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May 2013 - Volume 21, Number 2


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States Can Fix the National Debt:
Reforming Washington with the Compact for America Balanced Budget Amendment

by Nick Dranias, esquire,
Director of Policy Development and Constitutional Government
The Goldwater Institute

America is at a crossroads. Unlike any prudent household, Washington simply refuses to balance its budget. Washington has become so addicted to borrowing money that the outstanding national debt exceeds $16.5 trillion. The national debt now exceeds 100 percent of the Gross Domestic Product (GDP), a figure not seen since World War II. The 2012 federal fiscal year operating deficit was approximately $1.1 trillion. For the fourth fiscal year running, Congress has failed to pass an annual federal budget under which to operate our country. It is now clear the solution to our national debt problem is unlikely to be found in Washington. To save the nation from bankruptcy, the American people, acting through the states, can intervene and save our future. The Compact for America gives us the vehicle to do that.


The Compact for America proposes that state legislatures use an interstate compact, which is a cooperative agreement among the states, to advance a Balanced Budget Amendment.


The Balanced Budget Amendment (BBA) requires a majority of state legislatures to approve any increase above an initial debt limit. Essentially, 26 state legislatures would be required to cosign on the federal government’s credit card. But unlike the status quo of national debt brinkmanship, the BBA is designed to force Washington to prepare a budget to make the case for more debt long before the midnight hour arrives. It requires the President to start designating spending cuts when spending exceeds 98 percent of the debt limit. If Congress disagrees with the cuts, it must then override those cuts within 30 days. By forcing both the executive and legislative branches to show their cards long in advance of hitting a constitutional debt limit, the BBA would ensure no game of “chicken” can hold the country’s credit rating hostage.


An interstate compact provides the vehicle for this reform because it vastly simplifies the otherwise burdensome process of states originating constitutional amendments under Article V of the U.S. Constitution. In fact, the Compact for America will cut the time and resources needed for successfully advancing this crucial reform by more than 60 percent. For the first time ever, the state origination of a powerful BBA will be feasible.


Article V empowers state legislatures to originate constitutional amendments. This power was meant to be used as a crucial failsafe to protect our liberty from an overconcentration of power in Washington, D.C. In Federalist No. 85, which was the last Federalist Paper, Alexander Hamilton urged skeptical states to ratify the Constitution because they retained ultimate authority over the federal government through this state-initiated constitutional amendment process under Article V.


Hamilton observed that Congress would be obliged to call a convention for proposing amendments upon application of two-thirds of the legislatures of the states. He further emphasized that any constitutional amendment proposed in this way would become valid upon ratification by three-fourths of the states, just like any congressionally proposed amendment. He urged the states to realize that this was a practical power to restrain the federal government if it were targeted to the “general liberty or security of the people,” rather than merely “local interests.” And he reassured the states that they could “rely on the disposition of the state legislatures to erect barriers against the encroachments of the national authority” through state-initiated constitutional amendments. Because of this “closing argument” of the Federalist Papers, the Constitution was eventually ratified. It is now time for the states and the American people to prove Hamilton right.


Overview of the Compact for America Vehicle


The Compact for America (CFA) is the delivery vehicle for a powerful BBA. Understanding why the CFA is the best vehicle for advancing a BBA first requires a “50,000 foot” view of its structure and the constitutional amendment process it sets in motion. The CFA is an agreement among the states to use their sovereign power under Article V of the U.S. Constitution, which authorizes states to originate constitutional amendments by applying to Congress to call a convention for proposing amendments. In the absence of the CFA approach, the ordinary “plain vanilla” amendment-by-convention process under Article V would have no fewer than five essential state and federal legislative components — an “application” for a convention that would require passage by 34 state legislatures, a convention “call” that would require passage by Congress, convention delegate appointment and instruction legislation by at least 26 states, a “referral” of any amendment proposed by the convention that would require passage by Congress, and a “ratification” that would require passage by legislatures or conventions in at least 38 states.


By contrast, the CFA has only two essential legislative components — the state compact and a counterpart congressional omnibus concurrent resolution. As such, the CFA is designed to greatly simplify the amendment-by-convention process. It does this by consolidating into the state compact all of the legislation involved in the Article V process that states control — from the application to Congress, to delegate appointments and instructions, to the selection of the convention location and rules, to the ultimate ratification of the BBA proposal it advances. It then consolidates all of the congressional legislation involved in the Article V process — both the call for the convention and the ratification referral — into a single omnibus concurrent resolution.


This means the CFA consolidates the entire Article V process into a total of 39 enactments; specifically, 38 pieces of state legislation adopting the Compact and one piece of federal legislation (the omnibus concurrent resolution).


As unusual as the CFA may seem, there are more than 200 interstate compacts, many of which make the CFA appear rather mundane by comparison. For example, there are interstate compacts for military alliances to repel invasions, to bypass the Electoral College, and to impose cap-and-trade greenhouse gas regulation. Despite the range of novel approaches to coordinating state action found in the hundreds of interstate compacts that currently exist and that have existed in the past, no state or federal court has ever struck down a single interstate compact. Against this backdrop of longstanding judicial tolerance of the use of interstate compacts to enable states to solve problems of collective action, there is every reason to believe the CFA will survive any legal challenge.


If anything, the problems of collective action surrounding the use of Article V to advance a BBA make it a natural candidate for an interstate compact solution. In the final analysis, not only is there a solid originalist and precedential basis for recognizing the constitutionality of the CFA’s limitations on the Article V convention process, but there is a powerful pragmatic and public policy case as well. Simply put, time is not on our side when it comes to stopping Washington’s abuse of limitless debt spending. Only the CFA BBA offers a viable chance at imposing reform from the states in the near future.


Policy Report No. 257, April 23, 2013, reprinted with permission, <>. Nick Dranias holds a law degree from Loyola University, Chicago, Illinois, and is Director of Policy Development and Constitutional Government at The Goldwater Institute. His latest policy report is Save the Taxpayers Tens of Billions of Dollars: End Government-Sector Collective Bargaining.


Constitution of the United States of America, Article. V.


The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three fourths of the several States, or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress; Provided that no Amendment which may be made prior to the Year One thousand eight hundred and eight shall in any Manner affect the first and fourth Clauses in the Ninth Section of the first Article; and that no State, without its Consent, shall be deprived of its equal Suffrage in the Senate.


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