James A. Leach: “I am convinced that for one and three- quarters century of our history to have a balanced budget amendment to the…”

“I am convinced that for one and three- quarters century of our history to have a balanced budget amendment to the Constitution would have been folly; based on the last 25 years of ``me generation'' politics not to put a restraint on legislators, would be folly. Of the four approaches under consideration today, what distinguishes the Kyl amendment is that it is the only one to couple balancing the budget with a restraint on spending. Frankly, a restraint on spending is more important than a balanced budget amendment. We can have a budget in balance at 30 or 40 percent of GDP and it would be a disaster. The budget could be slightly out of whack at 19 percent of GDP and the economy would be far better off. A combination approach--a balanced budget amendment coupled with a restraint on spending, and a line-item veto--is the optimal approach. It is the best housing policy, the best small business program, the best young farmer initiative. The effect on the economy of implementation of such restraints on Congress will be to cause banks to use their deposit base to make loans to individuals and businesses for growth instead of to buy Treasury bills for stability. Here, I would stress that even with the reduction of interest rates over the last 5 years, rates are still at historically untenable levels in relation to inflation. Real interest rates can only be reduced if the cost of government is reduced.…”