A Constitutional Amendment to Control the Administrative State

The greatest threat to freedom is the federal bureaucracy. We must attack it from every angle.

Jeffrey Tucker reminded us again on October 20 that the administrative state is our paramount enemy. In his post, But Will Elections Change Anything?, Tucker writes:

The fix is going to require vast change. Tragically, the elected politicians may be the least likely to push for such a change. This is due to what we call the “Deep State” but there ought to be another name. It is rather obvious now that we are dealing with a beast that includes media, technology, nonprofits, and multinational and international government agencies and all the groups they represent. 

He’s right, of course. And there is no silver bullet that will fell the beast in its tracks so we can all live happily ever after. While my proposal will not kill the beast, it will cripple and slow the bureaucracy, making it an easy target for the kill shot.

I propose a Constitutional amendment talked about since the Reagan administration: a cap on the growth of federal outlays. In other words, I make no pretense of original thought. But the right seems to have lost its love of ideas. To call the GOP the “party of ideas,” as we did in the 1980s would be akin to calling (aka) Pope Francis a devout Catholic. Thus, I recycle this idea with a sense of urgency.

Index Federal Spending to GDP

The amendment would simply fix (or cap) the federal budget at a certain percentage of US GDP. The budget could exceed GDP only by a 2/3 vote of both houses of Congress and only for the current fiscal year.

Further, if a decline in GDP during a fiscal puts the federal budget over the ceiling, the following year’s budget must “pay back” the excess in nominal dollars. (If FY1’s spending exceeded the revised GDP cap by $600 billion, FY2’s budget must be $600 billion below its expected limit.) In short, Congress must return to the taxpayers excess spending, even if spent by accident.

The amendment might read something like this:

The sum of appropriations of the United States government shall not exceed [number] percent of gross domestic product in any fiscal year, except by a vote of two-thirds of the House and two-thirds of the Senate. Nor shall actual outlays by the Executive exceed [number] percent of gross domestic product in any fiscal year. Outlays in excess of this limit in any fiscal year shall be returned to the Treasury in the following fiscal year.

I’ll leave it to the lawyers to re-write until it actually works. I’m just getting things started for you.

Use 1963 as the Model

My Tea Party friends would probably want to use some pre-Civil War year as a baseline. I would, too, but I believe such a target would fail.

I pick 1963 for a few reasons:

1. Our national defense threat position was similar.

2. The economy in 1963 was robust.

3. The “great” entitlement programs had not been invented.

4. Most important, 1963 is the year I was born, and that’s gotta count for something.

According to the St. Louis Federal Reserve, total federal outlays in 1963 represented 17.5% of GDP¹

By contrast, in 2021 that number had risen to 29.25%²

With an indexed budget cap, the 2021 would have been slight more than half its size (59% to be precise.) That means the FY21 budget in real dollars would have been $3.6462 trillion instead of $6.18 trillion.

Projected federal revenue going into FY21 was $4 trillion, leaving a projected budget surplus of $2.18 trillion. To paraphrase Everett Dirksen, “A trillion here, a trillion there, and pretty soon you’re talking real money.”

So, let’s fix the national budget at seventeen percent of GDP:

The sum of appropriations of the federal government shall not exceed seventeen percent of gross domestic product except by a vote of two-thirds of the House and two-thirds of the Senate. Nor shall actual outlays by the Executive exceed seventeen percent of gross domestic product in any fiscal year. Outlays in excess of this limit in any fiscal year shall be returned to the Treasury in the following fiscal year.

Index First, Balance After

Most readers who’ve been paying attention since Jack Kemp (RIP) was a Congressman from Buffalo will remember the Balanced Budget Amendment. I was a big fan of both in the 80s, and remain a fan today.

Most balanced budget amendment (BBA) proposals include a rubric to limit growth of federal spending along with the requirement that budgets must balance. This compound idea confuses most Americans whose understanding of economics and government rivals that of a cockroach. It’s even more confusing to politicians.

If we split the typical BBA into its constituent parts, we find two things:

1. Federal spending must not exceed federal revenue.

2. Federal revenue (via taxes and fees) must not grow faster than the economy.

To all things, I apply Gall’s Law which begins, “A complex system that works is invariably found to have evolved from a simple system that worked.” And it goes on to warn that “A complex system designed from scratch never works and cannot be made to work. You have to start over, beginning with a working simple system.” According to his law of systems, our Constitutional Amendments must be crafted simply, to address one thing at a time in simple terms that even an Congressman can understand.

“A complex system designed from scratch never works and cannot be made to work. You have to start over, beginning with a working simple system.”

—Gall’s Law

If we accept the principle that most Americans (and almost all members of Congress) cannot hold two ideas in their heads simultaneously, we need to choose one of the two parts of the BBA to advance first. And I would lead with the indexed budget.

We have a $32 trillion national debt, and that excludes unfunded mandates like Social Security and Medicare. It seems reasonable to allow revenues to exceed outlays for a few years to pay down the debt. I am not a stickler for zero national debt because national debt is not necessarily a threat. (But that’s a discussion for another blog.)

If we can operate with $2 trillion surplus for a decade, the national debt would fall to about $6 trillion.³ At $6 trillion, the cost of servicing the debt would be less than GDP growth, which should drive most federal spending as I explained last week in my panic-ridden post:

I Have Some Bad News About the Economy

Once we have capped federal spending and paid down some of the debt, we can turn to the Balanced Budget Amendment to fulfill our fiscal responsibility duties.

Final Thought

If you ask most conservatives what we should do with a Republican president and Congress, you will get many answers. Near the top of the list will be cultural, regulatory, and legal reforms, I suspect. Things like reining in the DOJ, un-woking the military, slapping down the teachers’ unions, crushing the CDC and the FDA, eliminating the Department of Education and the EPA, punishing Big Pharma and Big Medicine, etc. I advocate for such reforms all the time.

But those issues all have well-funded, hysterical counter-constituencies. With both the left and right focused on those cultural issues, this might be the perfect time to sneak through fiscal reforms that will, by their nature, defund and diminish the administrative state which is a major cause of cultural decay and loss of liberty. As Jeffrey Tucker reminds those who consider bureaucracy benign:

But then the last three years happened. The rule by the administrative bureaucracy in every country became highly personal when our churches were closed, the businesses were shut down, we could not travel, we could not go to gyms or theaters, and then they came after every arm insisting that we accept a shot we did not want and most people did not need. 

A 40-percent haircut in the Administrative State will go a long way toward curing America’s most pernicious problems. It will also stabilize our personal economies so that our plans for the future depend on our own diligence and ingenuity rather than the whims of a bureaucrat in Washington DC.

1. U.S. Office of Management and Budget and Federal Reserve Bank of St. Louis, Federal Net Outlays as Percent of Gross Domestic Product [FYONGDA188S], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/FYONGDA188S, October 21, 2022.

2. Ibid.

3. To arrive at this estimate, I used the Fed’s method of determining the cost of servicing the debt and applied my weak math skills. I could be totally wrong, but you’re welcome to try it yourself. Bear in mind that with the rise in interest rates, the interest on the debt is now the fastest-growing part of the federal budget. For more, see this article in Washington Examiner: https://www.washingtonexaminer.com/policy/economy/interest-rates-debt-reckoning-sooner