WASHINGTON -- The House's leading proposal to add a balanced budget amendment to the U.S. Constitution contains a provision that could cause default on Treasury securities for the first time, House Speaker Thomas Foley warned yesterday.
In a speech before the National Press Club crafted in a last-ditch effort to derail the amendment, the Washington Democrat said the version authored by Rep. Charles Stenholm, D-Tex., would require a three-fifths vote of Congress to raise the public debt limit once the balanced budget requirement takes effect.
Because "debt limits are difficult to pass under any circumstance," even by a simple majority vote, he said, the provision is "sheer lunacy" that "makes default likely at some point in our history."
Despite this and other strong warnings contained in Rep. Foley's speech, Rep. Stenholm said yesterday that he still expects to get the 290 votes, or two-thirds majority, needed for the amendment to win House approval in a vote scheduled for Thursday.
Rep. Stenholm explained that the debt limit provision was drafted to enforce the balanced budget requirement by making it extremely difficult, though not impossible, for Congress to increase the deficit and debt financing.
Like Rep. Foley, some economists have said that, despite Rep. Stenholm's intent, the amendment's new emphasis on the debt limit could exacerbate the prolonged financial crisis and threat of default that usually accompanies passage of a debt limit bill.
The leading version of the amendment in the Senate, does not require a supermajority vote to pass a debt increase, like the House measure. But the Senate version's author, Sen. Paul Simon, D-III., said yesterday that he has been considering adopting the House provision as part of negotiations to eliminate the differences between the House and Senate measures.
"That just reaffirms the whole thing," he said, emphasizing the enforcement value of the debt limit provision.
Sen. Simon and Rep. Stenholm have been trying to iron out the differences between their bills in recent days in hopes that the same version passes in the first round of votes in Congress. A vote on the Senate amendment is expected shortly after the House vote.
Passing the same bill would enable sponsors to avoid possible clashes and complications that could occur in any conference committee over the bills, which could be dominated by opponents on the House and Senate Judiciary committee appointed by the leadership.
Rep. Foley left no doubt in his speech that he will use whatever resources he has to defeat the constitutional initiative. He said the debt limit provision is just one aspect of the amendment that, if enacted, will "undermine the financial credibility of the United State here and abroad."
He maintained the amendment would lead to a broad abdication of responsibilities and commitments Congress has made, including commitments to pay deposit insurance and interest on the debt. Those two items currently exceed $100 billion and $200 billion a year, respectively.
As the Stenholm amendment is currently drafted. Congress would have to approve the payment of those obligations, which some say are increasingly unpopular, with a three-fifths vote each year, if they caused and increase in the deficit, Rep. Foley said.
Another way the amendment would undermine the financial system and the economy, he said, is by eliminating the government's flexibility to respond to downturns in the economy and by "denying the government credit at times when it may be most needed."
The last decade and a half of "imprudent management" that led to a tripling of the national debt, while lamentable, does not justify "the surrender of the these powers for all time," he said.
While Rep. Stenholm remained confident of victory, Sen. Simon said a "tidal wave" of opposition stirred up in recent days by Senate leaders has thrown passage of the amendment in that chamber into doubt. "There's no question that a few weeks age we had the votes, but now it is unclear" whether a two-thirds majority will throw their support behind it, Sen. Simon said. "It is going to be very, very close."
But Sen. Larry Craig, R-Idaho, added that House approval of the amendment would "significantly strengthen" its chances in the Senate.