In response to the coronavirus pandemic, the money supply in the United States (as measured by M1) has quintupled over the past five years as the Federal Reserve pumped trillions of dollars into the economy.

At the same time, public debt as a percentage of gross domestic product (GDP) jumped nearly 25% and is now among the highest of all industrialized nations. Even more concerning, total federal net liabilities and unfunded social insurance obligations have grown from $20.4 trillion in 2000 to $110.1 trillion in 2021.

These disturbing trends have prompted David M. Walker, the immediate former comptroller general of the United States, to get behind an effort to introduce a Federal Fiscal Responsibility Amendment to the U.S. Constitution that would place strict limits on federal debt levels. His proposal is not a balanced budget amendment. Instead, it would limit public debt to GDP to ensure fiscal sustainability over time.

The stakes are enormous. Some of the industrialized nations with higher public debt to GDP ratios than the United States (133%) are Japan (257%), Greece (207%), and Italy (159%). Recent studies by the non-partisan Congressional Budget Office (CBO) project that U.S. public debt/GDP will exceed 200% by 2050.

As an investor, that should concern you, since those countries rank among the worst stock market performers over the past two decades. Fortunately, we are not in that league and if David Walker has his way, we will not ever get there.

David, thank you for taking the time to talk with us today. I know this issue is near and dear to your heart. Can you give us a general idea of what is at stake and how the proposed bill would address it?

History shows that economic strength is the leading indicator for the rise and fall of great powers. Countries with higher public debt/GDP ratios experience slower economic growth and poorer market performance. A public debt/GDP Constitutional amendment would force Congress to make tough choices rather than continuing to mortgage our collective future.

Some economists claim that the U.S. can grow its way out of its debt problem over the long haul rather than cutting spending or raising taxes. Do you agree with that?

No. The federal government’s financial hole has grown too deep to be solved with economic growth alone. Given known demographic trends, rising health care costs, and the expansion of so-called mandatory spending, tough spending and tax choices will be required to restore fiscal sanity and sustainability. The math does not come close to working to grow our way out of this problem.

We always hear politicians say that something has to be done about runaway federal spending, but it never seems to happen. What makes you think that they will work together to get it done this time?

Statutory fiscal constraints have not worked. As a result, the time has come to adopt a Fiscal Responsibility Amendment to the U. S. Constitution that will limit public debt/GDP. This is the key fiscal metric. If we grow the economy faster than the debt, we will be making progress. Ultimately, we need to reduce public debt/GDP from current levels to promote economic growth and provide more fiscal flexibility.

You have been involved in several efforts to help make a Fiscal Responsibility Amendment a reality. What is the status of that effort?

Under Article V of the Constitution, there are two ways to achieve a Constitutional amendment. First, two-thirds of the House and Senate pass a proposed amendment and send it to the states for ratification by three-quarters of the states. This is how all 27 amendments have been achieved to date. Alternatively, two-thirds of the states can call for a Convention to Propose Amendments (Convention), and Congress is required to set the date and place for a Convention.

Recent extensive research that I have been involved with discovered that 39 states had filed Applications for a Convention in 1979, of which 30 were limited to a fiscal responsibility amendment only and nine were plenary calls. Those numbers were 40, 32, and eight, respectively, in 1983. Despite these facts, Congress failed to act.

Shockingly, Congress has not asked the Archivist to collect, count, and store these applications despite their importance. In part, that’s because Congress has a conflict of interest and would prefer not to have a Convention.

As a result, a Concurrent Resolution will soon be introduced in the Congress that calls for Congress to set the date a place for a Convention within 180 days unless the Archivist determines within 60 days that we never had 34 valid state applications and provides a related accounting. In addition, several states are preparing to file a Mandamus action to assert their rights under Article V of the Constitution with the Supreme Court, if necessary.

If this amendment is not passed, what is most likely in store for the U.S. economy and its taxpayers?

Failure to put our federal finances in order will have serious adverse economic, individual opportunity, national security, international relations, and domestic tranquility consequences over time.

The truth is, tax rates will never be lower than today, and the longer we wait to address our structural fiscal imbalance the higher taxes are likely to go, and the longer we are likely to experience excess inflation and the greater the potential for stagflation. In addition, our future status as a superpower will be placed “at risk.”

Finally, are there any other thoughts you would like to leave with our readers? Also, is there a way they can let their congressional representatives know how they feel about getting this amendment passed?

America is a great nation, and our future can be better than our past. However, our future is “at-risk” and we must make tough choices sooner versus later to discharge our stewardship responsibility to our nation and future generations.

I do not think Congress will make the required tough choices unless they are forced to do via a Constitutional amendment. My latest book, America in 2040: Still a Superpower (A Pathway to Success), makes the case and outlines a way forward to help ensure that our future is better than our past. Also, you can let your elected representatives know how you feel by signing our online petition.

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