02/21/2014 01:00 PM House JUDICIARY

              HB 284-COMPACT FOR A BALANCED BUDGET                                                                          
                                                                                                                                
2:36:03 PM                                                                                                                    
                                                                                                                                
CHAIR KELLER, speaking  as prime sponsor of HB  284, informed the                                                               
committee that  HB 284  addresses the  federal national  debt and                                                               
proposes  a specific  constitutional  balanced budget  amendment.                                                               
There  are   several  states  involved  in   [the  Constitutional                                                               
Amendment  movement] and  the Goldwater  Institute is  presenting                                                               
the idea of continuing the  "Compact for America" [movement].  He                                                               
explained  that the  bill applies  [U.S. Constitution]  Article V                                                               
conditions and  uses the  compact approach in  order to  become a                                                               
U.S. Constitutional  Amendment.   The U.S.  Constitution, Article                                                               
V, lays out  two avenues of proposing amendments  and two avenues                                                               
for  proposing  amendments  and  ratifying  them.    He  directed                                                               
attention to Article V, which read:                                                                                             
                                                                                                                                
     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.                                                                                                    
                                                                                                                                
2:40:53 PM                                                                                                                    
                                                                                                                                
NICK  DRANIAS,   Director,  Constitutional  Policy,   Policy  and                                                               
Development, Goldwater Institute,  noted that he is  on the Board                                                               
for Compact for  America, Inc., is a 16-year attorney  of which 8                                                               
years  has been  focused in  constitutional law  and he  has been                                                               
involved in  developing Article V approaches  and researching the                                                               
issue for 4 years.   He then related that his  main claim to fame                                                               
is  a successful  win in  the  U.S. Supreme  Court striking  down                                                               
Arizona's system of campaign finance  regulations.  He noted that                                                               
[the   Goldwater  Institute]   published   Professor  Robert   G.                                                               
Natelson's,  three-part series  in  the fall  of  2010 and  early                                                               
2011, which  has proven  to be seminal  in providing  guidance to                                                               
Article  V  aficionados throughout  the  country.   Mr.  Dranias,                                                               
focusing on the  Compact for America Balanced  Budget referred to                                                               
the  slide  entitled "Your  Future  is  at Stake"  depicting  the                                                               
nation's current  gross federal debt,  not only the  portion held                                                               
by the public.   He opined the gross federal  debt is relevant to                                                               
[the  United States']  credit rating  and described  the U.S.  as                                                               
being  at  107  percent  of   Gross  Domestic  Product  (GDP),  a                                                               
situation the U.S. has not  experienced since the height of World                                                               
War II.   The  aforementioned is not  a sustainable  situation as                                                               
the U.S. cannot easily  grow its way out, and in  fact, it may be                                                               
impossible.   The degree of  unsustainability and  "crazy" fiscal                                                               
policy going  on in Washington  must end.   Referring to  a slide                                                               
entitled "It Isn't Getting Better"  depicting how the deficit has                                                               
narrowed from $1.1 trillion last  year [2013] to $650 billion, he                                                               
advised that those  figures possess no value because  the U.S. is                                                               
increasing  its  debt at  a  pace  over several  hundred  billion                                                               
dollars,  given the  amount of  debt already  accrued, and  it is                                                               
continuing along  the unsustainable  same path.   He  likened the                                                               
fiscal situation in the U.S. to  that of Greece five or six years                                                               
ago  when Europeans  began to  panic.   He then  opined that  the                                                               
fundamental problem with  the debt is that  of concentrated power                                                               
in  which the  debtor  is able  to set  their  own credit  limit.                                                               
Therefore, that concentration of power  needs to be broken up and                                                               
the plan is  to have a balanced budget amendment  as contained in                                                               
HB 284 that is a  plausible and bi-partisan route de-centralizing                                                               
the  power over  debt and  limiting the  ability of  a debtor  to                                                               
write their own credit limit.                                                                                                   
                                                                                                                                
2:45:04 PM                                                                                                                  
                                                                                                                              
MR. DRANIAS, referring to the  slide entitled "A BBA that Divides                                                               
Power is the  First Payload," explained that  the balanced budget                                                               
amendment was developed  with the goal of reaching  38 states and                                                               
is  an idea  that should  command  respect and  support from  the                                                               
center-left, center,  to center-right.   In fact  every component                                                               
of  the  balanced  budget  amendment  has  been  poll  tested  by                                                               
McLaughlin & Associates at over  60 percent approval ratings.  He                                                             
then reviewed  the sections of  the balanced budget  amendment as                                                               
follows:   Section  1 defines  what balance  would be  and limits                                                               
spending  to the  actual cash  in  the bank  at all  times.   The                                                               
definition of  a balance is that  spending at all points  in time                                                               
are limited to tax revenues or  the equivalent.  A consequence is                                                               
that there  must be a  revolving line  of credit to  "smooth out"                                                               
the tax  cash flow volatility,  he opined.  Therefore,  Section 2                                                               
provides a large  revolving line of credit that  initially is set                                                               
at 105  percent of the outstanding  debt and the extra  5 percent                                                               
is designed to provide a transition  period to the use of debt so                                                               
that  within  an  adequate  time,  the  hard  choices  are  made.                                                               
However, ultimately there is a  constitutionally fixed debt limit                                                               
that  would be  enforced unless  that debt  limit can  be lifted.                                                               
Section  3  ensures  that  the  concentration  power  problem  is                                                               
lifted.    He explained  that  if  any  increase in  this  "huge"                                                               
initial line  of credit were  deemed necessary, it would  have to                                                               
be  in the  form  of a  proposal requiring  a  referendum of  the                                                               
states.    In essence,  he  summarized,  Congress would  have  to                                                               
"refer  up"  the   states  and  secure  support   from  26  state                                                               
legislatures, a simple majority and  not a super majority, of any                                                               
proposed increase in  the debt limit.  He opined  that this makes                                                               
good  fiscal sense  as  it introduces  the states  as  sort of  a                                                               
fiscal   board  of   directors  that   intervenes  and   provides                                                               
supervision  for a  wayward CEO.    Section 4  enforces the  debt                                                               
limit  without  damaging  the U.S.  credit  history  and  rating.                                                               
Within the current  statutory debt limit system,  he noted, there                                                               
are "games  of chicken" that arise  each time it comes  into play                                                               
and  this amendment  creates  a  process by  which  the "game  of                                                               
chicken" cannot  happen.   In essence,  he opined,  the president                                                               
will now  have to name what  he will impound, delay,  not pay, or                                                               
what he will  prioritize over others in terms of  spending, at 98                                                               
percent  of the  debt  limit.   He  explained  that  the extra  2                                                               
percent basically provides 6-12 months  prior to the initial debt                                                               
limit, assuming  it is ratified  in the near future.   Therefore,                                                               
the  president, 6-12  months prior  to reaching  the debt  limit,                                                               
will have  a constitutional obligation  to identify  exactly what                                                               
he would impound  if that debt limit were enforced.   Mr. Dranias                                                               
acknowledged that is a considerable  amount of power, but advised                                                               
it is  not new power  as the  president has the  inherent implied                                                               
power to do  impoundments whenever there are  not adequate monies                                                               
to  support   appropriations.     This  amendment   requires  the                                                               
president to  exercise his  power in advance.   If  the president                                                               
lays out  a plan for  impoundment with which  Congress disagrees,                                                               
then Congress can  override those impoundments within  30 days by                                                               
a  simple majority  concurrent resolution  with equal  or greater                                                               
amounts.    The  idea,  he   clarified,  is  not  to  secure  the                                                               
impoundments, but  rather to [make  the plans known]  6-12 months                                                               
before reaching the  debt limit so everyone has a  clear sense of                                                               
what is  at stake  if that  debt limit, as  it is  currently set,                                                               
will be enforced.  Section 5  ensures that if the debt problem is                                                               
to be fixed, the U.S. does  not destroy its capacity for economic                                                               
growth by  over raising taxes.   He explained that debt  is taxes                                                               
and if the intention  is to pay the debt, then  the U.S. does not                                                               
want to have  taxes so high it destroys its  capacity to grow and                                                               
pay back that debt.  Therefore,  the compromise to limit tax rate                                                               
increases which would  require a super majority vote,  2/3 of the                                                               
whole number  of each house  for any increase in  existing income                                                               
taxes, general revenue taxes, or  any new general revenue tax, he                                                               
explained.  Furthermore, three  powerful" exceptions were created                                                               
to allow a  reasonable degree of revenue increases:   replace the                                                               
income tax with  an end user non-VAT [Value-Added  Tax] sales tax                                                               
that  is sometimes  called the  "fair  tax;" eliminate  deduction                                                               
credits  and  loop  hole  exemptions  that  is  sometimes  called                                                               
"making tax  flatter;" and implicit exception  in the definitions                                                               
the  Goldwater  Institute  uses   regarding  the  possibility  of                                                               
raising tariffs  and fees.   He  specified that  those exceptions                                                               
could  result in  new revenues  with simple  majorities as  it is                                                               
done  now.   The  special  interest "push  back"  will be  fairly                                                               
strong,  he  expected, and  if  the  people's representatives  in                                                               
Washington are able to overcome  that special interest push back,                                                               
it would  show a genuine consensus  on the need for  new revenues                                                               
rather  than  relying on  spending  cuts.    He opined  that  the                                                               
overall  incentive  structure  would  incentivize  spending  cuts                                                               
first  as the  root  problem is  spending  beyond [the  nation's]                                                               
means.    He  further  opined that  revenue  increases  would  be                                                               
possible  and   would  be  obtained  through   forms  of  revenue                                                               
increases that  would either  flatten or make  the tax  code more                                                               
voluntary.    He reiterated  that  the  poll tests  performed  by                                                               
Goldwater Institute and others are  fairly consistent and go back                                                               
40 years.                                                                                                                       
                                                                                                                              
2:54:59 PM                                                                                                                    
                                                                                                                                
[Vice Chair Lynn passed the gavel to Chair Keller.]                                                                             
                                                                                                                                
2:55:09 PM                                                                                                                    
                                                                                                                                
CHAIR KELLER explained  that the bill's premise is  that the debt                                                               
problem  is a  crisis  and the  "Compact  for America"  Amendment                                                               
introduces  checks and  balances  necessary to  address the  debt                                                               
issue.   He  questioned the  status of  other states  taking this                                                               
amendment forward.                                                                                                              
                                                                                                                                
MR.  DRANIS  stated that  the  Georgia  House of  Representatives                                                               
recently passed  a similar bill  out of  its House with  a 103:63                                                               
vote.   The  bill  is pending  in  Arizona, is  on  the table  in                                                               
Arkansas where a  fiscal limit may preclude it  from being heard,                                                               
and may possibly be introduced in Louisiana and Ohio.  The                                                                      
intent, he noted, is to keep "this session" narrow so that the                                                                  
compact legislation is substantively identical, he opined.