In yesterday’s Wall Street Journal Senators Snowe and DeMint wrote an opinion piece (subscription req’d) which points out that none of today’s budget negotiations offer anything like a long-term cure for the fiscal irresponsibility that has become the norm in Washington, DC. They argue that this goal is best achieved via a balanced-budget amendment to the Constitution, and remind us that the Senate last considered this measure in 1997—when the nation’s debt was just $5.36 trillion. The amendment passed the House, and failed in the Senate by a single vote.
A misinformed New York Times writer immediately jumped on his keyboard to ask what would have happened in 2009 if we’d had this amendment in place. Would Congress have been forced to cut spending programs and raise taxes as IRS tax receipts shriveled? If he had bothered to read the language of the four balanced-budget amendment proposals in the Senate he would have learned that each offers Congress an opportunity to override the amendment by super-majority vote. In 2009 that vote surely would have passed.
In truth the amendment would have been overriden in other years, such as the years when the deficit was enlarged by war and tax cuts. But the need to annually override the Constitution would have weighed heavily. In just two or three years the supermajority would have crumbled and fiscal responsibility would have returned. Instead of starting with $10 trillion in debt and running it up to $14.4 trillion, the 2009 Congress might have started with 7 or 8 trillion in debt, and run it up to $10 trillion. And instead of starting with an economy that had already been overstimulated for years (and thus less-receptive to the arguable effects of stimulus), we would have started 2009 with a leaner government and a more-or-less balanced budget. We don’t know whether the economy would have given a warmer welcome to the added government spending, but we DO know that we wouldn’t now be worrying about a threat of sharply-rising interest rates, trillion-dollar annual interest costs, and calamity for the US and for the entire planet.
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Postscript to those who worry that a balanced-budget amendment (“BBA”) would simply force tax increases whenever spending got out of control: All four of the BBA bills in Congress(http://weelectedyou.org/2011/04/the-farmer-and-the-lottery/ ) would put a cap on federal spending. Two set the cap at 20% of GDP, and two set it at 18% of GDP. Democrats would like to see a higher percentage.
Let the debate begin, because this is the core issue. How much can we afford to spend, and how much do we want to raise in taxes? Right now Washington is in an uproar because individual groups of voters are being targeted for spending cuts or tax increases—and none of them are happy about it! It makes a lot more sense to budget those amounts first, and then fit our spending and taxation to the budget.
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A balanced budget Amendment is a stupid idea,proposed by none too bright individuals,or teabaggers.America has had many catastrophes,see bush trillion dollar wall street bj,and this Amendment would hamstring the Government in times of crisis.The idea is every bit as stupid as never raising taxes.I am sick and tired of the idiots in powdered wigs,equating taxation without representation with todays world.We all have elected representatives,who should be able to do what needs to be done,even if it is for just a few years,or if it is for a decade.Bush Sr. raised taxes,as did reagan and Clinton.These raises enabled the government to install programs that forwarded the American ideal,of exceptionalism and preserved the American way.You would think these people would realize what 8 years of these assinine policies under Bush did to our countries economy.,Americans should want to help restore our exceptionalism.Oue seniors paid a much hifgher tax rate,and we want to renege on their promised deals.This sounds like people who care aboutonly themselves and screw everyone else.1 and a half more years of this lunacy,and these ideas that seemingly come from people with double digit IQ’S.
The purpose of this post was to explain how Congress would run deficits in a crisis, so it’s distressing to see a comment from somebody who raced to the bottom of the page to put up a rant on another topic. As I said above, all of the BBA proposals in Washington right now (indeed, all that I’ve ever seen) allow our congressmen to overspend; they just wouldn’t be allowed to do it with a bare-majority vote.
The real danger is that they’d find ways to run deficits even in years in which they produced a “balanced budget”. The “doc fix” is an ongoing scam, started in the Clinton years, in which they claim $30 + billion in anual savings on Medicare and Medicaid by saying that next year they’re going to slash the price of a doctor visit to levels that would drive many primary care physicians out of business (many of them are hanging on by their fingernails as it is). Every year Congress votes not to make the cut, and then says the cut WILL happen “mañana”. The unified budget is another huge scam, as is the fact that Congress ignores all the future liabilities it creates, in clear contradiction of generally accepted accounting principles. The deficit is much bigger than the published number, which looks bad enough.
This year we’re expected to raise $2.6 trillion in taxes, and spend $3.8 trillion. And the true spending number is much higher.
As for the idea tht we need to raise taxes, yes we can. That $2.6 trillion is probably 16% or 17% of GDP, and we’ve raised as much as 20%. The bad news is that we’ve never raised more than 20% of GDP (see Facts and Figures, in the blue bar at the top of the page), and this year we will again spend about 25%. Raising taxes is not, by itelf, going to close the deficit. You could install a VAT to get us up to that 25% figure, but that still wouldn’t be enough to cover the future cost of Medicare.
JL