Four pillars of the American Fiscal Tradition—clear accounting, “pay as you go” budget planning, trust funds financed entirely with dedicated revenues, and explicit congressional approval of debt for specific amounts and purposes—once curbed the temptation to borrow. These practices helped federal leaders reduce debt for a minimum of ten out of eleven straight years after each of the nation’s first four peaks in debt. After the fifth debt spike (in 1945), traditional budget practices helped steadily reduce the burden of debt for three decades. Modern variations of time-tested practices could help federal leaders respond to the nation’s current debt crisis. Reform 1: A Separate, Tax-Financed Federal Funds Budget Driving a car without a dashboard and transparent windshield is dangerous, and so is budget planning without a clear view of the relationship between annual spending and revenues. Thomas Jefferson insisted that federal budgets be “clear and intelligible” to “any man of any mind.”1 Today federal accounting often disguises the level of borrowing, the use of borrowed funds, and the actual burden of existing debt.
What do You think about America's Fiscal Constitution?
