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Local View: A dangerous consequence

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Nebraska Legislature

The State Capitol stands in Lincoln, Neb., Friday, July 1, 2020. Nebraska lawmakers will resume their session on July 20, 2020, after a four-month pause triggered by the coronavirus pandemic. They still have major issues to address, including a property tax package and an upgrade of Nebraska's biggest tax incentive program, but all of that may be overshadowed by the pandemic's impact on tax revenue. (AP Photo/Nati Harnik)

There is no doubt that the federal stimulus actions that have taken place under both Presidents Trump and Biden have played a major role in our nation weathering the COVID-19 pandemic as well as it has.

And while reasonable people can disagree about the proper level of debt our country should have, being able to take on debt has been essential to providing needed federal relief during this unprecedented moment in our history.

A dangerous measure that could be debated by Nebraska lawmakers in the coming days would likely stop our country from being able to borrow in hard times and thus threaten our nation’s ability to respond to emergencies such as the COVID-19 pandemic.

The measure is LR14, and it’s identical to proposals before other state legislatures. It calls for a constitutional convention, and many proponents would like to use a convention to pass a federal balanced budget amendment or make other sweeping changes to our nation’s Constitution.

A balanced budget amendment – if enacted – would prevent the federal government from taking on debt. But federal debt actually works to stabilize the economy during recessionary periods such as that caused by the pandemic. During these times, businesses and consumers spend less, which leads to job losses. At the same time, the cost of unemployment benefits and other programs – including federal relief initiatives – increase as more people lean on this support.

Borrowing to fund these increases in benefits cushions the blow to the economy as it helps families and businesses that receive the benefits and also helps preserve the jobs that remained through the economic downturn.

Leading economists -- including Nobel Prize winners Kenneth Arrow and William Sharpe of Stanford University and Peter Diamond and Robert Solow of the Massachusetts Institute of Technology -- have said a balanced budget amendment would weaken our nation.

They say a balanced budget amendment would limit our ability to prevent recessions from spiraling into depressions. Economists say a balanced budget amendment would make it difficult for the federal government to borrow funds needed to fund roads, education and other infrastructure needs that are vitally important to our economy.

Federal dollars also play a key role at the state level as they account for approximately one-third of the state budget – about $3.6 billion in FY20/21. Furthermore, as a result of the pandemic, Nebraska has been allocated more than $21 billion in federal funding – twice our state’s total annual state and local tax collections. This has helped our state weather the worst of the pandemic’s economic effects.

Nebraska’s farmers benefit from hundreds of millions in federal subsidies each year, and federal dollars also support road construction, higher education and K-12 schools as well as military installations like Offutt Air Force Base. The funding that supports all of this would be vulnerable to cuts if lawmakers had to balance the federal budget every year.

And if federal funding is cut, it could force state and local governments to reduce the services they provide or raise other taxes and fees – including property taxes – to avoid service cuts.

Calls for fiscal restraint are sensible and valid as are conversations about the appropriate level of federal debt. LR14 and the federal balanced budget amendment the measure’s proponents support, however, are dangerous propositions and our state and nation would be best served by Nebraska lawmakers rejecting them.

All three authors are former Nebraska lawmakers and current members of the OpenSky Policy Institute Legislative Alumni Advisory Committee. Campbell represented District 25 from 2009 to 2017. Gloor represented District 35 from 2009 to 2017. Harms represented District 48 from 2007 to 2015. Campbell and Harms also are members of OpenSky’s Board of Directors.


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