GOP Balancing Act
A balanced budget amendment is the wrong debt solution.
The Wall Street Journal
July 19, 2011
http://online.wsj.com/article/SB10001424052702304521304576448091429014936.html?mod=WSJ_Opinion_LEADTop
Republicans this week plan to force votes in the House and Senate on a balanced budget amendment to the U.S. Constitution. The last time Congress voted on a BBA was in 1997. It failed. The first unsuccessful BBA was proposed in 1936. All efforts between now and then to vote a balanced budget amendment into the Constitution have failed. This one will as well, as there are sufficient Democratic votes in the Senate to block it.
What, then, is the point?
The point is that many Republicans—and we suspect silently more than a few Democrats—are frustrated and sickened at the spectacle of the nation's debt bursting past $14 trillion, with the prospect that the debt soon may reach 100% of GDP. They are upset as well that the Obama Presidency has pushed federal spending upward, from its historic postwar level around 20% of GDP to near 25% this year. Proponents of the BBA argue that only a spending limitation embedded in the Constitution can stop the U.S. fisc from going over the cliff.
These pages bear enough scars from the spending wars—against both political parties—to have won Milton Friedman spending-limitation citations many times over. But we have been writing since at least the 1995 vote on a balanced budget amendment that we do not believe this mechanism can achieve its desired result. Its effects may even prove perverse. We see no reason to change that view now.
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 new Members who are intent on fiscal responsibility should visit with Congressional historians to discover a root cause of this modern spending catastrophe—the 1974 Congressional Budget and Impoundment Control Act, the most laughable title ever placed on a federal law.
Passed amid Richard Nixon's struggles over spending with Congress, the law eviscerated the President's ability to impound Congressional spending. The law itself was an act of rage against Nixon's impoundments. "Control" over spending tipped into the hands of Congress, as is clear from the upward path of federal spending post-1974. This was the start of the infamous "baseline" budgeting rules, which automatically ratchet up spending from one year to the next.
Rather than trying to scale the impossibly high cliff of a Constitutional amendment, younger Members should revisit that bad law and fix it. Tom DeLay never wanted to fix it, but Paul Ryan does. The goal of an achievable reform act would be to put spending on a downward slope. That would include getting rid of baseline budgeting, restoring the Presidential impoundment power (if liberal Congresses hated it, it must have been good), and requiring the two-thirds majority for tax increases.
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.
The essential American soul is hard, isolate, stoic, and a killer. It has never yet melted. ~ D.H. Lawrence
| 
