Monday, October 3, 2011

Economy will collapse without a Balanced Budget Amendment

Rep. Bob Goodlatte pitches "Path to Prosperity"

With a couple of charts to illustrate his point that the federal government’s $14 trillion debt is unsustainable Republican 6th district congressman Bob Goodlatte peddled his Balanced Budget Amendment to the U.S. Constitution. Friday he was joined in support by Congressman Morgan Griffith (R-9), Va. Senator Ralph Smith, Delegate Charles Poindexter and Republican candidate for the 17th House of Delegates Chris Head at the Roanoke Regional Chamber of Commerce.

In 1995 the U.S. House of Representatives passed a balanced budget amendment but it failed in the U.S. Senate by one vote. Thirty-eight states would have to ratify any proposed amendment before it could be added to the U.S. Constitution.

Goodlatte said, “49 out of 50 states have a balanced budget requirement themselves.” It would ensure that no matter who controlled the congress they would have to abide by it.

“It would require congress to set priorities, he said” The explanation he gave correlated with Roanoke city manager, Chris Morrill’s “Budgeting for Outcomes” instituted for fiscal year 2011. Priorities are set by a panel, a bucket of money is allocated and if it runs out before they get to the bottom then it’s “a sorry that’s all folks” ending.

Of course city council and state legislatures first get a whack at the priorities and can overrule or rob Peter to pay Paul as they see fit.

The “path to prosperity” chart Rep. Goodlatte displayed should send shivers to all state legislatures. But lets back up a bit. Half the states with balanced budget amendments in their constitution have no enforcement penalty. That is why states like California and Illinois are in such dire straights with their debt.

States can use creative accounting to balance the budget by selling state assets, postponing payments to vendors, reducing payments to pension funds, borrowing from one state fund to finance expenditures from another.

Borrowing for capital expenditures does not count toward the budget. A question to Rep. Goodlatte about Virginia’s use of Grant Anticipated Revenue Vehicle (GARVEE) for highway construction.

Goodlate was quick to point out that at the conclusion of a transportation project the federal government will repay the Commonwealth of Virginia. There is no risk to the state. However, repayment to bond investors lies solely with the state not the federal government.

Rating agencies have pointed out the weakness in depending on this continued federal funding program. The chance that federal funds would not be available is remote. The question remains how will a balanced budget amendment effect the program.

Without a BBA Goodlatte believes congress and the president have no incentive to reduce spending. China, he said, owns a trillion dollars of our debt.

Goodlatte’s chart prediction revealed that by 2075 the United States debt would be at 900% of the Gross Domestic Product (GDP). “Our economy will collapse long before we get to that,” he said.

Along with 9th district Congressman Morgan Griffith Goodlatte believes the debt is “having a very serious impact on the economy of our country and on job creation.”

“We can’t wait until a balanced budget can be ratified [by the states] … it’s slow going,” he said. Both House Joint Resolutions Goodlatte submitted have deadlines at the beginning of the fiscal year following December 31, 2016.


Posted By Valerie Garner

Categories: Finance, Local Events, National, Politics

Tags: , ,

Comments (2)

Jack Mcguire

October 3rd, 2011 at 8:17 AM    

We have needed a BBA for many years. We cannot continue to borrow 40% of every dollar spent as we do now. We need to live within our means. Since we will not do it on our own, we need to pass this bill. Wouldn’t a zero deficit be a great thing?

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