A national organization of economists and businessmen yesterday proposed a new constitutional amendment on federal spending that is designed to provide a "reasonable alternative" to recent proposals that would mandate a balanced federal budget.
The complex proposal, prepared over the past six months by a generally conservative group working under the direction of economist Milton Friedman, was made public by the California-based National Tax Limitation Committee.
Despite its name, the Tax Limitation Committee's proposed amendment would not limit taxes. Instead, it would establish a constitutional ceiling that would prohibit federal spending from increasing any faster than the increase in the gross national product.
The proposal also contains a separate anti-inflation rule that would permit less growth in federal spending in years when inflation exceeds three percent.
The permitted increase in federal spending would be reduced 1/4 of a percentage point for each percentage point that inflation excees 3 percent. If the preceding year's inflation rate were 7 percent, for example, the amendment would permit federal spending to increase one percent less than the increase in GNP.
The amendment also contains provisions for exceptions under emergency conditions and a rule that would prohibit large cuts in federal grants to state and local governments.
With its various conditions and definitions, the proposal includes seven sections and, if adopted, would be the longest amendment since the 14th Amendment was adopted in 1868 validating the public debt and spelling out citizenship requirements.
Friedman argued at a press conference here yesterday that this complexity is one of the proposal's great strengths.
"We want to offer a thoughtful, reasonable alternative to some that have been presented in this field," he said. "If you have a simple budget-balancing amendment, even with emergency escape valves,, it turns out to be impossible to implement."
Friedman said his plan for a federal spending limit would "let the budget balance itself" over a period of years. Moreover, he said, it would reduce government spending, as a proportion of national income, from today's level, about 25 percent, to less than 20 percent about 10 years after the amendment was adopted.
Lewis Uhler, president of the Tax Limitation Committee, said the organization has not asked any members of Congress to introduce the proposed amendment, but hopes somebody will. "We're putting this on the table to contribute to the national dialogue on this issue," he said.