Volcker Changes His Mind, Favors Budget Amendment

Former Federal Reserve Board Chairman Paul A. Volcker told Congress today that he has changed his mind and now feels some form of constitutional amendment might be needed to curb runaway federal spending.

But Volcker, in his first testimony on Capitol Hill since leaving the Fed post in mid-August, said he still opposes a flat balanced-budget requirement.

Instead, Volcker proposed amending the Constitution to require that all spending bills be passed with a larger-than-majority vote, perhaps by a 60% margin.

“My reasoning is, we spend so much, let’s make it harder to pass a spending bill,” Volcker said.

Testifying before a House Judiciary subcommittee, Volcker also said he endorses a proposal for a constitutional amendment that would give the President the power to veto individual spending items in appropriations bills.

Such “line-item-veto” power has long been sought by President Reagan.

The committee is considering a long-bottled-up proposal for a balanced budget amendment.

Volcker said a constitutional requirement of a balanced budget would be too inflexible a way of dealing with huge budget deficits and could trigger a recession.

At the same time, Volcker said, he has come to the conclusion that there is a built-in bias in the present system that makes it easier to raise spending than to raise taxes.

Failure to Agree

“Year after year, the Congress and the Administration have failed to reach agreement on a reasonable package of spending and revenue measures that will put the budget on a more assured path toward balance,” Volcker said.

He said efforts by Congress to cut the deficit in steps through legislation like the Gramm-Rudman budget-balancing bill are likely not to prove effective.

“I appreciate the effort, but as a way to run the railroad, it’s ridiculous,” Volcker said.