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In his latest column for the Fiscal Times, Bruce Bartlett explains the flaws with the proposed “Balanced Budget” amendment:
Having proven conclusively that they could not care less about balancing the budget when they are in power — reserving their deficit concerns solely for times when Democrats are in power — Republicans are nevertheless hoping that their support for a balanced budget amendment (BBA) to the Constitution will fool people into thinking they are fiscally responsible on Election Day. But if they are, in fact, serious about amending the Constitution to require a balanced budget, it’s a terrible idea.It’s hard not to be cynical about the Republicans’ motives. They know that most Americans are justifiably concerned about the enormous budget deficit and rising debt levels. But Republicans also know that most Americans are opposed to cutting vital spending or raising taxes to close the deficit, so they don’t dare offer any meaningful program for actually balancing the budget. Republicans likely asked their pollsters what polled well and sounded like a serious response to the deficit problem, and what wouldn’t force them to support anything politically unpopular. The pollsters pointed to a balanced budget amendment.
The idea of a balanced budget amendment to the Constitution has been kicking around for many years. Here are the key provisions of the latest version, H.J. Res. 1, which has 180 sponsors in the House:
Section 1. Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless three-fifths of the whole number of each House of Congress shall provide by law for a specific excess of outlays over receipts by a roll call vote.
Section 2. The limit on the debt of the United States held by the public shall not be increased, unless three-fifths of the whole number of each House shall provide by law for such an increase by a roll call vote.
Section 3. Prior to each fiscal year, the president shall transmit to the Congress a proposed budget for the United States Government for that fiscal year in which total outlays do not exceed total receipts.
Section 4. No bill to increase revenue shall become law unless approved by a majority of the whole number of each House by a roll call vote.
Section 5. The Congress may waive the provisions of this article for any fiscal year in which a declaration of war is in effect. The provisions of this article may be waived for any fiscal year in which the United States is engaged in military conflict which causes an imminent and serious military threat to national security and is so declared by a joint resolution, adopted by a majority of the whole number of each House, which becomes law.
Note that legislation usually passes when a majority of those voting vote “yea.” But when there is a requirement that a majority of the “whole number” of each chamber must support a measure, it means there have to be 261 votes in the House and 60 in the Senate, regardless of how many members actually vote. It’s a sneaky way of raising the bar without appearing to do so.
Now, let’s look at some of the practical difficulties with this extremely rigid approach to federal budgeting.
1. It will take forever to get an amendment enacted by Congress and approved by three-quarters of the states, if it can be done at all. Back in the 1980s, Republicans expended enormous effort to get such an amendment but could never muster the two-thirds majority necessary in both houses.
2. The simplistic amendment being proposed − the budget must be balanced except in times of war − was rejected by most Republicans in the 1980s on the grounds that it would likely force a tax increase, which is by far the easiest way to bring the budget into balance quickly. Instead, they favored some sort of spending limitation amendment. Furthermore, a balanced-budget amendment would pretty much make it impossible to ever cut taxes.
3. It’s one thing to require a balanced budget when starting from a position of balance or near-balance. It’s quite another when we are running deficits of over $1 trillion per year for the foreseeable future. Even if we were not in an economic crisis and fighting two wars, a rapid cut in spending of that magnitude would unquestionably throw the economy into recession just as it did in 1937.
4. It’s doubtful that BBA supporters really understand the composition of federal spending. In fiscal year 2009, we would have had to abolish every discretionary spending program, including national defense, to balance the budget and that still wouldn’t have been enough without higher revenues. We would have had to cut more than $300 billion out of Medicare and Social Security as well.
5. A BBA would force the federal government to make economic recessions worse. Since federal revenues fall and spending rises automatically in economic downturns, it would force spending cuts and tax increases at precisely the point when the economy is reeling, potentially turning a modest downturn into a depression.
6. There is no explanation for how a balanced budget amendment would be enforced. Perhaps Republicans just assume that public opinion will be sufficient. But the reality is that for such an amendment to be operational and not just a meaningless expression of intent, there has to be a point in the budgetary process when the federal courts can enjoin spending or force tax increases. This is obviously a very bad idea in principle, but it’s also impractical. As a legal matter, we would have no way of knowing that the budget was in fact unbalanced until the fiscal year had ended. Even a federal court can’t make people give back federal funds that have already been paid out for interest on the debt, Social Security and Medicare benefits, wages and salaries for government workers, payments for goods and services, etc. Thus a balanced budget amendment of the sort Republicans propose is effectively unenforceable.
7. In practice, Congress operates primarily on the basis of budget estimates provided by the Congressional Budget Office and the Office of Management and Budget. Many seemingly obvious terms like “revenue” and “outlay” lack a legal definition. Consequently, key decisions about whether a budget is balanced or not will be in the hands of government bureaucrats.
8. Finally, I can easily foresee the U.S. in a perpetual state of war to avoid the necessity of balancing the budget. This being the case, Republicans should ask themselves if they really want the Constitution of the United States to be treated in such a frivolous manner. If we pass an amendment that we know in advance is unenforceable, doesn’t that debase the Constitution itself?
The best case for a constitutional balanced budget requirement is that it would constrain vote-buying by politicians by making the cost of tax cuts and spending explicit, rather than hidden behind the veil of deficits. Even if there is nothing especially important about balancing the budget annually as an economic matter, the discipline imposed by the belief that it is important, even if mistaken, may have important value. Nobel Prize winning economist Paul Samuelson, whose views were generally on the liberal side, once explained why this is the case:
“I think there is an element of truth in the . . . superstition that the budget must be balanced at all times. Once it is debunked, [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency.”
One of the things that got this country’s public finances seriously on the wrong track was the idea that there was an implicit limit on deficits imposed by the political system. Hence, tax cuts would necessarily “starve the beast” by forcing spending cuts. This idea was plausible in the 1970s, but unfortunately has been proven beyond doubt by 30 years of experience to be completely wrong. In practice, there is no limit to deficits beyond those imposed by financial markets.
Space prevents a fuller explanation of why a constitutional balanced budget requirement is a bad idea and just an election year ploy by Republicans to avoid explaining how spending should be cut or taxes raised to actually achieve budget balance. I have posted references to serious analyses of a BBA at (“Bartlett’s Notations ”).
Click here to read more.
WillyP // Aug 27, 2010 at 12:16 pm
You gotta wonder about these “Republicans” who spend their efforts attacking their own out-of-power party while Democrats dismantle our society…
http://nyyrc.com/2010/07/23/helicopter-pilots-wanted/
Watusie // Aug 27, 2010 at 12:44 pm
You gotta wonder about these “Republicans” who dismantled PAYGO and then instituted a huge new entitlement program (Medicare Part D), a huge new cabinet-level department (Homeland Security) and started a pointless war (Iraq), all without bothering to make provisions for paying for any of it, other than borrowing from the Chinese.
Saying no to PAYGO but yes to a constitutional amendment is like saying I’m starting a diet next Monday so today I’m going to eat a whole pizza followed by a tub of ice-cream. Knowing, of course, that “next Monday” is in fact a decade away, given the cumbersome nature of the amendment process.
Bruce Bartlett’s columns are great becasue, unlike WillyP, he actually understand economics and, more importantly, he is not afraid to call a spade a spade.
WillyP // Aug 27, 2010 at 1:31 pm
what do you do for a living watusie? anything?
buddyglass // Aug 27, 2010 at 1:44 pm
Yes. I think I like Bartlett now. A year-to-year BB requirement is silly and overly restrictive. The govt. should, at times, be capable of operating at a deficit, with the understanding that whatever debt it accumulates will paid off in the near future.
Krom // Aug 27, 2010 at 1:59 pm
WillyP, instantly reduced to implying that people he disagrees with are unemployed. Dude’s always good for a laugh.
dante // Aug 27, 2010 at 3:29 pm
The *only* time I would’ve supported this was in 1999/2000, but I would’ve insisted that it EXCLUDE SS revenue (the only thing that kept us in a “surplus” instead of a deficit was raiding the SS revenue). When things are going great, and you’ve got a national surplus, *that* is the time to put something like this out.
However, we’ve seen how this ends. The GOP were handed a budget surplus (or at least the closest one that we’ve seen in decades) in 2001 and proceeded to claim that tax cuts were “emergency spending” so that they could get around PAYGO rules. These are the people who are going to be responsible now?? They won’t even agree to offsetting the extension of the GWB tax cuts with spending cuts (or additional revenue) elsewhere.
Watusie // Aug 27, 2010 at 4:51 pm
WillyP, address the issue: the Republican party, having dismantled PAYGPO and turned a budget surplus into a deficit while wrecking our economy, offers up a balanced budget amendment as a panacea – never mind that it will take a decade to implement and in the meantime they want more deficit-building tax cuts for the rich and maybe, if they can get away with it, a war with every Muslim country in the world. Why on earth should anyone listen to anything that any Republican who was in Congress from 2000 to 2006 say about fiscal responsibility?
easton // Aug 27, 2010 at 5:43 pm
WillyP, want watusie to join you in your cage with Coco to share a banana?
And what do you do? I teach in Uni so I am on my Summer break so I got a reason to waste here (though I do have some prep work to do)
And I love this poison pill: Section 4. No bill to increase revenue shall become law unless approved by a majority of the whole number of each House by a roll call vote.
It is like they put it there so that the amendment could never pass. Um…idiots, if you want a balanced budget you make the process easier, not harder. But they don’t want a balanced budget, they want an amendment stating that taxes on the rich can never be raised, only lowered.
cheves222 // Aug 27, 2010 at 8:23 pm
I like Bruce Bartlett, even though I do not always agree with him. But over the last year or so, I honestly cannot remember him saying a single positive thing about a Republican. Are they THAT bad? Is there nothing, nothing at all, worth lauding a GOPer?
For instance, there are things I very much do not like about the Tea Party crowd, probably 70% of it. But they have *some* contrubutions. And the alleged “RINO” crowd grates on me, but they have important ideas, too.
But not to old Bartlett. They are all morons.
buddyglass // Aug 27, 2010 at 9:09 pm
Actually, I forgot it was Bartlett that wrote that lame critique of the FairTax. I’m a little less high on him now that I remember that.
llbroo49 // Aug 28, 2010 at 2:51 am
So what if a BBA isn’t realistic? It still sounds good at a campaign rally and on flyers.
This is what happens when common sense ideas run up against complex isuues.
Rabiner // Aug 28, 2010 at 4:24 am
llbroo45:
“So what if a BBA isn’t realistic? It still sounds good at a campaign rally and on flyers.
This is what happens when common sense ideas run up against complex isuues.”
Isn’t that the point of this commentary? Republicans would rather offer bumper sticker solutions to complex issues that have no way of actually solving the issue. It’s disingenuous and populist. That doesn’t make it practical or wise to do and by advocating it, Republicans come off as lacking gravitas or caring about the issue.
Elvis Elvisberg // Aug 28, 2010 at 12:55 pm
cheves222– I don’t think that Bartlett has been wrong about anything, though. He might not be saying nice things about Republicans because he doesn’t find anything nice to say. That’s politically incorrect for a pundit, but it’s factually accurate. Was there a time you thought he was unfair in his evaluation of a GOP proposal?
DebtRefer // Aug 29, 2010 at 12:48 pm
There is an alternative to a balanced budget ammendment that allows the voters to impose fiscal discipline on members of Congress. It is the Debt Limit Referendum .
The Debt Limit Referendum (DLR) transfers the authority vested in Congress by Article 1 Section 8 to the voters for setting limitations on borrowing on the credit of the United States. Whenever Congress wished to raise the limitation on public borrowing (that is outstanding US Treasury debt, but excluding the phony Social Security and Medicare Trust Funds), it could pass a resolution requesting the increase. However, the increase would not take effect unless and until the voters approved the resolution by voting on the referendum during the biennial federal elections.
Basically, candidates for office would have to make the case directly to the voters why it’s OK to continue deficit spending. If it is a compelling one, then the voters in their wisdom may permit it. Candidates fearing a ballot box backlash would probably only request small increments and then have to deliver results, else the next referendum may not fare so well.
Politically, a DLR is a much more populist-oriented measure that actually will have more teeth than any BBA riddled with exceptions and escape clauses.
Rabiner // Aug 29, 2010 at 2:12 pm
DebtRefer:
You’re proposal is worse than the BBA.
DebtRefer // Aug 29, 2010 at 3:24 pm
Rabiner:
I see that you’re not able to compose any reasons why it’s worse.
Any solution to our debt problem will involve both tax increases and spending cuts. Republicans wisely won’t agree to tax increases without Democrats committing to permanent long-term spending cuts in entitlement programs.
The way to enforce any agreement is to have the imprimatur of the voters backing any notion of the appropriate level of borrowing.
Rabiner // Aug 29, 2010 at 4:56 pm
DebtRefer:
I didn’t make a longer post regarding how bad an idea your DLR was because I didn’t want to give you the impression that I thought you were stupid (I had just woken up when I read your comment and was quite cranky at the time).
First I’ll comment on the Balanced Budget Amendment:
The BBA is a terrible policy idea because the government’s ability to prioritize spending and taxation should be the responsibility of Congress or the Legislative Branch. Deficit spending is a reflection of current priorities to spend more than tax due to a number of factors that can be related to war and peace, the economy, or social strife. Congress should not have that ability to prioritized removed from their discretion. If you don’t like how they use their discretion then you can always vote them out of power in the next elections.
Mandating a balanced budget is only necessary in countries where they have zero control over monetary policy (they don’t control the money supply) which is not the case in the United States. This is why States in many instances written into their Constitutions are Balanced Budget Amendments. They don’t control their monetary policy, the Federal government does that.
In a real world scenario lets take the 2008 to current recession if we had a BBA. Under a BBA the Federal government would of had to do one of 3 things basically to be in compliance: 1) raise taxes to astronomical numbers since revenues had fallen by a huge factor, 2) cut entitlement spending significantly which would of put senior citizens into poverty and hospitals out of business since Medicare would not be paid for, 3) cut discretionary spending significantly which includes Military spending when we are fighting 2 overseas wars. I don’t see how a Balanced Budget Amendment makes that any better by forcing government to ‘tighten it’s belt’ at such a time.
Now with regards to Debt Limit Referendum.
A DLR is actually WORSE than the BBA because it introduces anxiety and uncertainty into the political sphere. Will the debt limit be raised in November? Will it not pass and then government has to make draconian cuts? You think uncertainty of if the Bush Tax cuts will expire or be extended in January is bad, think about the uncertainty of ‘will voters approve a debt ceiling raise or will I lose my government contracts’ towards business in this country? It would be devastating to long term planning for government and business.
It also goes against the concepts ingrained in our government of Representational Republic. We aren’t suppose to as citizens decide on specific government policies, we are suppose to elect Representatives we trust to do that for us. You may be an expert at growing crops if you’re a farmer but you sure aren’t an expert on why we should or shouldn’t raise the debt ceiling. Why do you think it’s a good thing to all of a sudden expect 300 million Americans to have an informed and educated response to that question when the average American has no concept of economics?
DebtRefer // Aug 29, 2010 at 9:19 pm
Rabiner:
Thanks for the thoughtful reply. I don’t expect everyone to read the Debt Limit Referendum in detail before commenting, but let me clear up a few misconceptions, because based on your comments, I don’t think you grasp the mechanics of the DLR.
First, it’s not a referendum on the annual budget. It’s a referendum on the public debt ceiling. Notice the Congress passes a new ceiling about every 3 or 4 years to give themselves the room to deficit finance the government’s operations for a few years without having to revisit the issue. Congress will have plenty of lead time to place a referendum on the ballot a year or 2 in advance of the time when the Treasury will bump up against the ceiling.
Regarding the threat to representative democracy, the electorate can only vote on the referendum if Congress first places the issue on the ballots. This isn’t direct democracy where the citizenry can place a measure on the ballot to bypass the Legislature. The balloting is even weighted by states’ electoral votes, not the popular vote.
Madison, Hamilton, Jefferson, et. al. lived in an era with a gold standard, not one with a Federal Reserve where the dollar is a world reserve currency where sovereign governments invest hundreds of billions of dollars purchasing US Treasuries. In such a world, Congress cannot exercise the requisite fiscal discipline to refrain from deficit spending so I think our constitutional order is broken and in need of repair.
What’s so hard an sophisticated about letting voters decide the level of public debt they’re willing to bear? Almost every state in the union requires voter approvals for the issuance of debt by municipalities, school districts, water districts, et. This is much easier than deciding whether to vote for a Republican or a Democrat for Congress or the Presidency.
Our problem today is that, with the exception of Paul Ryan, voters do not reward politicians that speak frankly about matching tax revenues with expenditures. Democrats demagogue any Republican like Paul Ryan who dares to recommend a serious restructuring of Medicare to contain the runaway costs of the present model. Republicans demagogue any Democrat recommending tax increases to balance the budget. However, Bruce Bartlett and others understand that both sides are going to have to meet somewhere in the middle. However, without an external constraint on the repeated raising of the debt ceiling, both parties can continue to kick the can down the road into the future.
Only a DLR provides the external constraint beyond the reach of cowardly politicians while still providing enough flexibility to recognize that simple expenditure limits or zero deficit rules cannot be feasibly implemented, let alone get a 2/3’s vote from Congress to be considered by the states. The DLR has the potential for bi-partisan support because it is populist, flexible, and has real teeth that could limit the profligacy of Congress.
Rabiner // Aug 30, 2010 at 12:55 am
DebtRefer:
Regarding the DLR:
I don’t think you got my drift earlier. Congress was never expected to in the Constitution to have to go to the people and ask for specific legislation that is probably necessary to pass for a vote. IF you don’t want them to increase the debt level, as a voter, make it an issue in the election cycle of individual candidates and vote on them based on their position. It’s improper in a representational republic to do otherwise. Constitutional Amendments aren’t put to a popular vote if I recall but rather to Constitutional Conventions in each State to see if they pass. So why would we go the extra mile for this proposition? We tried populism in the Constitution and that didn’t go so well with Prohibition.
Paul Ryan’s Plan:
I have a lot of problems with Paul Ryan’s plan regarding a number of issues. I’d love to have a discussion about it somewhere else if possible based on the fact this thread will be off the main page soon.
Rabiner // Aug 30, 2010 at 1:00 am
DebtRefer:
“First, it’s not a referendum on the annual budget. It’s a referendum on the public debt ceiling. Notice the Congress passes a new ceiling about every 3 or 4 years to give themselves the room to deficit finance the government’s operations for a few years without having to revisit the issue. Congress will have plenty of lead time to place a referendum on the ballot a year or 2 in advance of the time when the Treasury will bump up against the ceiling.”
In addition think about the debt level in this way. You can’t plan 2 years ahead of time to need a new debt level. In 2007 I’m sure we didn’t expect to have to bail out banks to the tune of 700 billion dollars. What if to pass such a bill we needed to raise the debt level which was initially expected to be voted on in 2010? Does Congress just throw their hands up in the air and say ‘can’t help save the financial system from collapsing’?
DebtRefer // Aug 30, 2010 at 10:39 am
Rabiner:
The DLR has an provision allowing Congress to suspend the limit by 2/3’s vote for one year, and it requires that any debt issued under emergency provisions be repaid within one year. Again, reading the DLR would answer a lot of your concerns.
I cannot help people with theological objections to referendums. I understand the founders fear of direct democracy. However, a referendum is a CHECK upon the legislative branch! So while it violates the strict republican form of representative government, its spirit is in line with the founders’ desire to limit the power of government.
As to Prohibition, I do recalled that it was repealed so the system did work. So basically, you just have a theological objection to referendums. That’s fine. I won’t argue with people about whether Jesus rose from the dead, Mohammed flew on a steed to Jerusalem, Moses spoke to God in a burning bush, or whether referendums threaten what it means to be an American.
rightabouteverything // Jun 10, 2011 at 3:29 pm
This is very simple. Cap the growth rate of per capita federal spending to CPI. Require a 60% vote in both houses to exceed that. Force Congress to actually make choices about how to spend a finite amount of real money. Vote them out if they spend it on foreign wars and bailouts and corporate subsidies and pork instead of medicare. Leave tax rates exactly where they are today given that revenue continues to go up from one decade to the next and will, if we freeze the growth rate of spending, catch up with spending within 5-6 years. End loopholes and many deductions and credits but keep rates where they are. Revenue isn’t the problem.
Get the analysis right. Revenue went up. Spending went up faster. And they spent it all on nonsense. Democrats and Republicans alike. NOT roads, bridges, schools, etc… but foreign wars, earmarks, foreign aid – complete nonsense.