


The Big Beautiful Bill Act (BBBA) will add trillions of dollars to the national debt over the next decade. Elon Musk is right that this is a turning point for American citizens. It is now clear that neither political party has the will to enact a fiscally responsible budget or solve the debt crisis. Musk threatens to form a third party if Congress kicks this can down the road.
The budget process is broken, as special interests continue to carve out their bits of a spoils system. Congress is not even willing to discuss reforms in Social Security and Medicare. The trust fund for these two entitlement programs will be depleted over the next decade, and they will then be funded on a pay-as-you-go basis. The unfunded liabilities in these entitlement programs plus the federal debt are now estimated to be over $100 trillion.
This turning point may not result in a debt crisis such as that experienced in Argentina. Argentina defaulted on its debt several times, resulting in financial crises. As debt increases relative to national income, the U.S. is experiencing secular stagnation — i.e., rates of economic growth significantly below the long-term average. The economic impact has been felt by citizens as they learn to live with higher rates of inflation, lagging growth in real wages, and diminished economic opportunities. It is fair to say that for many younger citizens, the American dream of prosperity, including homeownership, college education for their children, and a comfortable retirement, is fading.
More troubling than these economic impacts is the loss of trust in our political institutions. This is especially true for younger generations who will foot the bill for Congress’s fiscal profligacy in higher taxes over their lifetime. Citizens are no longer willing to give legislators the discretion to pursue unsustainable fiscal policies.
A solution to our debt crisis may be found in the fiscal reforms enacted in Switzerland. Citizens in Switzerland faced a similar turning point in the early 1990s. Switzerland was experiencing unsustainable growth in debt that threatened economic stability and long-term economic growth. Swiss citizens responded by enacting debt brakes at all levels of government. The debt brake at the federal level was enacted as a constitutional amendment through a referendum with support from 85% of voters. The debt brake mandates that the federal government cap the growth in spending at the long-run rate of growth in the economy. The government may incur deficits but must balance the budget over the business cycle. With the debt brake in place, the Swiss reduced debt to 30 percent of gross domestic product. Sustainable fiscal policies have allowed the Swiss to achieve prosperity well beyond that of other developed countries, including the U.S.
Solving the debt crisis has had a profound impact in Swiss society. Swiss citizens have gained greater trust in their political institutions. This has enabled the government to not only solve their debt crisis, but also address challenges such as an aging population with increased demands for health and retirement benefits. The Swiss refer to this growing trust in their political institutions as dynamically growing credence capital.
The stakes for American citizens at this turning point are clear. Unlike the Swiss, we are experiencing declining dynamic credence capital. The lack of trust in our political institutions is undermining the ability of the government not only to solve the debt crisis, but also to meet other challenges. It is not clear that the U.S. now has the fiscal space to respond to a financial crisis or a major military conflict.
The U.S. Constitution does not provide citizens with the power of initiative and referendum, but Article V gives citizens as well as Congress the power to propose amendments. Citizens, through their state representatives, have been proposing a fiscal responsibility amendment for more than a century. In 1979, two thirds of the states had submitted resolutions calling for an Article V amendment convention, but Congress failed to record these applications and call the convention.
Critics will question whether we should enact a fiscal responsibility amendment through an Article V convention. But citizens are now mobilizing support for an Article V amendment convention through direct democracy in the states. The precedent for this approach to amending the Constitution is the 17th Amendment providing for the direct election of senators. Most citizens supported this amendment, and after many failed attempts to propose the amendment through Congress, they launched a state campaign for an Article V convention. Congress pre-empted this effort by proposing its own amendment.
That may happen with the current efforts to enact a fiscal responsibility amendment through direct democracy. That is okay, as long as we meet the challenge of unsustainable debt.
Barry W. Poulson is professor emeritus at the University of Colorado, Boulder Colorado, and on the Board of the Prosperity for US Foundation.
William Owens is a former vice chairman of the Joint Chiefs of Staff. He is on the Board of the Prosperity for US Foundation.
Image: pasja1000 via Pixabay, Pixabay License.