Don't let Congress off the hook on a balanced-budget amendment - possible constitutional amendment requiring a balanced federal budget

Nation's Business, May, 1988

Don't Let Congress Off The Hook On A Balanced-Budet Amendment

Editorials

"The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of two thirds of the several States, shall call a Convention for proposing Amendments..."

-- Article V, V.U.S. Constitution

All 26 amendments to the U.S. Constitution have originated in Congress, and the state-convention approach has never been used. Bt it has not been forgotten. Just the threat of a state convention has sometimes been enough to pressure Congress into approving proposed constitutional amendments.

Another such time may be at hand, Congress has refused to approve a constitutional amendment requiring a balanced federal budget. As a result of this congressional intrasigence, 32 states have endorsed a convetion, and action by only two more will force Congress to call a convention. But the issue is heading into a critical phase. While five states are now considering convention resulutions, secen of the 32 states that have given approval are thinking about withdrawing it.

Opponents of the state-level approach argue that a convention could not be restricted to a balanced-budget amendment but could conceivably open broad areas of the Constitution, including the Bill of Rights, to change.

Those backing the convention point out that Congress is considering a bill to set limits and rules for a convention. And the ultimate safeguard is the provision that no proposal of the convention could become a part of the Constitution until approved by three fourths of the states.

The states considering passing resolutions in favor of a convention are Kentucky, West Virginia, California, Wisconsin and Vermont. Those considering rescissions are New Hampshire, Nebraska, Florida, Wyoming, Maryland, Pennsylvania and Virginia.

Business people in those states should urge those legislatures considering a convention call to act favorably, and those considering rescission to reject any such retreat.

The continuing possibility of a constitutional convention will be a powerful incentive to Congress to act on a balanced-budget amendment.

Redo The Report On Capital Gains

The Congressional Budget Office fired a dud in its recent attack on the business-backed proposal to cut the capital-gains tax. While the media cited, CBO as a source of great expertise on the subject, a leading business economist pointed out that its report on the relationship between capital-gains rates and federal revenues was actually a pretty shoddy piece of work.

CBO said in its summary conclusions that a reduction in the capital-gains rate would result in a decrease in federal tax collections. But Richard Rahn, vice president and chief economist of the U.S. Chamber of Commerce, declared: "At best, the study is incomplete and gives a grossly misleading impression...."

Rahn commented in a letter to Rep. William Gray (D-Pa.), chairman of the House Budget Committee.

Rahn said that the most obvious problem in the CBO study was the failure "to take into account the central argument in favor of a capital-gains rate such a rate would promote economic growth, venture-capital formation and entreprenuership."

Rahn said the CBO overlooked the increased tax revenue from new ventures and their employees. The U.S. Chamber economist also pointed out that this country taxes long-term capital gains at a higher rate than all of its major competitors, putting it at a disadvantage in world trade.

Rahn urged Chairman Gray to request the CBO to do a new study that would address the points ignored in the earlier one. Because a reduction in the tax rate on capital gains is such an obvious way of stimulating the economic activity that generates federal taxes, the Budget Committee chairman should not hesitate to do so promptly. NB