—— 

Mr. CONYERS. You mean the Speaker decides. Well, which one is 

it? Can you tell me even now? 

Mr. GOODLATTE. I think there are lots of discussions going on on 

both sides of the aisle about that. 

Mr. CONYERS. But which amendment is before us right this moment? Can’t you tell that? 

Mr. SMITH. If the gentleman would yield to me for a minute. Today’s hearing is on the general subject of the necessity or lack 

thereof of a balanced budget amendment. It is not on a specific bill. 

6 

Mr. CONYERS. Oh, okay. Look, that is important to know, gentlemen, and thank you for telling me. 

Mr. NADLER. Would the gentleman yield? 

Mr. SMITH. The gentleman from New York, Mr. Nadler, the 

Ranking Member of the Constitution Subcommittee, is recognized. 

Mr. NADLER. Thank you, Mr. Chairman. 

Mr. Chairman, we have all been down this road before. My Republican friends love constitutional amendments. For any complaint, there is a constitutional amendment. It is not, however, a 

free vote. If adopted, a balanced budget amendment, especially the 

ones proposed, would have catastrophic consequences for the Nation, for the economy, and for the future. While it would be nice 

to have some easy way to force a balanced budget, the world 

doesn’t work that way. We know how to balance the budget. We already have done it. We already have the tools we need to do it. In 

the not too distant past, we managed not only to balance the budget but run surpluses and begin paying down the debt. 

Alan Greenspan, in testifying in favor of the Bush tax cuts in 

2001, said if we don’t pass these tax cuts, we will eliminate—we 

will entirely pay off the national debt by 2010 because of the Clinton budgets that he inherited, and that would be bad because the 

Federal Reserve won’t have leverage on Government bonds. And 

that is where we were. 

How did we get from there to here? Because of President Bush 

and a Republican Congress, we managed to turn record surpluses 

into record deficits in record time. How did we do it? Well, first 

there were the huge tax cuts for the very wealthy. Then there were 

the two wars fought off budget. I don’t recall hearing a peep from 

any of my colleagues on the other side who are now born-again fiscal conservatives. In fact, Vice President Cheney said we have 

learned that deficits don’t matter. That summed up the Republican 

attitude during the years of the Bush administration. Having the 

regulators go to sleep while financial manipulators, banks, and 

hedge funds crashed the economy killed off the revenues and we 

still haven’t recovered from that. 

But rather than admit to serious economic mismanagement and 

looking for ways to straighten things out, we get this dusted-off 

quack cure from the past, this coward’s approach. Instead of hard 

work to restore the economy and then balance the budget with appropriate tax fairness for the rich and appropriate cuts to the budget in defense, for example, we get this. If we took the approach of 

balancing the budget properly, as I said a moment ago, some of my 

Republican colleagues might not have to endure another town hall 

meeting where angry constituents want to know why they voted to 

destroy Medicare. 

Strangest of all, some of these balanced budget amendment bills 

call for balancing the budget by 2016, even though the Republican 

budget the House passed recently doesn’t project a balanced budget 

until 2040. 

The amendment that we voted out of Committee would require 

a three-fifths vote by Congress to exceed a balanced budget. That 

should lead to some really history-making horse trading. Can you 

imagine what the hold-outs will get in exchange for passing the 

7 

budget? It will make anything we do now look like child’s play. The 

pork will be incredible. 

Really troubling is the proposal to require a three-fifths vote to 

raise the debt ceiling. Do the sponsors really want to reduce U.S. 

Treasury notes to junk bond status? Do you think anyone will buy 

our paper if this becomes law? 

This amendment also treats military engagements as the only 

true emergencies requiring the budget to be out of balance. That 

shows a poor understanding of history and economics. Herbert Hoover tried that. If in the middle of a recession when tax revenues 

are down and unemployment is up, we begin to slash the budget 

in ways my Republican colleagues are now suggesting, much less 

the far more draconian measures that this amendment would require, we will go from the Great Recession right into another Great 

Depression. It has been tried before, and if we want the Constitution to enshrine Hooverism for all time, we will get what we deserve. 

We should manage the budget the old-fashioned way by making 

hard choices, by promoting growth, by making everyone pay their 

fair share of taxes, including billionaires and oil companies. It isn’t 

fun and it won’t make us a lot of friends, but we have done it before. We can do it again. It does require the courage of our own 

convictions to face the voters with the actual budget that we are 

proposing. 

And finally, what everyone may think of the substance of these 

proposed amendments, it is fundamentally wrong to bind future 

generations and the future Congresses they elect to a particular 

economic doctrine which may be popular today. The Constitution 

should provide procedures for Government and should protect individual rights, but should not lock in policies, especially economic 

policies. Whatever anyone may think of the debt or how to reduce 

it or the proper level of Government expenditures as a percentage 

of GDP, those kinds of policies are to be enacted as legislation 

which can be modified, amended, or repealed by future majorities, 

not enshrined in the Constitution to bind future generations to the 

opinions of this generation. That is fundamentally undemocratic 

and tyrannical. 

With that, I yield back the balance of my time. 

Mr. SMITH. Thank you, Mr. Nadler. 

Our first witness today is Dick Thornburgh. From 1979 to 1987, 

Mr. Thornburgh served as the Governor of Pennsylvania. In addition, he served as Attorney General of the United States under two 

Presidents and as Under Secretary General of the United Nations 

from 1992 to 1993. Governor Thornburgh is currently an attorney 

with K&L Gates. 

Our second witness is Douglas Holtz-Eakin, President of the 

American Action Forum. Dr. Holtz-Eakin has served as the Director of the Congressional Budget Office, Chief Economist for the 

President’s Council of Economic Advisors, and as a commissioner 

on the congressionally chartered Financial Crisis Inquiry Commission. Prior to his public service, he held academic positions at 

Princeton, Columbia, and Syracuse Universities. 

Our third witness is Philip Joyce, a professor of management, finance, and leadership at the University of Maryland School of PubVerDate Aug 31 2005 12:54 Dec 05, 2011 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6601 H:\WORK\FULL\100411\70574.000 HJUD1 PsN: DOUGA
8 

lic Policy. He is an expert in public budgeting and is the author of 

more than 50 publications, including the book ‘‘The Congressional 

Budget Office: Honest Numbers, Power and Policymaking.’’ In addition, Professor Joyce has 12 years of public sector work experience, 

including 5 years each with the Illinois Bureau of the Budget and 

the Congressional Budget Office. 

Our final witness is Matthew Mitchell, a research fellow at the 

Mercatus Center at George Mason University. Dr. Mitchell also 

currently serves on the joint advisory board of economists for the 

Commonwealth of Virginia. His work has been featured in numerous national media outlets, including the New York Times, the 

Wall Street Journal, and the Washington Post. 

We welcome you all. We encourage you to put your entire testimony in the record, and we hope you will be able to make your remarks within the 5-minute limit. 

Governor Thornburgh, we will begin with you. 

TESTIMONY OF HONORABLE RICHARD THORNBURGH, 

K&L GATES 

Mr. THORNBURGH. Mr. Chairman, Ranking Member Conyers, 

Members of the Committee, my advocacy of a balanced budget 

amendment to the United States Constitution goes back over a 30- 

year period, beginning during my two terms as Governor of the 

Commonwealth of Pennsylvania. Thus far, the results have not 

been encouraging, but I am comforted by the observation of President Woodrow Wilson who once said: ‘‘I would rather fail in a cause 

that will some day triumph than triumph in a cause that will some 

day fail.’’ My hopes remain high. Recent near train wrecks in the 

budgeting process have brought this cause to the fore once again, 

and I am privileged to appear before this Committee to try once 

again to make the case for this proposal and urge its enactment. 

From my standpoint and background, I suggest that it is particularly significant to note that all but one of the States have constitutional balanced budget requirements which, coupled with a lineitem veto and separate capital budgeting requirements, requirements which differentiate between investments and current outlays, have been utilized by their Governors and State legislatures 

throughout their histories and they work. 

I know this because of my personal experience in Pennsylvania 

during the 1980’s when we had to cope with serious projected deficits and a national recession which threatened to obstruct our efforts to revitalize and redirect our economy without the expenditure of vast amounts of revenue which we simply did not have. The 

discipline of our constitutional requirement to match revenues and 

expenditures not only forced us to tend both these aspects of our 

budgets but eventually contributed to an economic recovery which 

saw our State produce over 500,000 new jobs and our unemployment rate plummet from one of the 10 highest in the Nation when 

I was elected to one of the 10 lowest when I left office. Disciplined 

cost-cutting measures alone reduced expenditures by over $6 billion 

during my 8 years in office. 

While I champion this cause, I recognize that it is useful, indeed 

necessary, to look at and assess the arguments usually raised 

against a balanced budget amendment to the Federal Constitution. 

9 

First, it will be argued that the amendment would clutter up or 

trivialize our basic document in a way contrary to the intention of 

the Founding Fathers. This is clearly wrong. The Framers of the 

Constitution contemplated that amendments would be necessary to 

keep it abreast of the times. It has, in fact, already been amended 

on 27 occasions. 

Moreover, at the time of the Constitutional Convention, one of 

the major preoccupations was how to liquidate the post-Revolutionary War debts of the States. Certainly it would have been unthinkable to the Framers that the Federal Government itself would 

systematically run at a deficit decade after decade. Indeed, the 

Treasury did not begin to follow such a practice until the mid1930’s. 

Second, critics will argue that the adoption of a balanced budget 

amendment would not solve the deficit problem overnight. This is 

absolutely correct. But it begs the issue. Serious supporters of the 

amendment recognize that a phasing-in period of 5 or even 10 

years would be required to reach an ultimate zero deficit. During 

this interim period, however, budget makers would be constitutionally disciplined to meet declining deficit targets in order to 

reach a final balanced budget by the established deadline. 

As pointed out by former Commerce Secretary Peter G. Peterson, 

a leading spokesman for responsible budgeting, such ‘‘steady 

progress toward eliminating the deficit will maintain investor confidence, keep long-term interest rates headed down, and keep our 

economy growing.’’ 

Third, it will be argued that such an amendment would require 

vast cuts in social services and entitlements or defense expenditures. Not necessarily. True, these programs would have to be paid 

for on a current basis rather than heaped on the backs of the succeeding generations. Certainly difficult choices would have to be 

made about priorities and levels of program funding. But the very 

purpose of the amendment is to discipline the executive and legislative branches actually to debate these choices and not to propose 

or perpetuate vast spending programs without providing the revenues to fund them. The amendment would, in effect, make the 

President and Congress fully accountable for their spending and 

taxing decisions as they should be. 

Fourth, critics will say that a balanced budget amendment would 

prevent our hinder our capacity to respond to national defense or 

economic emergencies. This concern is easy to counter. Clearly any 

sensible amendment proposal would feature a safety valve provision to exempt deficits incurred in responding to such emergencies 

requiring, for example, a three-fifths super majority in both houses 

of Congress. Such action should, of course, be based on a finding 

that such an emergency actually exists. 

Fifth, it will be said that a balanced budget amendment would 

be more loophole than law and might easily be circumvented. The 

experience of the States suggests otherwise. The balanced budget 

requirements now in effect in all but one of the 50 States have 

served them well. 

Moreover, a constitutional line-item veto, similar to that available to 43 Governors, would assure that any specific congressional 

overruns or loophole end runs could be dealt with by the President. 

10 

The public’s outcry, the elective process, and the courts would also 

provide backup restraint to any tendency to simply ignore a constitutional directive. 

In the final analysis, most of the excuses raised for not enacting 

a constitutional mandate to balance the budget rest on a stated or 

implied preference for solving our deficit dilemma through the political process, that is to say, through responsible action by the 

President and Congress. But that has been tried and found wanting again and again and again. 

I pass no judgment on the specific proposals before this Congress 

to effect such an amendment, but surely this country is ready for 

a simple, direct, clear, and supreme directive that its elected officials fulfill their fiscal responsibilities. A constitutional amendment 

is the only instrument that will meet this need effectively. Years 

of experience at the State level argue persuasively in favor of such 

a step. Years of debate have produced no persuasive arguments 

against it. 

And the stakes are high. Perhaps Thomas Jefferson put it best. 

‘‘To preserve our independence, we must not let our rulers load us 

down with perpetual debt.’’ 

That is the aim of a balanced budget amendment. Reform-minded Members of Congress should choose to support such an amendment to our Constitution as a means of resolving future legislative 

crises and ending credit card Government once and for all. 

Such action would, as well, send a powerful message worldwide 

that the United States is willing to take necessary steps to put its 

fiscal house in order and strengthen our credibility in urging others 

to do likewise. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Thornburgh follows:] 

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Mr. SMITH. Thank you, Governor Thornburgh. 

Dr. Holtz-Eakin? 


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TESTIMONY OF DOUGLAS HOLTZ-EAKIN, 

AMERICAN ACTION FORUM 

Mr. HOLTZ-EAKIN. Thank you, Mr. Chairman, Ranking Member 

Conyers, and Members of the Committee. It is a privilege to be 

here today. 

You have my written statement. Let me make five simple points 

about this issue. 

Point number one is that the United States faces an enormous 

debt crisis. And I won’t belabor that. It threatens our economy and 

our legacy to the next generations and it has to be dealt with. 

A second point is that the U.S. Federal budgeting process will be 

radically improved by the adoption of some sort of fiscal rule, a target, whether it be a spending limit or a debt-to-GDP ratio, or something which would impose a coherence on the budget process, force 

the kinds of tradeoffs that have to be made among different elements of the spending and taxes. And those fiscal rules have proven to be valuable in other countries that have faced exactly the 

same kind of growth in debt problems the U.S. has. 

The characteristics of those rules are that they should be large 

enough to be effective. Small rules are not going to help us in this 

situation. They should be easily linked to whatever actions Congress takes on tax and spending policy, and they need to be transparent and well understood by the public so that they can buy into 

their execution. 

Point number three is that the balanced budget amendment is 

exactly such a rule. It is a target for fiscal policy that is linked directly to the actions of the Congress, and it is transparent and easily understood by the public. 

It has one key difference from other fiscal rules, including those 

we have tried in the United States, and that is it precludes a future Congress from reneging on their commitment that it has made 

and that is the dominant characteristic of past fiscal rules, whether 

it is Gramm-Rudman or PAYGO rules or whatever they may be. 

Future Congresses have always found a way to get around them. 

This would impose a level of discipline even higher than those 

would. 

The fourth point is that your typical balanced budget amendment 

includes more than just balancing the budget. Often it will include 

provisions for waivers in the event of military conflict, economic 

distress, or other circumstances. Often it will include provisions for 

limiting the size of the Government because there is nothing inherent about a balanced budget amendment that constrains Government to a size that is not economically damaging. And so in thinking about this, it is important to think about the other characteristics you want to embody in the balanced budget amendment. 

And then the last point I would like to make, before we turn to 

the questions, is that this issue of getting from where we are now, 

a deficit of a trillion and a half, a gross debt-to-GDP ratio of over 

90 percent, which puts us in the historic danger zone for a higher 

probability of sovereign debt crisis, paying a growth penalty of 

probably 1 percentage point per year based on the evidence, getting 

from that to a balanced budget is often thrown up as a hurdle. And 

I think that makes two mistakes. 

17 

Mistake number one is that during the period in which any such 

amendment would be ratified, there would be clear pressure on a 

Congress and Administration to start getting its budget in order so 

that if it were ratified, it would balance upon becoming an element 

of the Constitution. 

And the second thing that would happen during that period is 

that the public would, by definition, have to buy into the idea that 

this is good public policy and it wishes its Government to be constrained in this way. If it does not buy in, it won’t get ratified, and 

there is no rule that will be successful without the support broadly 

of the populace. 

And so I am pleased to have a chance to discuss this issue today 

and I look forward to answering your questions. 

[The prepared statement of Mr. Holtz-Eakin follows:] 

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Mr. SMITH. Thank you, Dr. Holtz-Eakin. 

And Professor Joyce? 

TESTIMONY OF PHILIP G. JOYCE, UNIVERSITY OF MARYLAND 

Mr. JOYCE. Thank you, Chairman Smith, Ranking Member Conyers, Members of the Committee. I appreciate the opportunity to 

testify today. 

I have to make it clear up front that I agree with any of you who 

say and all of my colleagues who say that the Federal debt is 

unsustainable and needs to be reduced. In fact, if the Super Committee decided to go much further than $1.5 trillion, I would cheer. 

I am sympathetic to the frustration that leads people to believe 

that the balanced budget amendment will be the long-awaited silver bullet that leads to fiscally responsible budgeting. I am for fiscally responsible budgeting, but I strongly disagree with the notion 

that amending the Constitution will get us there. 

I want to stress just a few points from my testimony. 

The first one is that evidence accumulated over decades indicates 

that budget process rules are effective at forcing already past policy. They are not effective at enforcing future policymakers to make 

choices that they don’t want to make. The Gramm-Rudman-Hollings legislation in the 1980’s was aborted when the President and 

the Congress appeared to meet the projected deficit targets through 

optimistic forecasts. The Budget Enforcement Act process of the 

1990’s with caps and PAYGO worked as long as there was consensus around reducing the debt. Put simply, there never has been 

a budget rule that the Congress and the President could not figure 

out a way to get around if they wanted to. 

The balanced budget amendment just puts Gramm-Rudman in 

different clothes by enshrining a deficit target in the Constitution. 

Promising balanced budgets later because the Constitution is going 

to make them happen will likely have little positive consequence. 

Second, a balanced budget amendment would not be self-enforcing. Implementing legislation would need to address many technical details. Lots of terms in the amendment are subject to interpretation and re-interpretation, definition, and re-definition. Actually achieving a balanced budget would involve making hard 

choices, the kind that the Super Committee is dealing with now. 

These would mean increasing taxes and reducing spending. Enforcement mechanisms would need to be developed. The inability to 

agree on these policy changes and sanctions is the problem we have 

today. The balanced budget amendment is a distraction from solving that problem. 

Third, analogies between the Federal budget and budgets of families, corporations, and State and local governments in my view are 

misguided. First, there is the very real issue of the different role 

that the Federal Government has to provide for economic stabilization. It is useful to ask what the States would have done if they 

had been left on their own and perhaps even had Federal funding 

reduced during the recent recession. 

Beyond this, however, is the simple fact that none of these entities actually balance their budgets. State and local governments, 

for example, borrow lots of money financed through separate capital budgets. I have worked in State budget offices and I still study 

30 

State budgeting, and I can tell you that States do not balance their 

operating budgets primarily because their constitutions tell them 

to. Budgeting at the State and local level is much more heavily influenced by the effect that irresponsible decisions would have on 

bond ratings and therefore future borrowing costs. 

My final point is that versions of the balanced budget amendment that attempt to limit Federal spending as a percentage of the 

economy are problematic for two reasons. 

First, any future Congress should be able to make the choices 

that it wants to. A spending level such as 18 percent of GDP would 

establish a ceiling that is substantially below the 40-year historical 

average, which is almost 21 percent of GDP, and doesn’t recognize 

the effect that demographics will have on future costs for entitlement programs. Making it substantially more difficult to raise 

taxes takes a very important tool for balancing the budget off of the 

table when we need all the tools that we could possibly get at this 

point given the magnitude of the problem. 

Second, even attempts to live within the spending limit would invite in my view a number of strategies or gimmicks to get around 

that limitation. I listed a number of these in my testimony, but 

perhaps the clearest one is that a spending limit would increase 

the incentives to provide expensive and inefficient benefits through 

the tax code. That is, we would see an increase in tax earmarks 

and tax expenditures. 

To conclude then a constitutional amendment will neither address the current debt problem nor keep the problem from returning. In 1992 testimony before the House Budget Committee, then 

CBO Director Robert Reischauer argued that it was a ‘‘cruel hoax 

to suggest to the American public that one more procedural promise in the form of a constitutional amendment is going to get the 

job done.’’ I agree. History demonstrates that if Congress and the 

President want to get around any rules, even constitutional ones, 

they will find a way to do so. There are much more direct ways for 

elected officials to show commitment to deficit reduction such as returning to the kind of actions taken in the 1990’s when two President, George H.W. Bush and Bill Clinton, worked with the Congress to enact spending cuts, tax increases, and enforcement mechanisms. Congress already has the tools. It just needs to use them. 

Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Joyce follows:] 

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Mr. SMITH. Thank you, Professor Joyce. 

Dr. Mitchell? 


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TESTIMONY OF MATTHEW MITCHELL, MERCATUS CENTER 

Mr. MITCHELL. Thank you very much, Chairman Smith, Ranking 

Member Conyers, and fellow Members of the Committee. It is an 

honor to address you. 

On its current course, U.S. fiscal policy poses a grave threat to 

our prosperity. Theory suggests that an important source of the 

problem is the Government’s ability to purchase services for current voters without going to the trouble of actually taxing them. A 

balanced budget requirement, by internalizing both the costs and 

benefits of Government services, would therefore seem to be a natural solution. 

In today’s testimony, I summarize the scope of the fiscal problem 

and then review State-level evidence to consider the ways that a 

Federal balanced budget amendment might address it. 

CBO projects that, absent policy change, the Nation’s public debt 

will exceed 90 percent of GDP within 7 years. If we could please 

bring up figure 1, please. 

The 90 percent figure is important. It is at that point, according 

to economists Reinhart and Rogoff, that debt begins to hamper economic growth. Using data from 44 countries spanning 200 years, 

they find that when debt reaches 90 percent of GDP, growth slows 

by 1 percentage point and may even be cut in half. 

This may not sound like much, but to put these numbers in perspective, consider this figure. What would have happened if in 1975 

the country had accumulated the sort of debt that we are about to 

accumulate and growth had slowed by 1 percentage point? This is 

shown by the middle graph. Today’s national income would be 

about 30 percent smaller than it actually is. And what would happen if growth had been cut in half? Well, then today’s income 

would be about 45 percent smaller than it actually is. 

Now, look at the blip in the top right of the graph. That is the 

Great Recession that began in 2008. Note that this most calamitous economic contraction in decades pales in comparison to the 

lost income associated with persistently anemic economic growth as 

a result of too much debt. 

These crippling debt projections are the result of two distinct 

problems. First is the long-running systematic bias toward deficit 

spending. Depending on your measure of the deficit, the Federal 

Government has spent most of the last 4 decades between 66 and 

90 percent of the time in fiscal deficit. The bias toward deficit 

spending is systematic in that it is evident in both good times and 

bad times and in both Democratic and Republican administrations. 

The second problem is entitlement spending. Absent policy 

change, spending on the autopilot programs, particularly Medicare, 

will consume an ever larger share of our Nation’s output. The end 

result is that total Federal spending as a share of GDP will be 

twice its historical average within just a few decades. 

Ultimately the problem is one of political incentives. We have 

known about these issues for decades. But politicians in neither 

party have an incentive to fix them. This is because the costs of 

the status quo are borne by those too young to vote, while the costs 

of reform would be borne by today’s median voter. 

44 

The solution is to make the generation that benefits from Government services pay for the costs of producing them. This is what 

a balanced budget amendment would do. 

Fortunately, Federal policymakers are not flying blind. There is 

much to learn from the States. Every State but Vermont has a balanced budget requirement, but the stringency of these requirements varies. For example, State balanced budget requirements 

can be weaker if they only apply to the proposed budget, if they 

only apply to estimates of the enacted budget, if they permit the 

legislature to carry over a deficit from 1 year to the next, or if the 

legislatively appointed supreme court is the ultimate enforcer rather than an independently elected judiciary. 

A number of studies have found that the more strict the balanced 

budget requirement at the State level, the better the fiscal outcome. For example, studies find that States with strict balanced 

budget requirements spend about $190 less per capita. If the difference between a weak and a strong balanced budget requirement 

saves State taxpayers $200, I would imagine that moving from a 

nonexistent to an existent balanced budget requirement would save 

the Federal taxpayer even more. 

Furthermore, States with strict balanced budget requirements 

also have larger rainy day funds. They have larger surpluses. They 

tend to balance their books through spending reductions rather 

than revenue increases and they tend not to suffer from a political 

business cycle in which spending grows just prior to an election 

only to be cut back precipitously afterwards. 

There are, of course, some objections. The strongest objection to 

a balanced budget requirement in my view may be that it would 

force governments to cut back on spending at the worst time. 

Though this is a fair critique, it is easily addressed. One answer 

is a rainy day fund. Another is to require a balance over some period longer than a year. 

Another objection may be in the transition. The Government currently borrows 45 cents for every dollar it spends. So if we were 

to achieve balance tomorrow, it could be pretty painful. But this too 

can be easily addressed in the language of the amendment by giving Congress a few years to come into compliance. 

So why do we look to the States? Well, in almost every conceivable measure, the U.S. States are more fiscally fit than the Federal 

Government. On a per capita basis, they spend about half of what 

the Federal Government spends. Their debt loads are one-seventh 

of the Federal Government. Their unfunded liabilities are one-third 

that of the Federal Government’s, and States manage to balance 

their operating expenses, some gimmickry aside, on an annual or 

biannual basis while the Federal Government spends most of its 

time out of balance. Much of the difference owes to the simple fact 

that each generation of State taxpayers must pay for the services 

that it receives. As long as we can foist the Federal bill on to the 

next generation, I believe we will continue to spend beyond our 

means. 

Thank you for your time, and I look forward to questions. 

[The prepared statement of Mr. Mitchell follows:] 

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Mr. SMITH. Thank you, Dr. Mitchell. 

Let me recognize myself for a couple of questions and, on the way 

there, thank all the panelists for dispelling a couple of myths about 

the balanced budget amendment. I sometimes hear that if we were 

to pass a balanced budget amendment, suddenly next year we are 

going to have to freeze all spending. That is wrong on two counts. 

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Thornburgh pointed out. And two, we are not going to have to 

freeze spending to get to a balanced budget. In fact, spending can 

actually increase but not just increase as fast as it has in the past. 

So to me the balanced budget amendment is probably the only 

practical solution to the almost endless deficits and the accruing 

debt that we face every day. 

Somebody said that the balanced budget amendment is the worst 

alternative except for all the others. And that leads to my question 

that I would like to ask Governor Thornburgh and Dr. Holtz-Eakin 

and Dr. Mitchell, and that is, is there any other better, more realistic alternative to a balanced budget amendment that would impose the necessary discipline so that we would not continue to increase our deficit and debt every year? And, Governor Thornburgh, 

could we start with you? And if not, why not? 

Mr. THORNBURGH. Not in my view or based on my experience, 

Mr. Chairman. I don’t think that we are very good at self-discipline, those of us in public life. We want to do good. We want to 

help our constituents. We want to devise and execute grand and 

glorious projects. That is our natural instinct. And it is a good one 

when it is disciplined, and the only way to bring that discipline is 

by constitutional directive. All the other palliatives that have been 

tried fall to the salutary rule that one Congress cannot bind the actions of a following Congress. A constitutional amendment, however, would put that on a permanent basis. 

Mr. SMITH. A good point. Thank you, Governor Thornburgh. 

Dr. Holtz-Eakin? 

Mr. HOLTZ-EAKIN. I agree. While imperfect, it is the best of the 

alternatives. I mean, as I said in my testimony, the Federal Government doesn’t have fiscal policy. It has fiscal outcomes that are 

the result of disjointed actions by Houses, Senates, and Administrations, and the track record of that is quite bad. We need to impose on that process a genuine fiscal rule, something which drives 

tradeoffs and brings some coherence to the outcomes. 

If you look at those rules, first of all, I think they have to be constitutional to be effective. I think Professor Joyce—you know, his 

testimony is quite eloquent in the failure and ability of Congresses 

to renege on a regular basis. And if you look at alternatives to the 

balanced budget amendments, they are either too complicated for 

the public to understand and thus support or too small to be effective. So it is not perfect. There are issues that will arise in the design, but it is the best of the alternatives. 

Mr. SMITH. Okay, thank you. 

And Dr. Mitchell? 

Mr. MITCHELL. Well, there are actually a number of institutions 

that have been shown at both the State level and the international 

level to improve fiscal outcomes. So I actually wouldn’t say that 

this is the silver bullet or that it is the only option. There are 

things like line-item vetoes, which fellow members on the panel 

have actually studied. There are special kinds of vetoes, item-reduction vetoes. There are reforms in the committee system. Of 

course, the committee system of Congress has not always been the 

way it is structured the way it is now. 

Nevertheless, I do view that given all of the options, this probably is the strongest. And one of the reasons is one of the ones that 

55 

I think one of the Members of the Committee brought up which is 

that we don’t want to enshrine today’s current ideological preferences in the Constitution. And so one of the nice things about a 

balanced budget amendment is that it would not do that. And the 

reason it wouldn’t is it doesn’t say how you balance the budget. It 

doesn’t say that you have to raise taxes. It doesn’t say you have 

to cut spending. It just says that you have to balance the budget 

and you have to do it by the old-fashioned way of prioritizing. Not 

everything that Government does can be priority number one. And 

so just the simple mechanics of balancing a budget require you to 

have to figure out what it is important to spend on and what it is 

not important to spend on. 

Mr. SMITH. Thank you, Dr. Mitchell. 

The gentleman from Michigan, Mr. Conyers, the Ranking Member of the Committee. 

Mr. CONYERS. Thank you, Chairman Smith. 

Since we overlooked Professor Joyce, could you help your fellow 

witnesses in terms of the question that was posed by Chairman 

Smith? 

Mr. JOYCE. Thank you, Mr. Conyers. 

What I would say is that the fact that—and I think we all do 

agree that most of, although I would not say all of, the prior things 

that have been tried have not worked, it does not necessarily follow 

that that means that a balanced budget amendment to the Constitution will work. And I think that is where I sort of separate myself from my colleagues. 

I actually think we have a good example of something that 

worked, which is in the 1990’s, we reduced the deficit the old-fashioned way. The old-fashioned way is that you cut spending and you 

raise taxes and then you try to enforce those actions. And that 

worked. It worked until the consensus around that broke down. 

Why did the consensus around that break down? Because the budget went into surplus. Surpluses sort of killed that process. 

But my general point that I made in my testimony is that I don’t 

care if it is a constitutional rule or another kind of rule. It is only 

as good as long as the consensus remains to stick to the rule. 

Mr. CONYERS. Thank you very much. 

It is a pleasure to have you here, General Thornburgh, as always. 

Is there any particular constitutional amendment that you support? 

Mr. THORNBURGH. Of the ones that have been introduced or—— 

Mr. CONYERS. And the ones you would like to see introduced. 

Mr. THORNBURGH. I don’t want to give an off-the-cuff judgment 

on the particular type of language. 

Mr. CONYERS. Well, it isn’t off-the-cuff. You have been here before on the very same subject. 

Mr. THORNBURGH. I am talking about specifics. 

Mr. CONYERS. Yes, specific. 

Mr. THORNBURGH. My specific is that the norm be established 

that expenditures match revenues. 

Mr. CONYERS. But what bill? This is great general conversation, 

but somewhere along the line, we are going to have to land on 

56 

something. And what would you like us—prefer that the Judiciary 

Committee land on? 

Mr. THORNBURGH. My own preference would be one as simple as 

possible, just as I stated, that in every year—— 

Mr. CONYERS. But it isn’t in existence yet. 

Mr. THORNBURGH. No. I am not a member of this body—— 

Mr. CONYERS. No. 

Mr. THORNBURGH [continuing]. For its own good. 

Mr. CONYERS. But you advise us. 

Mr. THORNBURGH. Yes. 

Mr. CONYERS. That is why we keep bringing you forward here all 

the time. 

Mr. THORNBURGH. That is what I am advising. 

Mr. CONYERS. Well, you are advising that we do a simple constitutional amendment, none of which meet that degree of simplicity that you would advocate. 

Mr. THORNBURGH. You asked my personal preference, and that 

would be it. Yes, sir. 

Mr. CONYERS. All right. Well, could I draft one for you and send 

it back for your approval or criticism? 

Mr. THORNBURGH. If you want me to draft one for you, I will do 

that. But I didn’t come here to discuss drafting techniques. 

Mr. CONYERS. Okay. Then I want you to draft one. Could I invite 

you to draft one? 

Mr. THORNBURGH. Making a balanced budget the norm rather 

than an occasional exception. 

Mr. CONYERS. All right. Will you accept my invitation? 

Mr. THORNBURGH. Sure. 

Mr. CONYERS. Okay. Thank you. 

Now, let me turn to the doctor here. Which amendment do you 

favor? 

Mr. HOLTZ-EAKIN. I have not studied the—— 

Mr. CONYERS. You don’t know either. Okay. Will you find out and 

get back to me? 

Mr. HOLTZ-EAKIN. Absolutely. 

Mr. CONYERS. All right. Thank you. 

And now, Dr. Mitchell, I appreciate your observation that this is 

not the only choice. And I would like to ask you where do you think 

we ought to end up in this process. 

Mr. MITCHELL. Well, I guess what I would say is that there are 

a number of characteristics of the balanced budget amendment 

that make it better. So, for example, I would like to see one that 

was as comprehensive as possible, addressed as much of the budget 

as possible. I would like to see one that was balanced over the business cycle so that you can deal with what I think is—and Professor 

Joyce brought this up—one of the strongest challenges to a balanced budget amendment, which is that it would be pro-cyclical. 

But if you had one that was balanced over the business cycle or 

that had a rainy day fund, then you could, in my view, largely take 

care of that problem. And then finally, one that did not require a 

balance tomorrow but that gave Congress some time to come into 

compliance. 

Mr. CONYERS. Would you help me and General Thornburgh by 

drafting one that follows along those lines? 

57 

Mr. MITCHELL. I would be happy to answer any, yes, specific 

questions or—— 

Mr. CONYERS. No. I am talking about drafting one. 

Mr. MITCHELL [continuing]. About specific language. You know, 

I don’t write—— 

Mr. CONYERS. You don’t draft. You don’t do drafting. 

Mr. MITCHELL. No. 

Mr. CONYERS. Okay, all right. 

Thank you, Mr. Chairman. 

Mr. GOODLATTE [presiding]. I thank the gentleman. 

Professor Joyce, in your written testimony, you argue that all we 

need to solve our current problem is, quote, to take timely action 

to reduce the deficit, but all previous actions taken to reduce the 

deficit have been short-lived. If you don’t support a balanced budget amendment, can you name any fiscal rule to balance the budget 

that you support and which has not already been tried since every 

other rule tried so far hasn’t worked over the long term since in 

the last 60 years we balanced the budget just six times? 

Mr. JOYCE. I think you could create a rule that said that you 

were trying to put the debt on a glide path to a certain percentage 

of GDP and if the majority of the Congress agreed to that and it 

became law, that could be your guiding principle. 

My point is not that rules are bad. I agree. I think one of the 

problems that we had in the 2000’s is that the consensus around 

any kind of a norm for fiscal responsibility broke down. My point 

is that any rule that you have is only as good as the willingness 

of the current Congress and the President to abide by—— 

Mr. GOODLATTE. Well, that is my point too. If in 60 years we 

have only balanced the budget six times and we have had lots of 

rules—we have statutes that say the Congress must balance the 

budget. We waived those. We have the Gramm-Rudman Deficit Reduction Act. Every year we have 10-year budgeting, and the Republican Study Committee this year offered a budget that balances in 

9 years. It got about 120 Members of the House, including myself, 

to vote for it. But it does not have the force of a constitutional 

amendment which cannot be waived by Congresses. 

Dr. Eakin, do you want to respond to that too? 

Mr. HOLTZ-EAKIN. I, as I mentioned in my opening remarks, 

think that the history of Congress reneging on commitments to 

bringing the budget into alignment is a real indictment of all other 

approaches and that you need something stronger to be effective. 

I guess with regard to the specifics of picking a debt-to-GDP ratio 

and having Congress aim for that, that is an economist’s dream, 

and I am thrilled at the prospect. But I don’t think you can sell 

that to the American public. It is too complicated. The steps between what Congress votes on and does and the debt-to-GDP ratio 

are just too distant, and I think that for that reason it would fail 

to have enduring support. 

Mr. GOODLATTE. And can always be waived. 

Mr. HOLTZ-EAKIN. And it can always be waived. So you need 

something that can’t be waived and it has got to be simple and 

transparent for the public. 

Mr. GOODLATTE. Governor Thornburgh, as a former Governor of 

a State with a balanced budget requirement, what lessons could 

58 

the Federal Government learn about Pennsylvania’s experience 

with a balanced budget requirement? 

Mr. THORNBURGH. Let me say I am somewhat puzzled by the description of the proposal to amend the Federal Constitution to provide for a balanced budget, describing it as useless if not pernicious. I wonder how many Members who hold to that view would 

be willing to go back and tell the current occupants of their State 

how is it that they ought to repeal the balanced budget requirements currently in effect in their States. I suspect very few. And 

my argument this morning is based on experience as a Governor 

of my own State and working with other Governors to urge that 

that module be replicated at the Federal level. It does provide discipline and it doesn’t lend itself to end-arounds or gimmicks to 

avoid it. 

One of the key things—and I mentioned this briefly, and I don’t 

want to dwell on it necessarily—is the separation of capital expenditures into a separate capital budget. A dollar spent on welfare is 

not the same as a dollar invested in a new highway or bridge, and 

State budgets all take that into account. The Federal Government 

does not, and I think it is the poorer for it. And I think to adopt 

a separate capital budget procedure would clarify a lot of the problems about where cuts are to be made or where expenditures can 

be justified. So I would urge that that, in addition to what has been 

mentioned as a line-item veto authority in the President, capable 

of being overridden, of course, be considered along with—— 

Mr. GOODLATTE. My time is running short. I wanted to ask Dr. 

Mitchell. The Federal budget, as I noted, has been balanced only 

six times since 1960. That is 50 years, not 60 years. Even under 

Keynesian economic theories, do these annual budget deficits make 

sense? 

Mr. MITCHELL. No, they don’t. If you look at what Keynes said 

and what Keynes’ followers say—there is a great post, by the way, 

by Paul Krugman. Look up ‘‘hard Keynesian.’’ There are two goals. 

One is you run a deficit when things are bad, and two, you run a 

surplus when things are good to try to pay off the deficit. 

Now, there is an enormous amount of debate among academic 

economists about Keynesian economics, but let’s just put that all 

aside and assume that Keynesian economics is right. If that is the 

case, we have spent most of the last several decades, the last 4 decades—we spent about 80 percent of the time in growth. So we 

would expect for the vast majority of that—if we were actually to 

implement a Keynesian policy, we would expect the Federal Government to have run surpluses for most of that time. Instead, as 

I mentioned, we have run systematic deficits. This isn’t just bad by 

market-oriented economic policy. This is bad by Keynesian economic policy. It completely undermines the Keynesian goal. 

So in my view, we are not really achieving the goals either of 

market-oriented policy or Keynesian policy because of this systematic bias toward deficit spending. 

Mr. GOODLATTE. Thank you. 

The Chair recognizes the gentleman from New York, Mr. Nadler, 

for 5 minutes. 

Mr. NADLER. Thank you. 

59 

Let me begin by clarifying the record. Professor Joyce said that 

the rules worked until the consensus broke down. Well, we had 

PAYGO rules in the 1990’s. They did work. Consensus didn’t break 

down. We elected George Bush and a Republican Congress. They 

repealed the rules, passed huge tax increases, and engaged in two 

unfunded wars—passed huge tax cuts, engaged in two unfunded 

wars, eliminated the surpluses, and exploded the deficits. If we restored PAYGO rules intelligently and started behaving the way we 

did in the 1990’s, we may have a different situation. 

Governor, you did mention the capital budget. If we pass any of 

the balanced budget amendments that have been introduced, they 

don’t recognize capital budgets. They don’t recognize any kind of 

entities to issue bonds whatsoever. They would require that the 

Federal Government always run a surplus, which means you would 

never borrow money for any purpose whatsoever. Now, if a family 

did that, they couldn’t afford the house or the car. No corporation 

would run that way. If a State did that, you would never build anything. Does that make any sense to you? 

Mr. THORNBURGH. No. My suggestion that separate capital budgeting be provided—— 

Mr. NADLER. I heard that. So in other words—— 

Mr. THORNBURGH. Representative Conyers—— 

Mr. NADLER. In other words, the balanced budget amendment— 

your testimony is that a balanced budget amendment without providing for borrowing under a capital budget is economically wrong. 

Mr. THORNBURGH. I don’t think it is as sound as it might be. I 

am just taking up Mr. Conyers on his—— 

Mr. NADLER. I didn’t ask if it is as sound as it might be. Does 

it make sense economically to pass a balanced budget amendment 

without a capital budget, which means we can never borrow money 

under any circumstances for any purpose without a three-fifths 

vote in Congress? 

Mr. THORNBURGH. I think it would be wiser to include a capital 

budgeting provision. 

Mr. NADLER. But we have to vote on the—we have never been 

able to get the supporters of a balanced budget amendment to 

make the distinction between a capital budget and an operating 

budget or an expense budget and exclude the capital budget from 

that. They always come in with one unified budget and say it has 

got to be balanced every single year, which means we can never 

borrow money. That is what the amendment requires. Would you 

support that if that is the way it is? 

Mr. THORNBURGH. I have already stated that I feel a separate 

capital budget is wise. 

Mr. NADLER. Thank you. Thank you very much. I don’t want to 

be so short, but I have a bunch of questions to ask of different witnesses. 

Now, also still Governor Thornburgh, the balanced budget 

amendments before us require super majority votes, three-fifths or 

two-thirds, to increase taxes, to raise the debt ceiling, to exceed 

spending as a percentage of GDP. Those are ideological choices 

which may make sense conceivably in one set of circumstances but 

not in another. Do you think such provisions, in addition to the requirements for a balanced budget, should be in the Constitution? 

60 

Mr. THORNBURGH. No. 

Mr. NADLER. Thank you. 

Third, and again getting back to what Dr. Mitchell said, it is true 

Keynesian economics basically says that budgets ought to be balanced over time. You ought to run surpluses in good times, deficits 

in bad times in order to prime the pump, not annually as required 

by this amendment. One of my problems with this, Dr. Mitchell, is 

that requiring an annual balanced budget is an ideological choice 

as opposed to a balanced budget over the business cycle or whatever, and we shouldn’t put ideological choices into the Constitution. 

It has been said that the purpose of this amendment is to bind future Congresses. It is another way of saying that we are going to 

make our judgments or the judgments of the voters now bind the 

judgments of the voters 50 years from now. Is that right? 

Mr. MITCHELL. Well, I would say the problem is that right now 

current policy binds the choices of future generations and future 

taxpayers. 

Mr. NADLER. Yes, but how do you take into account—— 

Mr. MITCHELL. Absent change—— 

Mr. NADLER. I heard what you said before. You made that point. 

But on that point, you said that we are binding future taxpayers 

to pay the debts incurred by this generation. True. But future taxpayers get the benefits of the investments made by this generation 

in roads, bridges, infrastructure, et cetera. A balanced budget 

amendment says you can’t make those investments unless you can 

pay for it out of current revenues. You can’t borrow money. Does 

that make sense? 

Mr. MITCHELL. I think it would be the case that future generations would be benefitting from investments if in fact the 45 cents 

out of every dollar that we borrow right now goes toward investments. I think that is definitely not true. Much of what my daughter’s generation will pay for is my consumption. 

Mr. NADLER. Should we preclude those investments by a balanced budget amendment that says you can’t borrow money for any 

purposes? 

Mr. MITCHELL. Yes. 

Mr. NADLER. We should preclude any investment. 

Mr. MITCHELL. And here is the reason why. I would be more concerned about this capital/noncapital distinction if it were the case 

that we were starting from scratch and we were having to build 

every single road right from scratch. But we don’t have to do that. 

Right now, all we need to do is to replace investments as they depreciate. That happens on a—— 

Mr. NADLER. Wait a minute. You are saying that this country 

needs no new investments. All we need is to replace the current 

roads? 

Mr. MITCHELL. No. I said—— 

Mr. NADLER. We don’t need new investments in high-speed rail 

or in Internet or whatever the next scientific breakthrough is. We 

can compete with the Chinese and everybody else based only on replacing our depreciating existing assets? 

Mr. MITCHELL. I think you might have misunderstood me. No. I 

was just—— 

Mr. NADLER. I hope I misunderstood you. 

61 

Mr. MITCHELL. I am sorry? 

Mr. NADLER. I said I hope I misunderstood you. 

Mr. MITCHELL. What I was saying is all we need to do is maintain the investments. And by the way, of course, investments are 

something that can happen at any level of government. Economic 

theory says that it should be a public good. If it meets the characteristics of a public good, it is not excludable, but most importantly, 

it should be provided at the level of government where it makes 

the most sense. It is very hard to make the case from much of what 

people call investments that they actually are national public investments. 

Mr. NADLER. Let me ask one last question. 

Mr. GOODLATTE. The time of the gentleman has expired. Without 

objection, I yield the gentleman an additional minute if he will first 

yield to me for a question of him. 

Mr. NADLER. I will first yield, but that is not on my minute. Is 

it? 

Mr. GOODLATTE. That is on your minute. 

Mr. NADLER. I will yield. 

Mr. GOODLATTE. It will be a quick question. If you are saying 

that the Congress and, by the way, 38 State legislatures, because 

that is what it takes to amend the Constitution, shouldn’t bind future Congresses, are you arguing that we shouldn’t have a written 

Constitution? 

Mr. NADLER. No. I am arguing, as I said in my opening statement, that a written Constitution should provide procedures for decision-making, procedures for governance, and protection of individual rights. A written Constitution should not enact policies 

which the next generation might differ from this generation. It may 

be the opinion of the majority of this generation—I hope it is not— 

but it may be the opinion of the majority of this generation that 

we shouldn’t ever spend more than 18 percent of GDP on Federal 

expenditures. That may not be the judgment of some future generation, and we have no right to bind them on those kinds of policy 

questions. Why 18 percent? Maybe it should be 22 percent or 19. 

That is a policy question. 

Sorry. Now can I ask Governor Thornburgh my last question if 

I can now remember what it was? Oh, yes. 

My last question is, Governor, you have stated that you wouldn’t 

support or you don’t think it is advisable I think is what you said 

or it is not a good idea to have specific limits on spending limits 

and on tax increases in a constitutional amendment. If they were 

in such a constitutional amendment, enshrining a policy preference, for example, for spending cuts over tax increases, which is 

a policy preference, and people agree or disagree and future generations may change their mind, that would limit the States. 

And my real question is if you as Governor had a State constitution that said you could never borrow money, you couldn’t have a 

debt-issuing agency, housing finance agency, or road—State dormitory authority or whatever, and you couldn’t have a capital 

budget, you could only operate by spending in this year what comes 

in in tax revenues this year, you could only make investments that 

way, and there is no Federal aid, could you have run a State that 

way? 

62 

Mr. THORNBURGH. I wouldn’t want to try. 

Mr. NADLER. Thank you. 

Mr. GOODLATTE. The gentleman from Iowa, Mr. King, is recognized for 5 minutes. 

Mr. KING. Thank you, Mr. Chairman. I want to thank all the witnesses for your testimony. 

Listening to this discussion that we have here, it occurs to me 

that I have a little granddaughter that just turned a year old the 

other day and she was born into this world with $44,000 worth of 

debt, her share of the national debt. It will be $88,000 for her when 

she is in fifth grade, just our budget window, birth to 10 years 

down the road. I have sat in this Congress and listened to the lament about people graduating from college with a degree and an 

opportunity to engage in this free market economy with a student 

loan of perhaps $40,000 as opposed to their share of the national 

debt that is greater on the day that a baby is born than it is—that 

baby that is born on the day of the graduation has more debt than 

the student with a degree. 

We have got our priorities in the wrong place here, and these 

young people don’t have a choice. And maybe we are investing in 

some of the infrastructure that is good and right for them, but that 

offsets the burden of the debt in a negative way in my view. 

I just look back at where we sit today, and I think I would direct 

my first question to Mr. Mitchell, but it could go to anybody, and 

it is this. As I roll this thing back and I look at American history, 

there was a time in American history when you had to be a male 

property owner in order to vote. The reason for that was because 

they wanted the people that voted that set the public policy, that 

decided on the taxes and the spending to have some skin in the 

game. 

Now we have data out there that shows that 47 percent of American households don’t pay taxes, 51 percent of American wage earners don’t have an income tax liability, and it is pretty clear that 

there are a lot of people that aren’t in the workforce at all. In fact, 

of our unemployment numbers that run in the 13 million or 14 million category, when you go to the Department of Labor statistics 

and look at that data, you can add up those that are simply not 

in the workforce, the different age groups but of working age, add 

that number to the number of those who are on unemployment, 

and you come up with a number that was just a few months ago 

80 million Americans. Just as of less than a month ago, that number went over 100 million Americans that aren’t working. Now I 

don’t think they are paying taxes, but many of them are voting, 

and when they vote, they vote for more Government benefits because that is what comes into their mailbox or into their debit card. 

Mr. CONYERS. Could I ask the distinguished gentleman a question? 

Mr. KING. I think I have set the stage for the question just fine, 

Mr. Ranking Member, who has never done this in his entire career. 

So I would direct my question then to Mr. Mitchell and ask do 

you believe that a balanced budget amendment is a means by 

which it can offset the disadvantage that the workers, the taxpayers, those who actually fund this Government, have? Does a 

63 

balanced budget help set some of that back in order that was 

sought to be put in order when it was property owners that voted? 

Mr. MITCHELL. Yes. I mean, the basic problem here is one of 

externalities. So this is a problem that is familiar to environmental 

economists. If a factory is allowed to—in the process of making a 

product for consumers is allowed to bilge smoke into the air, that 

is an externality, and they will make too much of the product unless it is internalized. 

So here what is happening is that this current generation is allowed to externalize the costs of Government on to the next generation. The median voter, as I said before—the costs of reform, the 

costs of avoiding this kind of economic contraction that we are staring at—those are going to be borne by people like me, the median 

voter. But the costs of the status quo are going to be borne by my 

daughter. She cannot vote. And until we can internalize that externality, I think we are going to continue to make the wrong choice 

because none of you have the incentive to make the right choice. 

It is not your fault. You are all good people. You are servants of 

the public and you are listening to what your constituents and your 

median voters are saying. And the incentives that they offer you 

are not right. 

Mr. KING. That is a very cerebral answer, and I agree with it. 

I would just take us to another step along this way, and that 

would be—remember now, this is not a proposal. This is an historical observation of property owners only voting. What if that were 

transferred into a society like today and it were taxpayers that 

were voting? What do you expect, Mr. Mitchell, would be the result 

of the public policy that would emanate from such a thing? 

Mr. MITCHELL. Well, I think that when more people had skin in 

the game and when people have to pay for the services that they 

consume, they tend to consume fewer services. 

Mr. KING. And then I will take you to another step of this, and 

that is something that I have been for, the national sales tax, for 

a long time because everybody becomes a taxpayer. And it is another means to get everybody with skin in the game and every little boy that grows up in America would have to put a couple dimes 

up on the counter to buy their Skittles or every little girl that 

bought her Barbie Doll clothes would have to do the same. Have 

you contemplated what that might do to the body politic here and 

the American culture and what the results might be if everybody 

were paying taxes on a national sales tax? 

Mr. MITCHELL. I mean, I would say it is sort of the same thing 

is that again when everybody pays, I think when you internalize 

both the costs and the benefits, you would expect people to consume less. There would probably be smaller Government. 

I would add a note of caution on something like a national sales 

tax. In my view, if step one isn’t repealed, the Sixteenth Amendment, you are likely to get two taxes. 

Mr. KING. And I reclaim my time, and I am thanking the gentleman for his comment and adding my comment to this, that I believe the momentum to repeal the Sixteenth Amendment would 

come directly out of the passage of the fair tax. I don’t think that 

people would ever re-establish an IRS. 

Thanks very much. I yield back the balance of my time. 

64 

Mr. CONYERS. Mr. Chairman, could I ask an additional minute 

for my dear friend, Mr. King? 

Mr. GOODLATTE. Without objection, the gentleman from Iowa is 

recognized for an additional minute. 

Mr. CONYERS. Could I just ask the previous speaker as a successful businessman himself, did he ever—— 

Mr. KING. Would the gentleman from Michigan care that I would 

be happy to yield to the gentleman from Michigan? 

Mr. CONYERS. Yes, I would care. I appreciate it. 

Mr. KING. I would yield to the gentleman from Michigan even 

without a request. 

Mr. CONYERS. Did you ever have to borrow money as a successful 

businessman yourself? 

Mr. KING. Is that directed to me? And I would reclaim my time. 

I would say certainly, yes, and I had to pay it back with interest, 

22 percent at one point in my life. Should we open up that can of 

worms? 

Mr. CONYERS. Well, it is not a can of worms. It is just real life. 

Governments have to do that too, Mr. King. 

Mr. KING. I think the point that was made that is most significant with regard to the witness’ testimony was that Governor 

Thornburgh doesn’t believe that many States would want to repeal 

our balanced budget amendment requirement. I know of no State 

that has done so and I know of no State that has initiated that. 

I think that tells you they like having the comfort of having to live 

within a balanced budget. I would like to see this country have the 

comfort of living within a balanced budget. 

Mr. CONYERS. Sure. It is okay for you to borrow, but it is not 

okay for Governors to borrow. 

Mr. KING. It doesn’t make me a hypocrite. It makes me a businessman, and the United States of America prints the money, sets 

the policy for the country, and we will be in perpetual debt, and 

we will be Greece if we don’t get this under control. This Congress 

does not have the will to do so. We need to ask the American people to impose that upon us, and I will be grateful for the day that 

comes so we can see it become—— 

Mr. CONYERS. Look, if you would impose it on little kids, I know 

you would impose it on the Government. 

Mr. KING. I would recognize that the time has expired, and I will 

take care of my little kids and I hope you take care of yours too, 

Mr. Conyers. I yield back. 

Mr. GOODLATTE. The gentleman from Virginia, Mr. Scott, is recognized for 5 minutes. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Mr. Chairman, there is a serious question as to whether this legislation will help or hurt actually balancing the budget. At some 

point, we have got to stop talking about process and actually get 

to balancing the budget. But unfortunately many people have run 

on platforms that violate fundamental principles of arithmetic. 

They are promising all these tax cuts and not sufficient spending 

cuts to come anywhere close. 

Now, my suggestion has been that we let all the Bush era tax 

cuts expire. That will give us as much deficit reduction as anything 

on the table. I recognize that is unpopular, but when we start cutVerDate Aug 31 2005 12:54 Dec 05, 2011 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6601 H:\WORK\FULL\100411\70574.000 HJUD1 PsN: DOUGA
65 

ting Social Security and Medicare in order to preserve those tax 

cuts, I believe that position is going to get a lot more popular. 

Now, we have been talking about this balanced budget amendment and talking about all these States that have balanced budget 

amendments. The gentleman from Arizona has acknowledged that 

his State Arizona received $6.4 billion in stimulus money, $1,000 

for every man, woman, and child, $4,000 for a family of four. Even 

after that, they had to sell the State capital building, sell the State 

capital building for $735 million, then sold the supreme court 

building for another $300 million in order to help balance their 

budget. 

We keep talking about some kind of restraint and some kind of 

balanced budget or a balanced budget amendment. As the gentleman from Michigan has indicated, we don’t vote on ‘‘some kind.’’ 

We have to vote on H.J.Res. 1 and ascertain whether that is going 

to help or hurt. 

Now, Governor Thornburgh, you indicated that you need some 

glide path to balance, and you recognize that H.J.Res. 1 doesn’t 

have any glide path. You recognize that. You talked about your balanced budget. You recognize that even the Republican Study Group 

budget that balances in 2020 requires a three-fifths vote because 

it is not balanced this year. An irresponsible budget requires a 

three-fifths vote. Does your Pennsylvania legislature require a 

three-fifths vote to pass a budget? 

Mr. THORNBURGH. No. 

Mr. SCOTT. You can cut taxes on a simple majority under this 

amendment, but it would take a two-thirds vote to repeal a tax cut 

or to raise taxes. Does your constitutional amendment require a 

two-thirds vote to raise taxes? 

Mr. THORNBURGH. I don’t have a constitutional amendment. 

Mr. SCOTT. In Pennsylvania. 

Mr. THORNBURGH. Oh, the Constitution? No. 

Mr. SCOTT. In Pennsylvania, it doesn’t. 

This legislation has a war exception. If you were Governor and 

called out the National Guard, could you run an unbalanced budget? 

Mr. THORNBURGH. No. 

Mr. SCOTT. There is no war exception in your constitutional 

amendment. Is there not? 

Mr. THORNBURGH. We have no power to declare war. 

Mr. SCOTT. Okay. 

You have indicated you have a capital budget so you can, in fact, 

borrow money. 

Mr. THORNBURGH. Yes. 

Mr. SCOTT. Exactly what provision in H.J.Res. 1 do you think 

would be helpful to actually balance the budget other than the 

title? 

Mr. THORNBURGH. As I indicated, I have not studied the details 

of this. My message—— 

Mr. SCOTT. Provision. What provision in H.J.Res. 1—can you 

name one—that actually helps balance the budget, other than the 

title? 

66 

Mr. THORNBURGH. The provision that I would strongly support is 

one that requires a matching of revenues and expenditures, also 

has a separate capital budgeting requirement, also has—— 

Mr. SCOTT. But that is not in H.J.Res. 1. You are talking about 

things that are not in H.J.Res. 1. 

Mr. THORNBURGH. I didn’t understand that I was asked here to 

talk about a specific piece of legislation. 

Mr. SCOTT. Okay. 

Mr. THORNBURGH. This was more—— 

Mr. SCOTT. We are just getting your testimony straight. 

Professor Joyce, there are provisions in the bill, a three-fifths 

vote which would cover the Republican Study Group and an irresponsible budget. Would that provision help or hurt balance the 

budget? 

Mr. JOYCE. It would hurt. 

Mr. SCOTT. The two-thirds vote to raise taxes. Would that help 

or hurt balance the budget? 

Mr. JOYCE. It would hurt. 

Mr. SCOTT. The two-thirds vote to spend more than 18 percent 

of GDP. You will notice you can cut Social Security and Medicare 

with a simple majority, but to save it with taxes would require a 

two-thirds vote. What effect would that have on Social Security and 

Medicare? 

Mr. JOYCE. Well, the obvious effect it would have on Social Security and Medicare, because of demographics and because of health 

care inflation, those programs are projected to continue to rise. 18 

percent of GDP is 3 percent lower than the 40-year historical average. The 40-year historical average is not going to be sufficient to 

allow for that growth. So it would clearly have an effect of requiring cuts in those programs. 

Mr. SCOTT. Let me ask Dr. Holtz-Eakin. In 2001, when your Administration came in, you weren’t there, but when that Administration came in, the fiscal challenge was that we were running so 

much of a surplus and we are paying off the national debt too 

quickly, what happened? 

Mr. HOLTZ-EAKIN. I think it is pretty clear that in retrospect a 

big part of the revenue surge in the late 1990’s was driven by the 

dot com bubble. We had a bubble burst. We know the economic consequences were a recession. We know the budgetary consequences 

were enormous drop-offs in revenues. It was also the case that we 

benefitted in the 1990’s from the decline of the Soviet Union and 

we had a peace dividend that everyone acknowledged made it much 

easier to hit spending caps which were imposed. That reversed 

with the advent of the events of September 11th, 2001. Everything—— 

Mr. SCOTT. From 2001—— 

Mr. GOODLATTE. The time of the gentleman has expired. 

Mr. SCOTT. Can I have 30 more seconds, Mr. Chairman? 

Mr. GOODLATTE. Without objection, the gentleman is recognized 

for 30 additional seconds. 

Mr. SCOTT. From the 2001 projection of a $5.5 trillion surplus to 

what it ended up, a $3 trillion or $4 trillion deficit, a swing of 

about $9 trillion, how much of that was attributable to the war? 

$1 trillion. 

67 

I yield back, Mr. Chairman. 

Mr. HOLTZ-EAKIN. The war in Iraq cost well over $1 trillion. I 

don’t know the numbers for Afghanistan. 

Mr. SCOTT. $1 trillion. A $9 trillion deterioration, $1 trillion attributable to the war. 

Thank you, Mr. Chairman. 

Mr. GOODLATTE. The Chair recognizes the gentleman from Arizona, the Chairman of the Constitution Subcommittee, Mr. Franks. 

Mr. FRANKS. Well, thank you, Mr. Chairman. 

Mr. Chairman, I wanted to just say a word of thanks to you for 

pointing out the importance of a written Constitution. 

It is also probably important in the context of this discussion to 

remind ourselves that, indeed, some of the Founding Fathers, those 

who put the Constitution together, made some pretty dramatic 

choices and that, indeed, did have some binding effects on us today. 

In fact, most of the constitutional provisions, Mr. Chairman, are 

those that bind down Government, that require Government or restrain Government, and that certainly is the thing that we are trying to do here today. 

I am always reminded, Mr. Chairman, that every budget, whether it be a person’s budget or a business budget or a State budget 

or a Federal budget, every budget eventually balances. It happens. 

Either someone balances it by wise policy or someone else has to 

pay the price for someone failing to do so, but it ultimately balances one way or the other. 

The challenge here that we are trying to deal with is: are we as 

a country going to balance our budget by wise policy or are we 

going to allow cataclysmic financial failure to balance it for us, and 

that is, indeed, the question. 

Let me, if I could, address the gentleman that suggested that Arizona had to go through some difficult machinations to balance 

their budget. He is correct. We did. But let me also suggest to you 

that if had not been for Federal meddling and for Federal policy 

related to Fannie Mae and Freddie Mac, there wouldn’t have been 

a real estate bubble in Arizona. Arizona would have been fine without it. But the fact remains that Arizona did, in fact, balance our 

budget, and if we hadn’t had a balanced budget amendment, it certainly would not have occurred. 

Mr. Joyce has pointed out and I think absolutely correctly and 

eruditely that Congresses have the tendency to ignore budget rules. 

I believe he is correct. That is why we are here today because the 

Congress has ignored every other mechanism, and the most powerful mechanism we have is a constitutional amendment. And it may 

not work. Mr. Joyce may be correct. It may not work. But if it 

doesn’t, then at least I will be able to look back many years from 

now when my 3-year-old today at that time says, well, Dad, where 

were you when the country was going to pieces economically. I will 

say to him that I was trying to pass a balanced budget amendment. 

I did the best I could. And that will help me a great deal. 

Mr. Nadler pointed out that Mr. Joyce’s comments related to a 

breakdown in the consensus or as long as the consensus remains— 

that that was his main point. And he pointed out that PAYGO 

rules were changed. And I would just say, Mr. Chairman, I think 

that is prima facie evidence that the consensus did, in fact, change 

68 

and that is why we are dealing with this challenge today, is because the consensus goes up and down, up and down. But the 

mathematics remain the same. Unless we can repeal the laws of 

mathematics, we must do something to balance our budget. 

With that, I would like to address a question to Mr. Thornburgh. 

Mr. Thornburgh, you know, there are a lot of cataclysmic, end-ofday scenarios that are put forward by this notion of balancing the 

Federal budget. Let me ask you. Did Pennsylvania—has your society broken down completely because you have a balanced budget 

amendment in your constitution? 

Mr. THORNBURGH. No, it hasn’t. 

Mr. FRANKS. Has the balanced budget amendment—did it at the 

time you were Governor give you any leverage or additional assistance in trying to make those decisions that you had to within State 

government to balance the tax structure with the spending architecture? 

Mr. THORNBURGH. Yes. 

Mr. FRANKS. What do you think would be the result in Pennsylvania if you, in fact, did repeal your balanced budget amendment? 

Mr. THORNBURGH. I can only speculate, but as I stated earlier, 

the temptation to undertake big projects and provide increased 

benefits would be very strong, and my guess would be that Pennsylvania or any other State without a balanced budget amendment 

would find themselves in the same pickle that you folks are in. 

Mr. FRANKS. That was kind of the answer I was looking for. I 

was leading the witness there. 

But thank you, Mr. Thornburgh, for your service to the country. 

Mr. Mitchell, one argument that is raised against the balanced 

budget amendment is that it will prevent the Federal Government 

from intervening in the economy during recessions. Now, we have 

attempted to do that recently without a lot of success. It occurs to 

me that if we continue on the path that we are going on, we are 

not going to have the ability to intervene in anything except our 

own economic obituary. 

Let me ask you what do you think the down sides of a balanced 

budget amendment would be in terms of our ability to intervene 

with related recessions? 

Mr. MITCHELL. So as I mentioned before, there is a wide degree 

of disagreement among economists about the efficacy of countercyclical fiscal policy. You can find estimates of the multiplier that 

are very, very large and you can find estimates that are very, very 

small. 

One thing I would point out is there are some interesting studies 

that look at the differences across countries to see in what circumstances fiscal multipliers—what makes them larger or smaller, 

so multipliers, the bang you get for the buck of stimulus. An interesting thing happens is that countries that have huge debts—they 

are the ones that actually have the smallest multipliers. 

So again, I am not necessarily a Keynesian—I don’t necessarily 

subscribe to Keynesian economics. I think that there are a lot of 

problems there. But let’s just assume Keynesian economics. 

Keynesian models show that you are going to be much less able to 

implement Keynesian fiscal policy in a scenario where debt-to-GDP 

ratios are 90, 100 percent of GDP. So in my view, if you are a 

69 

strong Keynesian, if you are a progressive, then the status quo 

should be pretty alarming to you. 

Mr. FRANKS. Mr. Chairman, will the Committee indulge me for 

30 more seconds for one very quick comment? 

Mr. GOODLATTE. Without objection, the gentleman is recognized 

for 30 additional seconds. 

Mr. FRANKS. For 1 minute. 

Mr. GOODLATTE. For 1 minute. 

Mr. FRANKS. Mr. Mitchell, let me just direct the question to you. 

A lot of people are concerned that a balanced budget amendment 

will hurt the poor. A lot of us believe that if we balance this budget, that it will create an incentive for Government to try to broaden 

the tax base to increase its own revenue and it will help everyone. 

Can you address that? 

Mr. MITCHELL. So if we have a balanced budget amendment, it 

would broaden the tax base likely? 

Mr. FRANKS. Well, I am asking you would it broaden our economic success and would it be a boon or a disaster for the poor? 

Mr. MITCHELL. In my view, the biggest disaster would be to lure 

generations into believing that these programs are going to be 

there and then have them cut out from under them precipitously 

and sharply, and that is, again, what the status quo calls for. So 

unless we take measures right now to start, again, internalizing 

the externality and saying that each generation pays for what it receives, then we are going to face that situation which I think is 

going to fall hardest on those who are least able to deal with it. 

Mr. FRANKS. Thank you, Mr. Chairman. 

Mr. CONYERS. Mr. Chairman, could I just have 30 seconds, 

please, to ask the distinguished gentleman a question? 

Mr. GOODLATTE. I think the proper protocol, since his time has 

already expired, would be yield to Ms. Chu who is next in line. If 

she wants to yield to you, that would be perfectly fine. 

The gentlewoman from California is recognized for 5 minutes. 

Ms. CHU. Thank you, Mr. Chair. 

Mr. Mitchell, in the Senate version of this bill, S.J. Resolution 

10, the CBO estimated that the balanced budget amendment would 

translate to an average effective cap of 16.6 percent of GDP over 

the years 2016 to 2021. When was the last time that Federal expenditures equaled less than 17 percent of GDP? 

Mr. MITCHELL. I don’t know offhand. They generally have been 

around in the neighborhood of around 20 or 21 percent in the last 

several decades. 

Ms. CHU. Right. In fact, I believe it is 1957 that it was 17 percent. And in that year of 1957, how many seniors could afford 

health care coverage because they were covered by Medicare? 

Mr. MITCHELL. I am not sure. 

Ms. CHU. I believe the answer is that it is none because Medicare 

wasn’t a Federal program at that time. 

And in that year of 1957, how many children were able to see 

a doctor because their parents could afford it with Medicaid? 

Mr. MITCHELL. Were able to see a doctor or able to see a doctor 

through Medicaid? 

Ms. CHU. Through Medicaid. 

Mr. MITCHELL. I would assume it be again zero. 

70 

Ms. CHU. Yes. The answer is none because Medicaid wasn’t a 

Federal program at the time. 

And in 1964, before the introduction of Medicare, how many seniors were uninsured? 

Mr. MITCHELL. I don’t know. I am not a historian on that. I 

would assume that the answer again is different. The answer of 

how many people are uninsured is very different from the answer 

of how many people are covered by Medicare. 

Ms. CHU. Yes. 

Mr. MITCHELL. There is a good amount of evidence that public 

provision of services like these do crowd out private provision. 

Ms. CHU. Well, nearly half of all seniors were uninsured, making 

the elderly the least likely Americans to have health insurance, 

and today with Medicare, 97 percent of seniors are, indeed, covered 

and the elderly are now the most likely to have insurance. 

Mr. MITCHELL. I presume you are saying today meaning those 

who are on Medicare, not those who are counting on it in the next 

several decades. Right? 

Ms. CHU. Yes. 

Mr. MITCHELL. Because that is very different. 

So again, I just want to stress under current policy—so my generation is conservatively going to inherit an unfunded liability that 

is $60 trillion. $1 trillion is a million million, and we are talking 

about 60 of those. And this is the conservative end of the estimate. 

It could get up to $104 trillion depending on how you measure it. 

So in my view, Government is not going to fulfill that promise because in order to actually live up to the promise of making $60 

trillion funded, it would have to impose hugely, enormously costly 

taxes. In my view, the most likely scenario is that someone from 

my generation will be lured into expecting Medicare and then have 

it precipitously cut right when we are eligible. 

I would call for a change to the status quo, get us off that course 

so that we can actually live up to the promises that we have made. 

Ms. CHU. Mr. Joyce, could you comment on this? 

Mr. JOYCE. Any constitutional amendment which attempts to 

limit the amount of spending is, as Mr. Nadler suggested earlier, 

trying to tie the hands of future Congresses, future Presidents. It 

is particularly problematic in my view to have a spending limitation that is as low as something like 18 percent because it doesn’t 

account for what is going on in terms of Federal programs right 

now. Moreover, I think the problem of having an imbalance between cutting spending and raising taxes gets in the way of our 

ability to actually do what is necessary. 

I think just for 1 second—I think that a lot of what is going on 

in this conversation is that I think a lot of people are agreeing that 

the debt is too large and something needs to be done about it, but 

it does not necessarily follow that that means that amending the 

Constitution to require a balanced Federal budget is that thing. 

You can agree that balancing the budget, even over the business 

cycle, would be a good thing to do without necessarily believing 

that amending the Constitution is going to get us there. 

Ms. CHU. Thank you for that. In fact, because of Medicare, the 

life expectancy of the elderly is 20 percent longer than in 1960, and 

because of Medicare, the numbers of seniors that are living in povVerDate Aug 31 2005 12:54 Dec 05, 2011 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6601 H:\WORK\FULL\100411\70574.000 HJUD1 PsN: DOUGA
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erty has decreased by half. So what this indicates is that Medicare 

and Medicaid are important programs that improve the lives of 

millions of American citizens and that a balanced budget amendment like H.J. Resolution 1, which passed this Committee in June 

and would impose an expenditure cap of 18 percent, doesn’t adequately capture the current or future needs of the country. And in 

fact, Federal spending hasn’t been at 18 percent—well, it wasn’t 

during a single year of the Bush administration nor a single year 

of the Reagan administration. 

Thank you. I yield back. 

Mr. GOODLATTE. Would the gentlewoman like me to yield her an 

additional minute so she can yield to the gentleman? 

Ms. CHU. Oh, yes, absolutely. 

Mr. GOODLATTE. I yield to the gentleman for an additional 

minute. 

Mr. CONYERS. I thank the gentlelady. 

I just wanted to make sure I understood Dr. Mitchell when I 

thought that he said that a balanced budget would be more beneficial to women, infants, and children than not. 

Mr. MITCHELL. Well, I didn’t women, infants, and children, but 

what I would say is that the status quo is particularly harmful to 

those who are going to be lured into expecting these programs and 

have that expectation ripped out from under them. 

Mr. CONYERS. So they should never have gotten it in the first 

place. 

Mr. MITCHELL. In my view a balanced budget amendment is the 

much better course for those who are least well off among us, yes. 

Mr. CONYERS. Okay. I will discuss this with you by letter. I 

mean, the whole idea is astounding to me that if you are implying 

that they are better off getting cuts rather than ever having received them in the first place—— 

Mr. MITCHELL. Well, no. What I am—— 

Mr. CONYERS. That isn’t what you meant. 

Mr. MITCHELL. No. What I am implying is that the Medicare actuaries and the Social Security actuaries are telling us that we 

have a $60 trillion unfunded liability. And what I am implying is 

that the CBO has said that in order to make that unfunded liability funded, it would require all taxes to be doubled. And what I am 

implying is that the estimates of Christina Romer, a very respected 

economist, the President’s former economic advisor, shows that 

every 1 percentage increase in taxes decreases GDP—— 

Mr. CONYERS. What you are saying is that it is better that they 

don’t ever get any help to begin with as opposed to having gotten 

help and maybe not getting it in the future. 

Mr. GOODLATTE. The time of the gentlewoman has expired. 

The Chair recognizes the gentleman from North Carolina, Mr. 

Coble, for 5 minutes. 

Mr. COBLE. Thank you, Mr. Chairman. I apologize for my belated 

arrival. I was tied up at a Coast Guard hearing. 

Good to have you all with us. 

Mr. Thornburgh, you have been a longtime advocate for a balanced budget amendment, I think probably over 3 decades. Let me 

put a question to you, a layman-like question. Let’s assume the 

Congress does, in fact, adopt a balanced budget amendment and it 

72 

is approved, and then we fail to balance the budget. What would 

be the realistic result in that situation? 

Mr. THORNBURGH. It is rather hard to envisage that happening 

in terms of experience at the State level, Congressman Coble. The 

question has not really been presented because representatives of 

the people honor their constitutional obligations. 

Mr. COBLE. It has always been a moot point I presume. 

Mr. THORNBURGH. Yes. 

Mr. COBLE. Thank you, sir. 

Mr. THORNBURGH. If you have a rogue Congress or a rogue President, then there are other legal remedies available, but I have a 

hard time looking forward to elected representatives behaving that 

way. 

Mr. COBLE. Thank you, sir. 

Doctor, let me ask you a question, if I may. In your written testimony, you note that if the Federal spending and deficits are not 

brought under control, keeping taxes at their norm of 18 percent 

would generate an unimaginable debt spiral. If the Federal Government does not adopt a long-term fix like a balanced budget amendment, how high will taxes need to be raised to cover the increasing 

debt burden? 

Mr. HOLTZ-EAKIN. It is literally not possible to calculate. I mean, 

if you look at the growth of Medicare in particular, it has been 

growing at 7 and 8 percent a year. You could easily double taxes 

over the next 20 to 30 years and have the spending continue to increase and accumulate additional debt. There is no realistic scenario in which the Federal Government can tax its way out of its 

deficit and debt problems. 

Mr. COBLE. Some will argue that Social Security, Medicare, and 

Medicaid will be cut if we do, in fact, adopt a balanced budget 

amendment. What will happen to these programs if we don’t adopt 

a balanced budget amendment or some other permanent fiscal 

rule? 

Mr. HOLTZ-EAKIN. They will, in the end, implode. Social Security 

right now is running red ink, left on autopilot. Future retirees will 

get a 23 percent across the board cut in a couple of decades. That 

is a disgrace as a social program. Medicare right now—the difference between taxes and premiums paid and spending by the 

Medicare program is $280 billion right now, and if left unchanged, 

it will continue to get larger. Medicaid is entirely deficit financed. 

Those programs are broken and they will not survive to the next 

generation of old and low-income, and they will face cuts either at 

the hands of international bankers or Congresses. They simply cannot continue as they are. 

Mr. COBLE. I thank you. 

The final question to Mr. Thornburgh. Dick, what do you say to 

critics of the balanced budget amendment who say it is not necessary. Congress and the President simply should make tough legislative choices. 

Mr. THORNBURGH. Well, I think my answer would be to read the 

testimony that has been given this morning by the experts to my 

left who have chronicled the effort after effort made through legislative enactments to establish a model for enacting a balanced 

73 

budget only to see them crash and burn in every respect. So history 

is the best lesson on that. 

Mr. COBLE. Thank you. Thank you all for being with us. 

I yield back, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman. 

The Chair recognizes the gentlewoman from Texas, Ms. Jackson 

Lee, for 5 minutes. 

Ms. JACKSON LEE. Thank you very much, Mr. Chairman, and I 

have enjoyed the opportunity to serve with you on this Committee. 

I think we have been on this Committee for a period of time together, a long number of years, and I know my Ranking Member, 

former Chairman of the Committee, Mr. Conyers, is probably seeing the remnants of deja vu. I am trying to see whether I am in 

2011 or 1995. This is almost like Groundhog Day for many of us. 

And we take it seriously. 

I consider Attorney General Thornburgh, Governor Thornburgh 

as a colleague. I think we were in the Government at the same 

time when he was then Attorney General. You were Attorney General, Mr. Thornburgh—forgive me. Forgive my memory, but I know 

that we must have overlapped. And I want to thank you for your 

service as I do others. But we have a philosophical difference of 

opinion and I think it is a philosophical difference in reality. 

Let me speak to Mr. Mitchell, and I know they gave your bio. 

Forgive me. I was in a Homeland Security hearing. You graduated 

from where, sir? I am so sorry. 

Mr. MITCHELL. George Mason University, Arlington, Virginia. Actually I was in the Fairfax campus. 

Ms. JACKSON LEE. A great campus. I am a University of Virginia 

graduate. So we were down the road from you. Undergraduate. Is 

that what you are saying? 

Mr. MITCHELL. No. That was graduate Ph.D. undergraduate was 

Arizona State. 

Ms. JACKSON LEE. All right. We are delighted. 

I quarrel a little bit. I understand your center is funded. How are 

you funded, sir? 

Mr. MITCHELL. We are entirely privately funded. So thousands of 

funders from around the world. 

Ms. JACKSON LEE. But are your major funders the Cook brothers? 

Mr. MITCHELL. I don’t know much about what our funding structure is. One of the nice things is that we have a real strict policy 

that keeps people like me ignorant of that so that none of our 

funders can influence research one way or the other. 

Ms. JACKSON LEE. We thank you for that. 

First of all, let me just suggest that the Federal Government is 

not a State government. And I respect the testimony of any person 

who wants to use a State government. But I would say this. If we 

were the Federal Government—and this is not condescending. This 

is real—then no one would complain as to how Brownie performed 

during Hurricane Katrina. No one would complain of how slow we 

might have been moving on—and I am not suggesting we are. But 

no one would put a call out for us in Vermont or upstate New York 

or the Carolinas or the fires in Texas or the earthquakes that occur 

74 

on occasion in California and elsewhere. No one would call the Federal Government. 

If we were, in fact, a State government, no ally such as our 

NATO alliance, such as the folks who were engaged in the Communist domino theory during the Vietnam War, no one in the Gulf 

War where President Bush decided that Kuwait needed our assistance or where President Bush decided independently that he needed to go into Iraq—that is not the challenge and the charge of 

State governments. 

And so I query you with the backdrop of the different responsibilities, the emergency calls that the Federal Government has to 

maintain. I query you. 

And then let me secondly get to my professor and ask the question. So I need you to be very brief, Mr. Mitchell. And I want the 

professor from Maryland—excuse me—Professor Joyce—how in the 

heck is there any rationale to the balanced budget amendment? 

Can you just quickly comment, sir? 

Mr. MITCHELL. Sure. So with respect to the first question, all the 

important things that Government does, I would argue that we 

won’t be calling on those things if debt-to-GDP ratios reach 100 or 

200 percent as they are projected to do. So that is the greatest 

threat to Government solving problems. 

Ms. JACKSON LEE. Okay. I am going to stop you there. 

Mr. MITCHELL. I would say there is good international evidence 

of countries having balanced budget amendments. 

Ms. JACKSON LEE. All right. 

Professor Joyce, the way I frame my question—but you answer. 

How in the world does this make any sense at all—the balanced 

budget amendment? 

Mr. JOYCE. The balanced budget amendment? I don’t think it 

makes a lot of sense for the Federal Government. I think the analogies to States are misguided, and I think the reason they are misguided is partially because of what you pointed out, which is the 

different responsibilities of the Federal Government, but also, as 

has been pointed out earlier, States have separate capital budgets. 

It is not true that States do not borrow. States borrow all the time. 

There are $2.4 trillion in outstanding debt at the State and local 

level right now. 

And the answer I would give to the question that was asked Governor Thornburgh earlier, which is what would happen at the Sate 

level if you didn’t comply with the balanced budget requirement, is 

that the markets would discipline the States because the State governments have to go into the markets and borrow money and the 

bond rating agencies won’t put up with irresponsible fiscal practices. That is not a sort of unseen hand that we have at the Federal 

level. So we would have to determine in legislation what the sanction would be. 

Mr. GOODLATTE. The time of the gentlewoman has expired. 

Ms. JACKSON LEE. The gentleman was trying to finish a point 

that I had asked, Mr. Chairman. If I could just let him finish. 

Mr. GOODLATTE. Without objection, the gentleman will be allowed to finish his testimony. 

Mr. JOYCE. My only point is that all of the devil is in the details 

in terms of how we get from a balanced budget requirement, whatVerDate Aug 31 2005 12:54 Dec 05, 2011 Jkt 000000 PO 00000 Frm 00078 Fmt 6633 Sfmt 6601 H:\WORK\FULL\100411\70574.000 HJUD1 PsN: DOUGA
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ever it is, to actually complying with that, and that involves technical considerations, it involves actually increasing taxes and cutting spending, and it also involves enforcement procedures. The 

amendment is silent on all of those things. That is the heavy lifting 

that would need to occur. 

Ms. JACKSON LEE. Thank you, Mr. Chairman. 

We can be fiscally responsible without a balanced budget. 

Mr. GOODLATTE. I thank the gentlewoman. 

The Chair recognizes the very patient gentleman from Ohio who 

is a leader on this issue, Mr. Jordan, for 5 minutes. 

Mr. JORDAN. I would just point out to the professor the market 

is disciplining the United States. Maybe you haven’t noticed, but 

Standard & Poor’s just downgraded the bond rating of this country 

for the first time in 70 years. It does apply to the Federal Government just like it would to the States. 

Ms. JACKSON LEE. Would the gentleman yield? 

Mr. JORDAN. No. I want to ask Dr. Holtz-Eakin a question here. 

Doctor, how much time do we have? You know, in your testimony, you talked about the dangerous ratio we have now of GDPto-debt. Frankly, it is 1-to-1, a $15 trillion economy, almost a $15 

trillion debt. For 3 years in a row, we have run deficits over $1 trillion. 

The one I always point to is we are spending this year $235 billion in interest. And what are interest rates like right now? Record 

low, historic low. They are going to go up. And if they go up just 

modestly over the next 10 years, we go to where we are spending 

$235 billion on interest to we are spending more in interest than 

we currently spend on national defense. So someone tell me how 

you can sustain that model where you spend more to service debt 

than you do to defend your country. 

I think what Americans are asking is when is it all going to collapse. This is why 80-some percent of the American people want a 

balanced budget amendment because they see Congress can’t do it. 

Let’s at least try something else that will save us from the crisis 

that is coming. 

So my question to you is how much time do you think we have? 

Mr. HOLTZ-EAKIN. The honest answer is neither I nor anyone 

else knows for sure, but you should pretend you have no time. The 

United States has all of the characteristics of countries that get 

into sovereign debt problems. It has a high debt-to-GDP ratio, 

above 90 percent gross debt-to-GDP. It has an inordinate reliance 

on short-term finance. If you look at countries that get in trouble, 

they borrow a shorter and shorter term. If and when interest rates 

go up, they are stuck and they can’t roll that debt over. It has a 

lot of nontransparent and hard-to-value liabilities. We are still 

finding out about housing liabilities. We are worried about the 

State and local pensions. We have all of the characteristics of countries that get in trouble. And so we cannot pretend we are immune 

from either the laws of arithmetic or economics. We need to set a 

different course. 

Mr. JORDAN. And what does it look like when it really starts to 

get—I mean, I would argue it is pretty ugly out there right now. 

What does it start to look like when things really head bad like we 

are seeing in Europe today? 

76 

Mr. HOLTZ-EAKIN. You will see a sudden and inexplicable at the 

time increase in U.S. borrowing costs. You will see capital flight, 

and people will be running around asking—you know, people like 

me—why is this happening. And it will be like I don’t know. It just 

seems odd at this time. Investors lose confidence and confidence 

isn’t a number. Confidence isn’t a point in time. It is a judgment 

about the future and the capacity of both the economy to deliver 

the resources and the Government to use them effectively. When 

they lose that confidence, it is gone. 

Mr. JORDAN. Dr. Mitchell, your thoughts. 

Mr. MITCHELL. Yes. So, I mean, the old saying here is that if you 

are camping, you don’t need to outrun the bear. You need to outrun 

the other campers. And that is exactly the situation in the bond 

markets. 

The reason this is very difficult to predict is that we don’t know 

at what point lenders will see Sweden as a better investment than 

the United States or Germany as a better to the United States. But 

on our current course, there is going to be some point when that 

happens, and it can happen extraordinarily fast as a number of 

other countries have experienced. A few months ago, I read the 

Treasury Secretary say, you know, we are not Greece. Well, I guarantee you that there was an official in Greece at some point that 

said we are not Argentina. Countries don’t expect this to happen, 

but it happens and it happens very quickly. And my worry is, 

again, particularly for those who are interested in the progressive 

side of what Government can do effectively, that the rug is going 

to be pulled out so quickly that your programs are the ones that 

are going to be harmed the most. 

Mr. JORDAN. Let me ask you a related question. In my mind 

there is no question we need a balanced budget requirement. The 

discipline that that would hopefully bring to Congress, which they 

have just failed to show over the last 4 or 5 decades, I think is just 

absolutely required. But you can’t just get there with reducing 

spending alone. You have got to have economic growth. I mean, you 

look at the mathematics of this and you have got to have a growing 

economy. 

So there has been much made by the other side about the restrictions placed on making it more difficult for Congress to raise taxes 

and how that may—give me your thoughts on those super majority 

requirements making it more difficult for the elected officials to increase the tax burden on Americans and how that relates to 

growth. Mr. Mitchell, then Dr. Holtz-Eakin? 

Mr. MITCHELL. Well, I started to allude to this earlier. Christina 

Romer and her husband, David Romer, very extremely respected, 

well respected economists—she, of course, served in the Obama administration—they have, as far as I know, the most comprehensive 

assessment of the impact of taxes on an economy. A very, very 

carefully, well-designed study. And they find that every 1 percentage point increases in taxes as a share of GDP, GDP falls by 3 percentage points. 

Now, by 2035, spending will be 15 percentage points higher than 

it is today. Of course, we can pay for this with taxes. Right? Imagine if we increase taxes as a share of GDP 15 percentage points 

higher than its historical average. Under that scenario, by the 

77 

Romers’ estimates, that would be a 45 percent reduction in economic output. It is just not feasible that we could pay for it that 

way. 

So in my view anything that says that you live within your 

means is a good policy, and anything that says that we are going 

to reduce debt and reduce taxes on the economy is going to be beneficial. And I think the 1990’s are an excellent illustration of that. 

Mr. FRANKS [presiding]. Mr. Deutch, you are recognized for 5 

minutes, sir. 

Mr. DEUTCH. Thank you, Mr. Chairman. 

Dr. Holtz-Eakin, I think you said Social Security is broken. You 

said the program will implode. It is a disgrace, I think, as a social 

program. I would like to understand what a balanced budget 

amendment will do for Social Security, a program which you acknowledged will pay full benefits if we do nothing until 2037. So 

tell me what the balanced budget amendment does to secure Social 

Security for our retirees. 

Mr. HOLTZ-EAKIN. The balanced budget amendment doesn’t have 

anything to do with Congress’ policy priorities. It is simply a restriction on how they are financed and should be seen just as that. 

It is 2011. We have a debt-to-GDP ratio that is dangerously high. 

We have a proven track record of having a bias toward deficit and 

debt finance, and a balanced budget amendment would be a palliative against that clear and demonstrated bias. 

Mr. DEUTCH. Except the funding—I would like to focus on Social 

Security, though, and the funding stream for Social Security which 

you have acknowledged is the payroll tax, right, which is the funding stream for Social Security that President Roosevelt put in—— 

Mr. HOLTZ-EAKIN. It used to be true for payroll tax holidays. 

That no longer appears to be the case. 

Mr. DEUTCH. I am sorry? 

Mr. HOLTZ-EAKIN. I said that used to be true but since we now 

have payroll tax holidays, so on a regular basis I don’t know. 

Mr. DEUTCH. It is true. And you and I are in agreement that we 

shouldn’t touch the funding stream for Social Security, and I am 

thrilled to hear you say that. 

I would like to understand, though, at a time when 50 percent 

of American households have no retirement savings, zero, and for 

close to 40 percent of American retirees, Social Security’s $1,100 a 

month payment or so is the only income that they receive, how is 

it that you call into question a system that by all accounts is the 

most successful retirement program and the most successful Government program that exists, domestic program that exists? 

Mr. HOLTZ-EAKIN. I call into question the desirability of leaving 

it as it is when it is right now running red ink, when it is right 

now promising future retirees a benefit cut during their retirement 

across the board in a mechanical and not well thought-out fashion. 

I would prefer—and this is my only point—that this Congress immediately reform Social Security to be durable over the long term 

and to not run red ink. That will be my preference. 

Mr. DEUTCH. First of all, the Social Security system, as you 

know, functions now the way that it has functioned from the very 

beginning which is workers pay in in order to fund the system, and 

78 

as you point out, there is no red ink. There will not be any shortfall 

until 2037. 

Mr. HOLTZ-EAKIN. No, that is not true. There is red ink right 

now. 

Mr. DEUTCH. If we don’t do anything—— 

Mr. HOLTZ-EAKIN. That is a matter of fact. 

Mr. DEUTCH. Let me just finish. Dr. Holtz-Eakin, let me finish. 

You acknowledge if we do nothing, Social Security will pay out 

until 2037. My question is why do we continue to lump Social Security in as a contributor to the deficit when the dollars that go into 

Social Security through the payroll tax are dedicated for Social Security. 

Mr. HOLTZ-EAKIN. It is contributing to the deficit right now. It 

is in cash flow deficit. It will contribute even more in the years to 

come. That is simply arithmetic. Payroll taxes in will not be as 

large as the benefits going out. 

Mr. DEUTCH. Right, but the dollars—but I need to correct you. 

This idea that it is running a deficit when the fact is the Social Security Administration buys bonds just like anyone else buys bonds 

with the dollars that are paid in. There is a surplus in Social Security now. That surplus happens to be held in Government securities. And why is it that when it comes to Social Security, you view 

that, you characterize that as a deficit and so many who are critical of Social Security as a program characterize that as a deficit 

when, in fact, the dollars are sitting there in the form of Government bonds just as Government bonds are sitting in retirement accounts and in other accounts of Americans all throughout this 

country? 

Mr. HOLTZ-EAKIN. I, first and foremost, am not a critic of the Social Security program. I am not arguing for its abolition. I am desiring to put it on the sound financial footing, number one. Number 

two, I do include it with the other social safety net programs, Medicare, Medicaid, the forthcoming Affordable Care Act that I don’t believe we can afford, because it like those programs will force the 

U.S. Treasury to go into public markets and borrow to make good 

on the bonds that they have in a trust fund somewhere in West 

Virginia. But all of those programs are driving the accumulation of 

Federal debt and they should properly be debated on the same financial terms and let Congress decide priorities. That is it. 

Mr. DEUTCH. Well, the funding for Social Security, though—it 

needs to be restated—isn’t being paid for with deficit spending. The 

funding—— 

Mr. HOLTZ-EAKIN. It is. 

Mr. DEUTCH. The funding for Social Security comes from the payroll tax. 

And my last question to you is this. If we are going to be serious 

about reforming Social Security at a time when, since 1980, 80 percent of the growth in income has gone to the top 1 percent, 

shouldn’t we also be looking at the contribution limits of the payroll tax? Is it appropriate that the Social Security tax rate for 

someone earning $50,000 a year is 6 percent. The Social Security 

tax rate for someone earning $500,000 and $1 million a year is less 

than 1 percent. And if we are going to be serious about reforming 

Social Security, why wouldn’t we also consider phasing out that 

79 

cap, paying more out, retaining the system the way that it has always functioned? The progressivity of the system, you pay more in, 

you get more out. Why wouldn’t that be part of this discussion? 

And aren’t we eliminating that discussion if we are going to include 

Social Security in a balanced budget amendment? 

Mr. HOLTZ-EAKIN. Certainly there is nothing about putting a balanced budget amendment in that changes the fundamental policy 

choices you face. 

Number two, there have been lots and lots of Social Security reform plans, bipartisan in nature, partisan in nature, and the cap 

and the rate are always part of the policy discussion. So I think 

that remains true today. 

But mostly I would say to you and I would ask that you please 

be honest with the American people. The reality is that right now 

Social Security is running a cash flow deficit. So what are the rest 

of these social—— 

Mr. DEUTCH. Dr. Holtz-Eakin, my time is up. No, no, no. Please. 

Please. 

Mr. HOLTZ-EAKIN. It is not—— 

Mr. DEUTCH. Dr. Holtz-Eakin, please. Let me finish. 

Mr. HOLTZ-EAKIN. I am a subject matter expert—— 

Mr. DEUTCH. Mr. Chairman? Mr. Chairman, can I reclaim my 

time, please? 

Mr. FRANKS. The gentleman’s time has expired, but without objection, we will grant the gentleman an additional minute, and I 

hope you allow the witness to answer. 

Mr. DEUTCH. I will. Listen, I appreciate, Dr. Holtz-Eakin, this exchange. But please don’t sit there and lecture me to be honest with 

the American people when Social Security—the honest point that 

is missing too often from the Social Security debate is that without 

doing a thing, Social Security will pay full benefits until 2037 if we 

do nothing. This idea that Social Security is going to be bankrupt 

tomorrow, that we should scare my constituents that somehow 

their payments that they rely upon—those payments are in jeopardy unless we pass a balanced budget amendment, unless we 

slash benefits to seniors, it is just—— 

Mr. NADLER. Would the gentleman yield for a second? 

Mr. DEUTCH. I will. 

Mr. NADLER. I would also point out something that is never 

pointed out publicly that if you read the Social Security trustee’s 

reports, Social Security is flush—flush—for at least 75 years if you 

assume that the annual growth rate, the economic growth rate of 

the United States, will be 2.4 percent or more. In order to get a 

problem in 30 years, you have to assume it is going to be much 

less. They assume 1.6 percent. The growth rate of the United 

States has averaged over 3 percent since the Civil War. Right now 

we got a depression. It is less than that, but over any long period 

of time, if you assume a growth rate of over 2.4 percent, then Social 

Security is flush. The intermediate projection of Social Security, 

which is what is always quoted for 2037, assumes a growth rate 

over a long period of time. The last time I looked it was 1.6 percent, but that was 5 years ago. So it may be up to 1.8 percent now. 

A highly unrealistic assumption. 

Mr. FRANKS. The gentleman’s time has expired. 

80 

Dr. Holtz-Eakin, if you would like to respond. 

Mr. HOLTZ-EAKIN. Briefly. I think that speaks volumes to the importance of having sound economic growth policies in the United 

States. Growth is an essential element. I said this earlier. I agree. 

With regard to Social Security, the legal authority to pay benefits 

is exactly as you described. The financial mechanism by which the 

benefits would be paid is that payroll taxes would be insufficient 

and the U.S. Treasury would have to either go borrow the money 

or this Congress would have to cut some other spending program 

or raise taxes. So it is, in fact, going to meet its ability to pay those 

benefits only by contributing to the problem we are discussing 

today, which is the enormous current and projected debt, and that 

is a fact I believe is important for Americans to know so they can 

make a good decision about it and the rest of our spending priorities. 

Mr. FRANKS. And the gentleman from Texas, Mr. Gohmert, is 

recognized for 5 minutes. 

Mr. GOHMERT. Thank you, Mr. Chairman. 

I realize that you don’t get paid to come be a witness and you 

worry that somebody might ask something very personal, and I am 

about to do that. If you don’t want to answer, you don’t have to. 

But is there anybody here who has ever gone to a bank or credit 

union and borrowed money that you did not intend to pay back but 

pledged that your children or grandchildren would pay back? Anybody? 

[No response.] 

Mr. GOHMERT. That is what we are doing. 

I really don’t know the answer to this question. But the Seventeenth Amendment was ratified in 1913, and that changed the way 

in which Senators were selected. Some publications have said, because I bring this up, I must be in favor of doing away with the 

general election of Senators, and I am not, but I am in favor of giving States control again like they had before the ratification of the 

Seventeenth Amendment whether it is, as someone at the Heritage 

Foundation proposed, giving States a veto, an amendment to give 

them a veto over bills like the President has. A certain number of 

States do so within a certain period of time. 

But does anybody know how many times the budget was balanced by the Federal Government before 1913 when the Seventeenth Amendment took away the leverage of States to force Senators to live within their means at the Federal level? 

Mr. JOYCE. The only thing I would say to you—I don’t have a 

number, but the only thing I would say to you is that historically 

until we got to World War II, the sort of pattern was that we ran 

surpluses when we were in peacetime and we ran deficits when we 

were in wartime. Now, how many years ago—that is sort of a different question. 

Mr. GOHMERT. Most of the time, the budget was balanced, and 

as I am sure you are aware historically—well, the State legislators 

selected the Senators which gave States control where if you came 

up as a U.S. Senator and passed some unfunded mandates that you 

sent back and slapped the States with, then there was a good 

chance you were never coming back to the Senate again. So it did 

give the States great leverage there in ensuring that the Federal 

81 

Government didn’t do what particularly since World War II we 

have done a great deal of. 

I know just to eliminate one of the misconceptions, I constantly 

hear people say we can’t keep printing money and they don’t have 

to worry. I found out this summer, when I visited with Treasury, 

that most of our money is not printed. They just create it in a computer. So you don’t have to worry about us printing too much 

money. They just create the numbers. It is not even on paper anymore. 

This past week, one of the great things about not being in session is, if you take your job seriously, you go home and you visit 

with your constituents. I was getting gas at a gas station at a place 

where they have a table where some of our seniors like to gather. 

And they came up and asked if I would sit down with them and 

I did. And one of them pointed out I can hardly make it on my 

$800 Social Security check each month. I am really not making it. 

I also happen to know—we ran a check when I first got here to 

Congress in 2005 and took arbitrary numbers and said if an employee worked this long and paid into Social Security, how much 

would the monthly payment be and did the same with the State 

of Texas employment retirement system and Galveston that opted 

out of Social Security. What would your check be? And it turned 

out that if you were in Social Security, they said it would be somewhere between $600 and $900. If you were with the employment 

retirement system of Texas, it was going to be right at $2,800. If 

you were with Galveston, it was going to be around $2,600-$2,700. 

I don’t know of anybody over here that wants to hurt our seniors, 

but I would sure like to have those seniors living on more than 

$800 a month. And that is what they can get but they have to keep 

begging to their master, the Federal Government. And I think it 

is time we did something about that. 

I also want to point out that, Dr. Mitchell, the Washington Post 

apparently took some of your research and it seemed like they 

came to the wrong conclusion that we shouldn’t have a balanced 

budget amendment. I don’t think they fully appreciated your research. But I just want you to understand they also at one time 

basically sang the praises of Al Awlaki who was just killed recently 

because he was an enemy of the United States. So if they were a 

fan at one time of Al Awlaki and they were not a fan of yours, you 

may be in really good company. 

Did you have a comment on their take on your research? 

Mr. MITCHELL. They actually did not mischaracterize it. So with 

a couple of professors—— 

Mr. GOHMERT. They used it to support the notion we didn’t need 

a balanced budget amendment. 

Mr. MITCHELL. Yes. So I have conducted a study with a couple 

of professors, Noel Johnson and Steve Yamarik, and we look at the 

impact of these types of rules, and we find what many other people 

have found, which is that they do lead to less spending and they 

do seem to lead to less partisan fiscal outcomes. 

But we also found something that was kind of curious which is, 

I think, something we should put on the—just keep aware of. Partisan regulatory outcomes seemed more likely in some States that 

had these rules. So, for example, Democrat-controlled States 

82 

seemed to regulate more when bound by a balanced budget requirement, a strict balanced budget requirement. 

In my view, the fact that I look at this and count that as a negative and still come to the conclusion that weighing carefully the 

pluses and minuses and keeping your eyes wide open and I still 

stand here before you saying that a balanced budget amendment 

makes sense, I think tells you where I stand on it. I think that the 

pluses clearly outweigh the minuses even if they might lead to 

more regulating. 

Mr. GOHMERT. Thank you. Well, my time has expired. But it 

seems like since a constitutional amendment dramatically changed 

how often we balance the budget, maybe we need another one to 

make sure that we do that again. 

I yield back. 

Mr. FRANKS. I thank the gentleman. 

The gentleman from South Carolina, Mr. Gowdy, is recognized 

for 5 minutes. 

Mr. CONYERS. Mr. Chairman, could I ask unanimous consent to 

get an additional minute for Judge Gohmert so I might ask him a 

question? 

Mr. FRANKS. Mr. Gowdy, would that be all right if I did that? 

Mr. GOWDY. Certainly, Mr. Chairman. 

Mr. FRANKS. All right. We will back up here. Mr. Gohmert, you 

are yielded an additional minute and perhaps you might want to 

yield to—— 

Mr. GOHMERT. I didn’t know the former Chairman had a question. 

Mr. CONYERS. I do. 

Mr. GOHMERT. Okay. Yes, I would yield. 

Mr. CONYERS. Thank you. 

Is it your impression that seniors would benefit by a balanced 

budget constitutional amendment? 

Mr. GOHMERT. It is my impression if we followed that by getting 

more bang for our buck, yes, I absolutely do. Actually in September 

of 2005 after President Bush had expended all of his political capital pushing for changes to Social Security, I went to some of our 

leaders in that area and said, look, obviously President Bush is not 

going to get what he wanted. But I really think—I have talked to 

some Democrats and Republicans. I think we could pass a bill that 

would amend Social Security to say for the first time in the history 

of Social Security, all Social Security tax money would go into the 

Social Security trust fund and draw interest and not just be invested in the stock market but it could be in revenue-generating 

Treasury notes and people would have a whole lot more than $800 

under the same circumstances. But I was told actually we couldn’t 

do that because the Government might buy bonds and that would 

potentially make them the biggest bondholder. 

And so imagine my surprise 3 years later when we were told by 

some of the same people that the Federal Government has to buy 

these mortgage-backed securities because they are the only ones 

that can spend that kind of money and buy bonds. So I am still 

hopeful we can have a correction like that, put some real money 

in the account that earns interest instead of being squandered—not 

83 

necessarily squandered but spent on other programs. It ought to be 

spent on Social Security. 

Thank you, Chairman Franks. 

Mr. FRANKS. I thank the gentleman from South Carolina for his 

patience, and I recognize him for 20—I started to say 20 minutes. 

That would be a good payoff, wouldn’t it? For 5 minutes. 

Mr. GOWDY. Thank you, Mr. Chairman. You just scared everyone 

when you said 20 minutes. 

General Thornburgh, I want to thank you for your service to our 

country, particularly in the field of law enforcement. 

Dr. Holtz-Eakin, I am going to ask you a series of, I hope, short, 

precise questions in hopes of kind of a fill-in-the-blank answer because I want to ask you some longer ones later. 

What is our annual deficit? 

Mr. HOLTZ-EAKIN. $1.5 trillion right now. 

Mr. GOWDY. What is our cumulative debt? 

Mr. HOLTZ-EAKIN. Roughly $14.5 trillion. 

Mr. GOWDY. Are they any spending outlays that are not on the 

books? Are there any unfunded liabilities? 

Mr. HOLTZ-EAKIN. There is nothing that is genuinely off the 

books in the Federal budget. The definition of an ‘‘unfunded liability’’ is a bit slipperier. I don’t think it is actually appropriate in the 

Federal context. 

Mr. GOWDY. Well, let me ask you this. In present-day dollars, 

what do we owe our seniors in terms of Medicare? 

Mr. HOLTZ-EAKIN. The truth is conventional estimates are something like $60 trillion, but the reality is that assumes that at some 

point we have a miracle in the future and Medicare grows more 

slowly. An honest calculation never converges. It is infinitely large. 

Mr. GOWDY. Infinitely large. 

Mr. HOLTZ-EAKIN. Yes. 

Mr. GOWDY. So the computers can’t even figure out how far we 

will be in debt. 

Mr. HOLTZ-EAKIN. In the absence of some change that we have 

not yet seen, yes. 

Mr. GOWDY. All right. When I look at a pie chart of the budget 

for this year or last year, if you zeroed out the Department of Defense, would you balance the books? 

Mr. HOLTZ-EAKIN. No. 

Mr. GOWDY. If you zeroed out all discretionary spending, would 

you balance the books? 

Mr. HOLTZ-EAKIN. No. 

Mr. GOWDY. I think you testified that the wars cost $1 trillion? 

Mr. HOLTZ-EAKIN. The Iraq war has cumulatively cost about $1 

trillion as of about a year ago. 

Mr. GOWDY. So laying aside any cost-benefit analysis of actually 

thwarting any attacks on our land since 9/11, our cumulative debt 

would only be $14 trillion if we had not had the war. Right? 

Mr. HOLTZ-EAKIN. Roughly, yes. 

Mr. GOWDY. Mr. Marino, my colleague, and I were prosecutors in 

a former life. So we didn’t follow politics and economics perhaps, 

obviously, as closely as somebody as learned as you did. The 111th 

Congress—the budget that they passed—was it balanced? Not the 

112th. The 111th. 

84 

Mr. HOLTZ-EAKIN. The 111th, no. 

Mr. GOWDY. Actually I don’t think they passed a budget. 

Mr. HOLTZ-EAKIN. It was not a budget resolution. 

Mr. GOWDY. Assuming arguendo, was there any discussion of actually balancing that budget? 

Mr. HOLTZ-EAKIN. Not to my knowledge. 

Mr. GOWDY. The budget proposed by the President—was it balanced? 

Mr. HOLTZ-EAKIN. No. 

Mr. GOWDY. The budget not proposed nor voted on by the Senate—is there any discussion of it being balanced? 

Mr. HOLTZ-EAKIN. No. 

Mr. GOWDY. In the 1990’s, the glory days when a Republican 

Congress forced President Clinton to have a balanced budget and 

generated a surplus, was that money used to pay down the debt? 

Mr. HOLTZ-EAKIN. During the periods of surplus, we reduced 

Federal debt outstanding. 

Mr. GOWDY. We paid down the debt. 

Mr. HOLTZ-EAKIN. Yes. 

Mr. GOWDY. How much? How far did we get it down? 

Mr. HOLTZ-EAKIN. I don’t know. Phil might know. 

Mr. JOYCE. Probably in the neighborhood of $500 billion or $600 

billion over 4 years of surpluses I would say. 

Mr. GOWDY. That is billion with a B? 

Mr. JOYCE. That is correct. 

Mr. GOWDY. In the past 50 years, how many surpluses have we 

had? 

Mr. JOYCE. Five. 

Mr. HOLTZ-EAKIN. Six. 

Mr. JOYCE. Well, I will give you a sixth if you can find it. 

Mr. GOWDY. We have a constitutional amendment that provides 

for the generation of revenue, but yet you argue we should not 

have one for capping spending. Is that a fair assessment? 

Mr. JOYCE. I don’t think you should have a balanced budget 

amendment that takes any of the tools to reduce the debt off the 

table. That would be my position. 

Mr. GOWDY. We do have a constitutional amendment that provides for revenue production. Correct? 

Mr. JOYCE. If you are talking about the amendment that allowed 

for the income tax? 

Mr. GOWDY. That one. 

Mr. JOYCE. That is correct. 

Mr. GOWDY. We have two that relate to alcohol. Right? 

Mr. JOYCE. Yes. 

Mr. GOWDY. We have one that even limits congressional salaries 

and how they can be impacted. 

Mr. JOYCE. Yes. 

Mr. GOWDY. And in 50 years, we have managed to produce a surplus either five or six times, and you think we have the self-restraint to balance our budget. 

Mr. JOYCE. I didn’t say I think you have the self-restraint to balance your budget. I said that the restraint is not going to be provided by amending the Constitution. You have demonstrated the 

85 

restraint to reduce the Federal deficit at times when there was a 

consensus around doing that. That is what happened in the 1990’s. 

Mr. GOWDY. We also are $15 trillion in debt. Agreed? 

Mr. JOYCE. The gross debt, yes, is $15 trillion. 

Mr. GOWDY. Mr. Chairman, could I have an additional 30 seconds to ask Dr. Holtz-Eakin two more questions? 

Mr. FRANKS. Without objection. 

Mr. GOWDY. If we were to take our colleagues on the other side 

of the aisle up on their idea of punishing the people who had the 

unmitigated temerity to be successful, let’s tax the billionaires at, 

say, 50 percent, would that solve our fiscal woes? 

Mr. HOLTZ-EAKIN. No. 

Mr. GOWDY. Let’s say that we took them up on their idea to do 

away with the subsidies for so-called ‘‘big oil’’ and while we are at 

it, let’s do away with the subsidies for the entire green industry as 

well. Will that balance the budget? 

Mr. HOLTZ-EAKIN. No. 

Mr. GOWDY. What about those dreadful corporate jet owners? If 

we just did away with that, would that balance the budget? 

Mr. HOLTZ-EAKIN. No. 

Mr. GOWDY. Can you balance the budget without taking on entitlements? 

Mr. HOLTZ-EAKIN. No. 

Mr. GOWDY. Thank you, Mr. Chairman. 

Mr. FRANKS. These prosecutors get pretty good at asking questions, don’t they? 

With that, I would recognize Mr. Marino for 5 minutes, another 

prosecutor. 

Mr. MARINO. Thank you, sir. 

Gentlemen, thank you for being here. General, it is always a 

pleasure. And gentlemen, I appreciate your candor and your politeness. Thank you so much for that, and I will reciprocate that. 

Mr. Mitchell, I think that then Senator Obama did agree with 

you—then Senator Obama—that raising taxes during a recession is 

dangerous and not advisable. Do you recall that? 

Mr. MITCHELL. I do recall that, yes. 

Mr. MARINO. I am going to switch gears a little bit. Professor 

Joyce, would you be so kind—rules have always been waived particularly for our budgets. Is that correct? I mean, we all realize—— 

Mr. JOYCE. I wouldn’t say always, but I would say—— 

Mr. MARINO. For the most part. 

Mr. JOYCE. I would say when the rules got too tight that they 

wouldn’t allow for whatever policies wanted to be pursued, they 

were waived. 

Mr. MARINO. Right. And I have been told it has been done many 

times, maybe even hundreds of times. What do we do when Congress reneges on that without having a balanced budget, or in addition to the balanced budget, more legislation that prevents that? 

Mr. JOYCE. I think again, you pass a balanced budget amendment and the States ratify it, and I will tell you that I think that 

even though 18 States might have called for that to occur, there 

might be some States out there that would figure out it is not in 

their interest to ratify the balanced budget amendment and for the 

Federal Government to balance its budget. 

86 

But I think you would have to follow it up with some kind of enforcement legislation. That is, the balanced budget amendment is 

not self-enforcing and you would have to determine what the consequences of failing to enact balanced budgets. 

The amendments that are under consideration say that the budget should be balanced and that should rely on estimates of revenues and outlays. And so the obvious question is if the actual budget is unbalanced but the estimated one is balanced, what do you 

do in order to account for that. That is the problem we ran into 

in Gramm-Rudman. It wasn’t that we couldn’t estimate that budgets were balanced. It is that we didn’t get there in fact. 

Mr. MARINO. Then are you suggesting—and I don’t want to put 

words into your mouth—that we do strengthen a balanced budget 

amendment to address what happens? 

Mr. JOYCE. No. I am suggesting that you can’t put those kinds 

of details into a balanced budget amendment, and I am suggesting 

that what it would be far preferable to do would be to enact the 

tax increases and spending cuts that were necessary in order to reduce the debt, put the enforcement mechanisms in place that would 

attempt to enforce those—— 

Mr. MARINO. How about a combination? How about a combination of what you just recited with a balanced budget amendment? 

More strength? 

Mr. JOYCE. I would differ with Dr. Mitchell in the following respect. He thinks the balanced budget amendment does more good 

than harm, and I think the balanced budget amendment does more 

harm than good. 

Mr. MARINO. Let me ask you this. Are you still at the University 

of Maryland? 

Mr. JOYCE. I am. 

Mr. MARINO. And you have a budget personally like we all have 

a budget. 

Mr. JOYCE. You mean at the University of Maryland? 

Mr. MARINO. University of Maryland and you personally. 

Mr. JOYCE. I do. 

Mr. MARINO. Would you recommend that the university and you 

and I spend like the Federal Government is spending, keep borrowing money without any indication of paying it back and passing 

it on to a generation? Mr. Gohmert stole my thunder a little bit 

there. 

Mr. JOYCE. No. I am sorry to—— 

Mr. MARINO. No, go ahead, please. 

Mr. JOYCE. If this hearing was called ‘‘should the Federal debt 

be reduced,’’ then I would say, yes, the Federal debt should be reduced. This hearing is about should we amend the Constitution to 

require an annually balanced budget. 

Mr. MARINO. But would you agree with me that if you or I went 

to the bank or the University of Maryland went to the bank and, 

let’s say, just to put it in perspective, we owed a quarter a million 

dollars, we give an IOU, we are going to pay interest, but we wanted another quarter million and we haven’t paid anything on the 

principal in 50 years, do you think they would lend us any money? 

Mr. JOYCE. I do not think so. 

Mr. MARINO. Okay. Thank you, sir. 

87 

I guess this is a little bit of a rhetorical question, and I am going 

to throw it out to each of you to respond to it. It has been suggested that the Federal Government is supposed to come to the aid 

of the States. And I do agree with that. But who is to come to the 

aid of the American people, the 80 percent of the people who are 

looking at this deficit and this debt and saying it is having an impact on me now at this level? Dr. Mitchell? 

Mr. MITCHELL. No one. 

Mr. MARINO. Professor Joyce? 

Mr. JOYCE. I think only the Congress and the President can come 

to the aid of the people. 

Mr. MARINO. Dr. Eakin? 

Mr. HOLTZ-EAKIN. I would concur with Professor Joyce. Only the 

Congress and the President can. 

Mr. MARINO. And General? And we can’t seem to do that without 

a balanced budget. 

Professor Joyce, do you know how long it would take for us to 

even put a dent—a dent—in the debt if we were to eliminate the 

tax cuts? 

Mr. JOYCE. I believe that the CBO has estimated that the effect 

of eliminating the tax cuts is something like $2.1 trillion over 10 

years, and so if you eliminated the tax cuts, that would decrease 

the debt by that amount, sort of all other things being equal. 

Mr. MARINO. And if we continue to borrow and spend money on 

the same path that we are doing now, would you be surprised if 

even the experts were saying 60 years to put a dent? 

Mr. JOYCE. No, that wouldn’t surprise me. 

Mr. MARINO. We talked about—you were asked—and I would not 

put you in this position, but you are not here to draft legislation. 

Would you agree with me, though, that every time we draft legislation—and everyone sitting here are ladies and gentlemen of honor 

and want this country in the same direction. It is just how we go 

about it. Can you just give me, each of you, a one line on what you 

would put in a piece of legislation, not the whole thing, what you 

think would be important to put in a piece of legislation that would 

help, in conjunction with a balanced budget and legislation, that 

we in Congress have the responsibility to pass? Dr. Mitchell? 

Mr. MITCHELL. Well, I would say that it should balance the budget over a time period that allows you to still deal with the business 

cycle. 

Mr. MARINO. Professor Joyce? 

Mr. JOYCE. I would say that what you need to put in a piece of 

legislation are the spending cuts particularly related to the entitlement programs and the revenue increases that would be necessary 

in order to get to a balanced budget or reduce the debt. 

Mr. MARINO. Dr. Eakin? 

Mr. HOLTZ-EAKIN. I would have roughly the same answer. I 

think the legislative route should be focused on entitlement reforms and spending limits going forward. 

Mr. MARINO. And General? 

Mr. THORNBURGH. A workable balanced budget amendment 

would include a mandate to match expenditures and revenues, 

number one. Secondly, to provide for a glide path for the reaching 

of zero deficit over a, say, 10-year period. Third, a super majority 

88 

exception to make expenditures for military or defense purposes, 

for natural disaster emergency aid, and in times of economic crisis, 

each of which would have to be certified by the President and the 

Congress to actually be the case so that it couldn’t be done on a 

whim. And finally, to add to that package a requirement for separate capital budgeting so that expenditures for entitlements are not 

treated the same as expenditures for highways and bridges, a lineitem veto which would empower the President, subject to override, 

to deal with unwise or unlawful expenditures. And I think that 

would pretty well wrap it up. 

Mr. MARINO. In conclusion, gentlemen, if you ever have the time, 

you find the spare time, please don’t hesitate, if you would like to 

send those suggestions and others to me because apparently we are 

not able to do it in and of our right and we need the input from 

experts like each and every one of you. And I thank you. 

And I yield back. 

Mr. FRANKS. The gentleman’s time has expired. 

Mr. CONYERS. Mr. Chairman, could I ask that the distinguished 

gentleman, Mr. Marino, have 2 additional minutes so that we could 

yield to the gentlelady from Houston, Texas? 

Mr. MARINO. Yes, of course. 

Mr. FRANKS. The gentlelady is recognized. 

Ms. JACKSON LEE. The Chairman is very kind. Thank you, Mr. 

Ranking Member, and thank you, Mr. Marino. 

Dr. Joyce, I am pointedly going to ask you—I need some bionic 

and immediate quick questions. A comment was made about S&P 

and the S&P, if you will, assessment. Wasn’t part of that discussion the actions of Congress’ seeming inability to come to a resolution on the debt ceiling? 

Mr. JOYCE. Yes. 

Ms. JACKSON LEE. One comment was made that a senior was 

complaining about $800. Wouldn’t there be jeopardy in terms of 

some approaches to Social Security that the $800 would turn to $0 

and that most seniors are complaining because we have not been 

able to give a cost-of-living increase as opposed to getting Social Security? 

Mr. JOYCE. I am not an expert on Social Security. The only thing 

that I would say is that any effort to substantially reduce the debt 

and the deficit would have to deal with all the major entitlement 

programs in addition to taxes in my view. 

Ms. JACKSON LEE. But it is important to preserve a lifeline for 

seniors. Is that not correct? 

Mr. JOYCE. I would say that is true. 

Ms. JACKSON LEE. All right. And with respect to the cap that Mr. 

Deutch was discussing, isn’t it reasonable to look at whether that 

cap should be the same on everybody’s income as it relates to investment in Social Security or returning the money back? 

Mr. JOYCE. Yes. I think one of the things that should clearly be 

on the table is looking at the cap. 

Ms. JACKSON LEE. And do you realize, having traveled up from 

Houston, sitting next to a seat mate who is part of a venture capital that indicates that new starts are alive and that many people 

are investing in those markets? In this instance, it was satellite. 

Is that not still going on and is not a component of improving our 

89 

economy is to create jobs? Should we not be focused on job creation? And isn’t the Government part of job creation, as well as the 

private sector? 

Mr. JOYCE. Yes. 

Ms. JACKSON LEE. And finally, is it not a moral compass that we 

should utilize, in addition to our own fiscal responsibilities, in 

terms of looking at how we make cuts? The 1997 budget that you 

said was very helpful—and that was the budget that I was very engaged in. President Clinton signed it. We established the CHIPS 

program—had a morality compass to it. Did it not in your opinion? 

Mr. JOYCE. I think it is always something that should be considered, not only what is the fiscal effect of something, but it is also 

what is the human effect of whatever actions you are taking. 

Mr. FRANKS. Thank you. 

Ms. JACKSON LEE. I thank the gentleman and yield back. 

Mr. FRANKS. The gentleman’s time has expired. 

You know, I am just an old roughneck, but we learned in the 

field that certain realities always have the last word. I don’t think 

there is anybody on this panel who doesn’t want very much for 

every American to be productive and to do well in life. And it is 

incumbent upon all of us to remember that only the productivity 

of the people has the opportunity to meet those needs. And so every 

policy should be bent toward that direction. 

Just for the record, I want to make sure everyone understands 

that my support for a balanced budget amendment is not just one 

of fiscal sanity. It is one that I believe will result in the most prosperity for rich and poor alike in this country. That is the motivation. 

And I thank all of you as witnesses here for contributing to the 

discussion. 

Without objection, all Members will have 5 legislative days to 

submit additional written questions for the witnesses. 

And without objection, all Members will also have 5 legislative 

days to submit any additional materials for the record. 

And with that, this hearing is adjourned. Thank you. 

[Whereupon, at 12:43 p.m., the Committee was adjourned.] 

(91) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

92 

Letter submitted by the Honorable John Conyers, Jr., a Representative in 

Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciary 


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93 

f 


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Article submitted by the Honorable John Conyers, Jr., a Representative in 

Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciary 


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95 


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96 


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97 


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98 


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101 


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102 


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105 


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107 


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108 

f 


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Letter from Gary R. Herbert, Governor, State of Utah; Rebecca Lockhart, 

Speaker, Utah House of Representatives; and Michael Waddoups, President, Utah State Senate 


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110 


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111 


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113 


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114 

Æ 


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