Wall Street Journal: The House GOP’s Balanced Budget Amendment Is A Bad Idea
One of the GOP's staunchest media allies isn't too impressed with their Balanced Budget Amendment.
In a move that will probably surprise some people, The Wall Street Journal has come out on its Editorial Page against the House GOP’s Balanced Budget Amendment:
The newest versions of the BBA include a strong provision requiring a two-thirds supermajority vote to increase taxes. That said, we doubt the historic 1981 Reagan tax cuts within the Kemp-Roth bill, once subjected to Congress’s revenue-neutrality accountants, could have survived the balanced budget mandate. Even with deficits, the U.S. grew strongly for seven years, adding to GDP as much as the entire West German economy.
Nor is it clear that the amendment could avoid unintended consequences. In the current fight over spending and the debt, the GOP Congressional leadership has worked well to protect the defense budget from a President who constantly cites the need to cut it. But under a mandated need to balance spending, the inevitable horse-trading would likely default to cutting defense while ducking fights on domestic programs.
The Senate and House versions both contain waivers in times of military conflict, but these are fraught with problems. The supermajority requirement for taxes is waived if a “declaration of war” is in effect, or if a majority votes to support spending for a conflict “which causes an imminent and serious military threat” as described in a joint resolution of Congress. Sounds complicated. Would Ronald Reagan’s spending that did so much to end the Cold War have survived these hurdles?
Tea party Republicans, to their credit, want to pass a BBA that would include the supermajority tax limitation. But it has no chance of passing, and absent that rule, political pressure could turn the amendment into a driver for the entitlement state as successive Democratic governments raised taxes, most likely with a European-style value-added tax to balance spending commitments.
The BBA’s supporters are right that the U.S. is riding a runaway entitlement train. That train, however, is the product of politics, and politics is the way it will have to be stopped. The main political impact of the BBA, however, will be to give “moderate” Senate Democrats up for re-election next year a chance to enhance their prospects by voting “for” spending control they don’t believe in.
We certainly support the House GOP’s plan today to vote to cut spending by $111 billion in fiscal 2012, and to cap spending in future years at a gradually smaller share of the economy. They should make this plan their main political argument, and leave the Constitution out of it.
Fred Bauer makes a similar point, and repeats another that is worth noting, namely that the Constitution already gives the Congress the power to act in a fiscally responsible manner:
The current incarnation of the balanced budget amendment falls into an error about which many on the right have traditionally pilloried the left: it substitutes legalism for virtue and prudence. We can balance the budget tomorrow if we want—by spending no more than we gain in taxes.Conservatives can cut spending if they want, though they seem to find this a challenging prospect when they actually take power. The Constitution already has a mechanism for a balanced budget, if our Congress and president want it. The fact that they have so rarely wanted it, and that the lack of a balanced budget has not always led to an economic or fiscal disaster, might give those sympathetic to prudential conservatism pause. This doubt might be reinforced by noting that the existence of balanced budget amendments in various states has not saved them in any way from fiscal turmoil. Indeed, California, perhaps the paragon of dysfunctional state finances, has operated under a balanced budget amendment for years. Passing constitutional requirements, in the case of California and other states, was a poor substitute for judgement in legislative and executive branches.
If not the Balanced Budget Amendment, then what? The major problem with getting the budget under control in the United States is that any plan that is going to work requires an agreement that covers many years . The Ryan Plan plays out over ten years, the White House put forward a plan that last twelve years, and the Obama/Boehner “Grand Bargain” would be a ten year plan. Of course, there is no such thing as a ten year budget plan. Every Congress passes a new budget, often in resposne to conditions that didn’t exist at the time the plan was agreed to, and Congressmen in office in a given year may not feel obligated to abide by the agreements made by other Congressmen a decade in the past. This is why budget deals that relay on spending cuts in “out years” never seem to work, because there’s no easy way for one Congress to bind another.
This is one reason that a Balanced Budget Amendment is so appealing, because it requires future Congresses to adhere to a budget that stays in balance. As the Journal and Bauer note, though, and as Steven Taylor and myself have noted here at OTB, the structural and policy problems created by turning the budgeting process into a Constitutional issues argue strongly that a BBA is not the way to go. As I noted yesterday, Moody’s suggested looking at the method by which other countries control their deficit spending. Germany recently adopted a Constitutional Amendment that limits annual deficit spending to 0.35%n of GDP, with exceptions that allow higher deficits in times of slow economic growth. And David Frum makes these observations:
1) Economic growth matters enormously to budget health. Everybody understands that. But what does not get enough attention: the casual inefficiencies we shrug off in good times weigh more heavily on economic performance in bad times. America’s crazy corporate tax code; the costs of litigation abuse; the failure to put a price on highway use; immigration policies that recruit less-skilled labor – these drag down growth and intensify budget problems.
2) The US budget is driven above all by healthcare costs. Healthcare inflation must be checked. Again: everybody understands. At decision time, however, both political parties prefer to protect their clients: Republicans protect healthcare providers; Democrats resist attempts to make Medicare enrollees contribute a larger share of the health costs they generate. We will need in the years ahead to implement both the Democratic-backed idea of comparative effectiveness review and the Republican-preferred concept of shifting toward a model of Medicare premium support.
3) Instead of a constitutional amendment to balance the budget, we need to internalize the norm that the budget should be balanced in normal economic times. To make that norm effective, we need to restore the institutional structures that used to uphold the norm: a stronger committee system in Congress, a more powerful Office of Management and Budget, budgets going to the floor on closed rules, and so on – a budgeting system that looks more like the system of the 1950s and early 1960s.
4) “Starve the beast” failed. What works is to make people feel the cost of the government they buy. The imposition of a VAT in Canada – with the cost of the tax always kept visible as an addition atop the price – has over the past two decades transformed the attitudes of Canadians toward government. Since the advent of the VAT (known in Canada as a GST, goods and services tax), Canada has swung from having one of the western world’s most expansionary attitudes toward government to having one of the western world’s restrictive.
A VAT Tax is a non-starter in the United States right now and for the foreseeable future, but the four elements that Frum hits on — economic growth, bringing health care costs under control, budget reform, and tax reform — are all right on the money it seems to me. We’d accomplish more by concentrating on these areas than we would by wasting time and effort to pass a bad Constitutional Amendment.
Update: Stephen Bainbridge proposes another idea, a Taxpayer Bill of Rights.
Of course it’s ridiculous and the Republicans would not even let it come to a vote if they thought it had a chance of passing. It is a political Kabuki dance designed to be the subject of campaign ads and supply cover for the Republicans when they vote to raise the debt ceiling.
Wouldn’t such an amendment also introduce the possibility of involving the courts in the budget process if Congress and the president couldn’t agree? If so, that seems pretty scary. On what basis would they determine what to cut and what taxes to raise?
@Rob Prather: Courts could not get involved in the budget process because the budget process is the domain of the legislature and courts can not force legislators to vote any which way. In state cases involving default, such as the NYC default in the 1970s, courts have generally just stuck to basic principles such as “this city has to make its debt payments and can’t treat various creditors unequally through an out-of-court restructuring.”
This is what comes from a generation of conservatives being told we need to run government “like a corporation”. What utter crap. There are times when a gov’t should – and indeed must – run a deficit. Gov’t isn’t supposed to make a profit – it’s supposed to provide certain services to its citizenry. Doing so is a government’s primary purpose, while a corporation’s only reason for existing is to make money for its investors.
Anyone who thinks a BBA is a good idea needs to be politely (or impolitely) ignored until they go read an Econ 101 textbook.
I live in a state with the Taxpayer Bill of Rights, and while it has some very good qualities (like putting tax increases to a vote), it has some very bad qualities as well (like limiting general fund budget increases to inflation + population increases. Because needs never change and service standards never differ, apparently). The voting on a tax increase would be unwieldy in a nationwide election.
@lunaticllama: Well, this begs the question: what’s the point of a BBA if it can’t be enforced? I’m against it because it doesn’t allow for the fact that there are times when a deficit is necessary (like now). It also has some idiocy about holding government spending down as a percenatage of GDP (it has much more idiocy I can’t recall at the moment).
Again, what’s the point?
@legion: Agreed in full.
The Republicans are pushing a bad idea? Shocking, shocking I say.
Has the United States budget ever been balanced? I mean before Clinton – when was the last one? In the 50’s?
And we’ve run a debt since when – Andrew Jackson?
I’m sorry but…the Republicans, and the silly people with tea bags dangling from their hats, are just f’ing stupid….there are no other words.
@Rob Prather: Don’t almost all states have balanced budget requirements? I don’t know that budget disputes necessarily end up in the courts. I think the primary problem is that a budget is an opinion about future income and expenses. Whether a budget is balanced is an argument, and I don’t know if the courts can or would get involved unless one side of the argument could be proved to be a lie (and could be done timely). I also think it’s likely that a consitutional provision will act politically to prevent budgets that are too far out of whack.
Anyway, I oppose a BBA because I agree that defecit spending may be prudent at times. If the courts would need to get involved in the budget that would be an additional strike against it.
Yes, every state but the Great State of Vermont – god’s country – have balanced budget requirements. And they all do it on the back of the federal government…otherwise they couldn’t do it.
See figure #5 at this link: http://www.census.gov/prod/2010pubs/fas-09.pdf
Interesting that Palin’s state takes the most aid isn’t it?
Even Rick Perry’s Texas is on the dole to the tune of over nearly $1500 a person – what happens when he suceeds from the nation?
So question – when the federal government has a balanced budget requirement – where does it turn for welfare?
Again – f’ing stupid.
@hey norm: We had a balanced budget for one year in the late 60s (1969, I believe). Other than that I believe you do have to go back to the 50s.
So Bachmann voted against the crazy bill. Which makes her not crazy?