Balanced Budget Amendment Pros and Cons

In recent weeks there has been a debate in the editorial pages of The Wall Street Journal regarding the merits of a balanced-budget amendment, or BBA.  First came an opinion piece by Senators DeMint (SC) and Snowe (Maine) in favor of an amendment (so far this year 48 senators have co-sponsored one or more of the Senate’s five BBA bills), and a few days later the editor of the editorial page fired back with objections that ranged from the possibility of sharp cuts in defense spending to a fear that the need to balance the budget would be consistently met with tax increases.   The editor followed that up with a piece by a Yale professor who raised some legal and technical objections.

Alan Parks, President of Americans for a Balanced Budget Amendment, answered all the objections with this letter, which was given a nice placement on the editorial page:

Regarding your editorial “GOP Balancing Act” (July 19):  The 1997 effort to pass a balanced-budget amendment in Congress failed by a single vote because our legislators knew that they had not balanced a budget since 1960. The 1969 budget was “balanced” with the help of deceit; that was the year they introduced the “unified budget” gimmick, which claims FICA receipts as if they are taxes. Since 1997 we’ve had two balanced budgets, in the Internet-bubble years of 1999 and 2000, and Congress has added $9 trillion in debt. Our legislators are incapable of fulfilling their primary duty of ably managing the purse strings of government. They need external pressure from the Constitution.

Most of your arguments against a balanced-budget amendment (defense spending could be cut, taxes could be raised) are really arguments against balanced budgets. Yale professor Peter Schuck adds some concerns about legal issues (“The Balanced Budget Amendment’s Fatal Flaw,” op-ed, July 22), but all of those problems have long since been navigated by the 49 states that have balanced-budget language in their constitutions.

Your fears of sharply higher taxes can be soothed by reading the text of the Senate balanced-budget amendment bill, S. J. Res. 23, which includes a cap on spending at 18% of GDP (previous versions had it at 20%). This percentage is the key issue in the entire budget debate. We have almost never, aside from 1944, 1945 and 2000, been able to collect more than 20% of GDP in taxes, even when the top tax rate was set at 91%.

Alan Parks
President
Americans for a Balanced Budget Amendment (http://balanceourbudget.com/)
Georgetown, Texas

Two other readers chimed in:

“A better budgeting approach would be to tie spending for the coming year to actual receipts in the preceding year. Such a reality-based approach would also have a countercyclical effect on federal spending, since in the first years of a recession, spending would be pegged to high receipts from the preceding boom.”

Michael M. Segal

Brookline, Mass.

 

“I used to share the Journal’s fear that a balanced-budget amendment would be used as a fig leaf for big spending: “Gee, I didn’t want to raise taxes, but the Constitution says I must.” But as things now stand, government can vote for new programs to mollify certain constituencies, while not having to stick other constituencies with the bill. We simply borrow the money to distribute to the groups to which the sponsoring politicians wish to pander.

We now have a situation in which public goods are essentially free. Demand is unlimited for free goods. If, however, someone had to pay for new government programs, and those programs could be assigned a cost in tax dollars, terms most taxpayers can understand, we would finally have some real opposition to the growth of government. Spending would be subjected to cost/benefit analyses in which the cost is real, rather than zero.

While crafting a balanced budget in the heat of debt-ceiling negotiations may not be advisable, such an amendment, carefully considered, seems necessary if we are to return to anything resembling fiscal sanity in this country.”

Mark M. Quinn

Naperville, Ill.

Update, Feb. 24, 2013;

Recently taxes were raised on upper-income Americans, thus steepening the graduated tax curve again (on top of two changes to Medicare taxation and a limitation on deductions for wealthy taxpayers).  The President’s “sequester” is slated to slash $60 billion a year from defense spending as of March 1 . . . The Wall Street Journal’s concerns about defense spending and taxation have been realized, but there is no balanced-budget amendment in sight.

If Congress had summoned that one last vote in 1997 and passed the BBA bill, there’s a good chance it would have been ratified by the required 38 states (3/4 of the total), because 49 of them have balanced-budget language in their constitutions.  We can only guess at the changes that this would have wrought, but it’s likely that the “Bush tax cuts” would not have occurred (and that tax rates would not have steepened in 2013).  The prescription drug benefit would not have been added to Medicare, and defense spending would have been constrained during the war years despite successful congressional votes to override the balanced budget amendment (under its wartime clause).  We would have several trillion dollars less in debt;  call it $10,000 less per person, or $20,000 less for each person young enough to feel the brunt of the coming hurricane.

— John Lumbard

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