Against a Balanced Budget Amendment.

Some Republicans argue that the current deficit is the product of legislative indiscipline. From time to time, they have proposed a “Balanced Budget Amendment” to the Constitution as the cure for this indiscipline. Sort of like fiscal gastric by-pass surgery.[1] Allow me to disagree.

First, the whole economic history of the Twentieth Century argues against the sanctity of balanced budgets. An obsession with balanced budgets made the Great Depression of the 1930s much worse than it need have been. “Hoovervilles” were the packing-box shanty towns named after the budget-balancing president of the United States in the early Depression. Massive deficit spending—which would be outlawed by a balanced budget amendment—got the Imperial Japan, Nazi Germany, and the United States out of that Depression. You don’t have to like the company we kept to recognize what worked. Since the Second World War all countries have used deficit spending to counter down-turns in the economy. It has turned out to be a crude tool, but it has been effective. Our current problems exist because the Democrats flinched before the cost of getting us out of the mess created by the housing bubble. The stimulus package needed to be twice as big and front-loaded into the first year. Then Republicans imposed the “sequester” that further reduced government spending.

Second, a balanced budget amendment will do nothing to resolve the fundamental disputes between Democrats and Republicans which stands at the center of our current dead-lock. Republicans rightly complain that the Democrats will not address the exploding cost of entitlement programs, which cannot be supported by any model of economic growth or taxation of the rich.[2] Democrats rightly complain that they cannot sell austerity to their constituents without some tax scalps from the rich to brandish. How will a balanced budget amendment solve this basic dead-lock? Making the budget an issue subject to judicial review merely passes the buck from the legislature to the courts. If you think abortion or gun-control are subjects best avoided at the Thanksgiving dinner table, just wait until taxes and spending get on the docket!

Third, about 22 percent of federal spending goes to defense, about 22 percent goes to Social Security; and about 22 percent goes to Medicare/Medicaid. That’s two-thirds of federal spending. About 7 percent goes to debt-service. Everything else that government does is crammed into the remaining 25+ percent of federal spending. What do people want to cut? Social Security? Medicare? Defense? I would bet not. OK, we could do without the Department of Education and the DEA. What about other things? Air traffic controllers? Paving the highways? The federal courts? The Coast Guard air-lifting injured commercial fishermen off heaving decks at night in the Bering Sea? Cuts to welfare won’t do it.[3]

If the vast majority of legislators do not want to make these cuts, then the only solution that would be imposed by a Balanced Budget Amendment would be big tax increases on a very wide basis. Basically it would involve undoing the George W. Bush Administration’s tax cuts.[4] Republicans should be careful about the things for which they wish. A balanced budget amendment has a snowball’s chance in Hell of solving those problems.

[1] For a recent example, see:

[2] Republicans conveniently fail to provide any detailed plans on how they would contain entitlement spending. There are a bunch of ways of doing it, but not without somebody’s ox getting gored.

[3] In fiscal 2014, SNAP added $74 billion to a$3.5 trillion budget. I can’t even calculate that small a percentage.

[4] They should best be called the Bush-Obama Tax Cuts because President Obama fought hard to have 98 percent of them made permanent. According to the NYT, two-thirds of the federal revenue lost from those cuts came from people who make less than $250,000 a year.

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