Why a Balanced Budget Amendment is Silly

I like the idea of a balanced budget amendment to the U.S Constitution. Columnist George Will certainly outlines the need for one. Unfortunately, no Republican has ever proposed one that wasn't balls-out stupid.

Proponents for an amendment usually fail to point out that debt-ridden basket cases like California and Illinois have balanced budget amendments. They, like most of the states, just use accounting tricks to make their books appear to be balanced, when in fact they're a shocking mess and only likely to get worse.

Conservative proponents of an amendment also display an almost incredible level of dishonesty when they compare deficit numbers from the Bush years to the present day in an attempt to demonstrate that Republicans are more fiscally responsible. A cursory look at the charts they present seem to make their case clear, but they neglect to tell you about the accounting tricks that the GOP employed from 2001 through the beginning of 2007.

The wars in Afghanistan and Iraq are prime examples of the budgetary chicancery they used. The Bush Administration didn't primarily fund the wars through the usual annual budget process. They instead went to Congress several times a year to seek military funding through emergency supplemental bills. Remember the $87 billion that John Kerry voted for before he voted against it? That was an emergency supplemental. And the costs of the wars through 2009 was roughly a trillion dollars.

The beauty of those those bills is that because they aren't part of the budget, they bypass annual deficit reporting numbers. Instead, they are added directly to the debt. So, when you're shown graphs listing deficits from the Bush years, you're only getting half the story. You're being lied to without the people doing it actually lying. But it's really no different from Enron accounting. It's the same kind of math that the Bush and Obama Treasury Departments used to prove that the Too Big To Fail banks were solvent when they weren't.

I mention this because these are the same people who most strongly advocate a Balanced Budget Amendment (BBA). You shouldn't take anything these people say on faith, given their demonstrated history of ignorance, duplicity, or both.

For an amendment to be effective, it would have to be clean. The language should have to look something like this: "Congress shall each year enact a budget that is in balance without exception." Another option is to require balance over three or five year periods, but there cannot be exceptions.

The lack of exceptions is key. If there's an emergency, such as a war, natural disaster or financial calamity that requires deficit spending, that money should be subtracted from the following year's budget (or the next three or five.) Or there would have to be an automatic tax increase to pay down the deficit.

I have yet to see a "clean" amendment proposed by anyone. More often than not, they're riddled with exceptions that Republicans like spending money on, or spending that is politically advantageous to them. It's important to note that the biggest deficits in U.S history were created by Republican presidents. Even the current Obama deficit is driven mostly by the wars, the Bush tax cuts, and program spending, such as Medicare Part D and No Child Left Behind that the GOP categorically refused to pay for when they controlled the process. The Obama stimulus (to date, his biggest ticket spending item) was a one-time outlay, whereas the Bush programs were structural and almost impossible to repeal.

More importantly, most of the Republican BBA proposals I've seen require a supermajority (usually three-quarters) vote to raise revenue. By 2016, just the cost of servicing the debt will be roughly equal to the Pentagon's budget, making balancing the budget by spending cuts alone almost impossible. New revenue will be absolutely necessary to avoid a catastrophe, and the denial of same demonstrates the singular unseriousness of most Republican proposals.

If a supermajority is necessary anywhere, it would be in passing emergency supplemental spending, which bypasses the budget process entirely and would also presumably get around any proposed amendment. Since most such spending tends to be military in nature, it would also make lawmakers think twice about going to war. At a minimum, it would make them be more forthright about the costs of war.

Before a balanced budget amendment is introduced, Congress is going to have to be serious about its accounting practices, which currently do not factor the single largest threats to the U.S economy: the unfunded liabilities of future Medicare and Social Security spending. Democrats point to the "balanced budgets" of 1998-2000, but if a private business or individual budgeted that way, they would find themselves being indicted. The unfunded liabilities might cost as much as $75 trillion by 2050 and no reasonable person thinks that the American economy is going to grow at anything near the rate necessary to absorb that cost.

An amendment will finally have to recognize that tax cuts actually are spending, and will require other spending costs to offset their cost. The single biggest driver of the deficit today remains the Bush-Obama tax cuts, which cost over $3 trillion over the last decade and produced almost nothing in economic growth.

From 2001-07, the Republican Party proved beyond any doubt that "fiscal responsibility" is nothing more than a rhetorical wedge for them. They say they deserve another chance, but their continued lies about the nature of the Obama deficits undermine that case. For that reason, they shouldn't be trusted about a BBA.

I believe that a balanced budget amendment is going to be necessary, but not before Congress undertakes a number of significant and painful reforms. Otherwise, it's nothing more than a rhetorical stunt and all of the trick accounting in the world isn't going to fool the international markets.