Americans have been voting on debt for centuries. When local governments want to issue debt, the law usually requires that they place the proposed debt issue on the ballot and let voters decide.
The tax revolt launched in the 1970s resulted in new laws imposing this requirement on some state governments as well. Perhaps the best known of these laws is Colorado’s Taxpayer Bill of Rights Amendment (TABOR), enacted through citizen initiative 1992.
TABOR requires all governments in Colorado to receive citizen approval to issue new debt and taxes. The ballot measure must inform citizens how much debt will be issued, how the money will be spent, and how the debt will be financed. TABOR gives citizens the right to decide how much debt the state can issue, and how much taxes they are willing to pay to service that debt. Surveys by the Colorado Tax Commission provide insights into citizen attitudes toward TABOR.
Over the years, hundreds of these proposals to issue new debt have been placed on the ballot in Colorado. When local governments submit proposed debt increases to voters for approval, these ballot measures usually pass. With TABOR, there is greater transparency and accountability for these debt issues. Colorado citizens support local ballot measures proposing new debt because they have confidence that the money will be spent for specific projects, such as libraries, schools, roads, and buildings, and that they will get good value for their tax dollars.
The state of Colorado has also proposed increased debt in several ballot measures. Only two of the six state ballot measures proposing increased debt have passed voter approval. In contrast to local governments, there is less transparency and accountability for debt issued by the state. Some state ballot measures propose issuing debt to fund a combination of state programs such as education, highway construction, and the like. But politicians find many ways to spend state funds on pet projects, often benefiting special interest groups.
Citizens have little confidence that the state will spend money for projects they deem necessary, or that they will get good value for their money. Indeed, surveys conducted by the Colorado Tax Commission revealed that Colorado citizens think the state wastes much of this money, and the federal government wastes most of the money it receives.
If citizens can vote on debt at the state and local level, why shouldn’t they have the power to vote on debt at the federal level as well? Under current law, the power to issue debt by the federal government resides in Congress. At the federal level, citizens do not have the power of initiative or referendum, as they do in many states. So, we depend entirely on elected representatives in Congress to decide how much new debt to issue.
Fiscal rules, such as the debt limit, are designed to constrain the total debt the federal government can issue. But the debt limit is routinely increased by a simple majority vote in Congress. Unfortunately, this has not worked well, the growth in federal debt is not sustainable. The federal government has issued more than $33 trillion in debt, which now exceeds our national income. Federal debt has been growing more rapidly than national income for decades and is projected to continue to do so in the coming decades.
A new tax revolt is underway that could provide greater transparency and accountability while giving citizens greater control over debt issued by the federal government.
Research by the Federal Fiscal Sustainability Foundation reveals that in 1979 two two-thirds of the states had submitted resolutions calling for a Federal Fiscal Responsibility Amendment. But Congress failed to count these resolutions or call the convention as required under Article V of the Constitution. The Federal Fiscal Sustainability Foundation is working with Congress to correct this flaw. As the Founding Fathers anticipated, Congress is reluctant to enact laws circumventing its power of the purse.
At this point, it is not clear what a Federal Fiscal Responsibility Amendment would look like. But a good model for such an amendment is Colorado’s TABOR Amendment. Requiring citizen approval for new debt has worked well in Colorado. Giving people this power at the federal level may be the only way that we can stop the unsustainable growth in federal debt.
There is a precedent for this form of direct democracy in Switzerland. Citizens in Switzerland have been voting on debt issued by governments at the municipal, cantonal, and federal levels for more than a century. The Swiss Constitution provides for initiative and referendum at all levels of government. Swiss citizens, rather than politicians, have the power to determine how much debt can be issued and how the money will be spent. It is up to Swiss citizens, not politicians, to decide how much debt they want and are willing to pay for.
American citizens should possess that power as well.
Photo by Jericho. Creative Commons Attribution 3.0.
Barry W. Poulson is Emeritus Professor of Economics at the University of Colorado.
