February 17, 2013

An Old Idea Revisited: A Balanced‑Budget Amendment

by Hal Gershowitz

Comments Below

Just starting his second term, President Obama has been in office now since 2008 and not once since he took office has the Democratically-controlled Senate passed a budget.  The President, who insists that we do not have a spending problem, continues to operate on that basis.   This is, of course, no way to run a country and it should be an embarrassment to those who have been elected to do just that.  Amending the Constitution can be a long process, and, perhaps, it would not succeed.  It requires three‑quarters of the states to approve it, and two‑thirds majorities in both Houses of Congress.  Nevertheless, as we have said on other subjects in the recent past, while it may take a long time, a journey of a thousand miles begins with a single step.

Almost all states have balanced‑budget amendments, and even those that do have found ways to work around the limitations that balanced‑budget requirements impose.  For instance, New York, which like 48 other states has some sort of a requirement for a balanced budget, once balanced its budget with a scheme, about which George Will recently wrote. The state sold itself Attica prison.  A state agency, which was established to fund urban redevelopment projects borrowed $200 million in the bond market, gave the money to the state, and took title to the prison.  The state recorded as income the $200 million its agency had borrowed, declared the budget balanced, and then rented the prison from the agency for a sum adequate to service the $200 million debt.  The folks who thought that one up could teach a thing or two about slight of hand to Wall Street.

A balanced-budget amendment would have to have certain requirements to prevent the budget from being balanced by raising taxes, lest we provide a license to the spendthrifts in Congress to raise taxes willy nilly in order to balance the budget.  Thus, there would have to be some requirement for a supermajority vote of the Congress in order to raise taxes and an exception for times when the nation is at war or suffering some super immense disaster (some scientists believe there is a 30% chance of a giant asteroid hitting earth within the next 30 years).

Another way of approaching the problem might be to tie any increase in the debt limit to a balanced budget

Even if such an amendment does not pass, support for the Amendment would become a way for fiscally responsible members of Congress (from both parties) to explain to the general public logical, essential and entirely defensible budgeting philosophy.  The logic of balancing the budget would be compelling to the American people, Democrats and Republicans alike. The Republicans, especially, need an understandable and positive alternative to what, today, passes for fiscal stewardship.  Taking the leadership on a constitutional amendment to balance the budget has the advantage of restoring some sense of purpose to the minority party.

There is also the question of what the remedy  might  be in the event that Congress failed to balance the budget once a balanced‑budget amendment were actually adopted and added as the 28th Amendment to the Constitution of the United States. Sequestration anyone?

The amendment process will certainly show who is really serious about trying to get spending under control and who just pays it lip service.  Perhaps our readers don’t need a refresher course on the way this country now stands regarding its debt, but as of the end of 2012 the country had $16,562,000,000 of outstanding debt, $5 trillion of which has been added since President Obama took office.  Our total debt (debt held by the public plus obligations the government has to fund various entitlements) has now reached 93.4% of America’s GDP. This level of debt, and the rate at which we are expanding it is both unsustainable and dangerous.

The Constitution can actually be amended without the approval of Congress. The Constitution allows two‑thirds of state legislatures to petition for a new constitutional convention to be called for the purpose of writing proposed amendments to the Constitution, a procedure that has never been used, and one that we would loath to see pursued. Such a constitutional convention would not necessarily be limited to a balanced‑budget amendment. It would also permit participants to add a laundry list of items to be included in a rewritten constitution. One might ask why there is a need to amend the Constitution to require a balanced budget given the successes during the 1990s of balancing the budget.  Well, we had a President and a Congress at that time that did not want to spend their way to a transformed America.

Historically, those who have supported a balanced‑budget amendment have wavered in the intensity of their support.  Many Keynesian economists believe that, while a large federal deficit has an adverse effect on the economy, deficit spending has significant benefits in times of recession.  That is also the position of Kenneth R. Hoover, author of, “Economics as Ideology Keynes, Laski, Hayek, and the Creation of Contemporary Politics.”  Several leading economists believe that a balanced‑budget amendment would mandate perverse actions in the face of recession by requiring spending cuts that would aggravate and deepen the recession.

We shouldn’t need a constitutional amendment in order to enforce responsible fiscal discipline on our profligate spenders in Washington, but after these past four-plus years of no-budget, perpetual-deficit government, the time may be right to tie a balanced‑budget amendment to any increase in the debt ceiling.  We wish it weren’t so, but when did wishful thinking ever solve a problem.

All comments regarding these essays, whether they express agreement, disagreement, or an alternate view, are appreciated and welcome. Comments that do not pertain to the subject of the essay or which are ad hominem references to other commenters are not acceptable and will be deleted.

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One response to “An Old Idea Revisited: A Balanced‑Budget Amendment”

  1. mark j levick says:

    The first step in solving a problem is recognizing that one exists. For the President and those who have elected him the amount of debt and its increase is not a problem. The Republicans who disagree are a problem as they oppose the concept of printing money to fund current entitlements, the new ones Obama wants to create and the expensive and inefficient bureaucracy which is administering those entitlement. Rather than embarking on the fools mission of initiating a balanced budget amendment the GOP should go on record as supporting infrastructure repair and development, trade school education for those who want to learn a skill that will get them non minimum wage jobs, overhall of the tax code, Government worker pension reform, caps on unemployment compensation and food stamp benefits for able bodied people who decline to perform Government service, competitive bidding requirements for all Government procurements, development of domestic oil and natural gas resources prioritized for internal consumption, support for Social Security, Medicare and universal healthcare coupled with a VAT tax, a luxury tax on income over $5 million and pleasure cars and boats having a sticker price over $75,000 plus a user fee for all recipients of Government services and national identity cards for those who wish to receive Government funded benefits, obtain a license to operate a vehicle, travel abroad or vote. The sales pitch would essentially be “let’s all participate”.

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