Balanced Budget Amendment

There is a movement among the most conservative of Republicans to get an amendment to the Constitution that requires the federal budget to balance every year.  Mike Lee, one of these newly elected Republican Senators has written a book The Freedom Agenda:  Why  a Balanced Budget Amendment is Necessary to Restore Constitutional Government.  I’m a liberal and his case is even convincing to me.  The most damning evidence he has is the federal budget was 2 percent of the GDP a hundred years ago and is 25 percent in 2011.  It’s obvious the government can’t keep growing.  He also points out the national debt is over $14 trillion dollars, equal to every man, woman and child owing $50,000, and those same people are running their up their bill by $5,000 a year.  OK, Senator Lee, you’ve convinced me we’ve got to do something, but what?

First off, we need to clarify some things.  If the current budget is truly 25% of the GDP, it’s because of extra spending due to the recession and the cost of the war in Afghanistan – so 25% is not the natural figure.  In fact, that percentage should automatically lower and rise with good times and bad.  But Senator Lee, lets assume the budget is too big and that we have to pay down the national debt.  Is this the time to do it?  The federal government is always a job stimulus feature of our economy, so to monkey with it now probably means causing more unemployment.  But I assume you Republicans are going to get your way and we’ll start spending cuts.  However, this is also were the bargaining starts – as well illustrated by recent weeks of gridlock between the White House and Congress.

The difference between conservatives and liberals is how big should the budget be.  What if 20% of GDP is the perfect figure for Democrats and 15% is what the Republicans would love?  We need to decide just how big the government needs to be.  I’m willing to agree it’s too big, and we’re spending too much, and we’re running up too much debt.  But how we cut spending and reduce the debt will be a war in Congress for years, even if the Tea Party leads the nation to pass a balanced budget amendment (BBA), which has been tried several times before and has never passed.

Passing a balanced budget amendment is almost a fantasy, but it would have a far better chance of becoming a reality if Republicans would change their mind about new taxes.

Instead of crying “No new taxes” we should be crying “No more tax cuts” until the deficit is drastically reduced.  And Senator Lee, I know you guys are adamant about about no new taxes, but I think if you seriously want to change the size of the federal government and reduce the deficit you should be willing to repeal all of the Bush tax cuts.  If the rich feel put upon by just rolling back their cuts, we should roll back all of the Bush tax cuts until the deficit is close enough to where a balanced budget amendment would work.

Now I’m not against drastically cutting the federal budget, but we should be careful not to hurt the economic recovery, which is mighty weak at best.  I think Americans public can handle more taxes right now than higher unemployment.  We know what balancing budgets are doing to the states and its not pretty.  I’d hate to see more hardships brought on across the nation by hacking away at the federal budget too.  However, if your goal is really a BBA, then conservatives have to consider increasing revenue.

I think the balanced budget is a great idea in theory.  My wife and I have been far happier now that we balance our budget and no longer go into debt.  Debt is a terrible thing, but sometimes bad things happen and you have to go into debt, even nations.

Let’s imagine that the Balanced Budget Amendment passes.  I know you Republicans also want it passed with a rule that says taxes can only be raised with a supermajority.  Let’s not go there right away.  Let’s plan for bad times, because there will always be bad times.  I suggest we have two automatic taxes in case of war or recession.  The War Tax would automatically kick in if the military has to spend more than it’s share of the balanced budget because of a war or warlike action.  And a Recession Tax would automatically kick in if the government needs to pay to help people during bad economic times.  And logically, we could also have automatic tax reductions in good economic times if we have a surplus (after we pay off the national debt).

What this would allow is the creation of a steady state balanced budget that is tied to a certain percentage of the GDP.  We should determine that percentage in the future after the deficit is paid off and when we can figure what size government is the absolute best for the economy.  Personally I’d prefer a prosperous economy and that might mean a larger government than conservatives want, but if Republicans can whittle away the government and still having a thriving economy, so be it.

I am just an ordinary citizen watching two giant political parties fight over their ideals, but it’s scary and creates uncertainty about the future, which I’m sure is felt by all my fellow citizens.  I know the arch conservatives want lower taxes immediately and they are using the fear of an uncontrolled rising deficit to concoct a plan to reduce the size of the government.  As a Democrat I’ll buy into the idea the deficit is insane – let’s reduce it.  I’ll even buy into the idea of a balanced budget, but you guys need to give in on taxes until we solve the deficit.

What if we repeal the Bush tax cuts and apply them to the deficit and then cut the federal budget to the size it was before the recession, and then work on balancing the budget.  Then while we’re paying off our national debt work on slowly reducing the annual budget with program cuts.  Then when we see drastic deficit reductions and an improved economy we can gradually reintroduce the Bush tax cuts.

Republicans think they have a mandate from the people to cut taxes, and I’m sure most citizens would love lower taxes, but I also think most citizens don’t want to see millions more Americans put out of work from cutting budgets.  What’s happening in the states is more than just cutting the fat.

The Bush tax cuts grew the deficit dramatically, so applying such revenue back into paying off the deficit should reduce it just as quickly.  If you really want a balanced budget then the quickest way to get one is pay down the national debt so it’s practical.  If you try to pay down the national debt with program cuts now you’re only going to scuttle the economy.

JWH – 7/27/11

One thought on “Balanced Budget Amendment”

  1. Republicans may talk about a balanced budget amendment, but they never once proposed a balanced budget during the entire eight years of the Bush administration. What was stopping them, if they thought balanced budgets were so important? Bill Clinton had budget surpluses, paying off the debt of previous Republican presidents. So why didn’t they continue with that?

    But Republicans decided that paying off our debt meant that we were collecting too much in taxes. So they slashed taxes, especially on the rich, and greatly increased spending. As Dick Cheney said, “Reagan proved that deficits don’t matter.” They dug us so deep in a hole that we still haven’t climbed out. So it’s kind of hard to take them seriously now.

    And the fact is, nothing this simple and automatic would work. It would be like sewing your mouth shut because you can’t stop eating too much – and sewing everyone else’s mouth shut, too. The side-effects are likely to be bad.

    The fact is, the Republicans have it all wrong. A super-majority to raise taxes? We’re in this mess primarily because of irresponsible tax cuts, so maybe we should require a super-majority in order to cut taxes. Republicans have deliberately tried to bankrupt America, as a way to force us to adopt a smaller government (and to defeat Barack Obama in 2012, too).

    Sure, we spend more than we did before Social Security, before Medicare, before Medicaid. And it’s worth every penny, too. We also spend more than the rest of the world combined on “defense” – seven times as much as our next biggest rival (and this at a time when our only enemy is a rag-tag band of religious nuts using improvised explosives). So much for the savings when the Soviet Union collapsed, huh? But even that is doable (if not very smart).

    We are in the middle of the worst economic collapse since the Great Depression, so of course spending is up and revenue is down. That’s exactly what we’d expect. Indeed, that’s what we want to happen during an economic collapse. Unfortunately, even before the collapse, the Republicans had us in a deep, deep hole. That’s certainly not how you want to start bad economic times.

    But long-term, we’d be doing fine if we just ended the Bush tax cuts. Social Security needs a very minor fix, and simply ending the income cap – where high-income earners pay a lower tax rate than low-income people – would be the only fix necessary. Medicare is harder, but it’s still doable.

    Lee’s book might be persuasive, if you just read his version of things. But then, creationists can probably be persuasive, too, if you don’t know your biology. I recommend Paul Krugman for a more balanced view. All too often these days, even Democrats adopt Republican talking points. You need to hear an unabashed liberal to get the other side.

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