The House of Representatives is set to vote on a balanced-budget amendment to the Constitution. The proposed amendment is disappointing — to say the least. It would restrict the government’s capacity to borrow (but not by much), and it would do nothing about total spending, which is the real problem.
Basically, all the House resolution would do is require a bare supermajority (three fifths) of Congress to override the prohibition on deficit spending. There is no limitation on taxation or total spending, so the amendment could be enforced by a catastrophic across-the-board tax increase. Instead of spending at 25 percent of GDP, taxing at 15 percent of GDP, and borrowing the rest (as the Obama budgets have done), we could find ourselves both taxing and spending at 25 percent of GDP. Without a strict limitation on taxation and spending, a balanced-budget amendment by itself could do more harm than good. As Sen. John Cornyn (R., Tex.) noted yesterday, “Let’s all remember that the disease in Washington is out-of-control spending, and budget deficits and the debt are really symptoms of that disease.”
Senator Cornyn has been pushing House members to consider the Senate version of the balanced-budget amendment (S. J. Res. 10), which is far better than the House version. It would require a two-thirds supermajority to override the balanced-budget requirement as well as a two-thirds majority for tax increases, and — crucially — it would limit spending to 18 percent of the previous year’s GDP. As I noted earlier this year in a paper for the Texas Public Policy Foundation, an absolute spending limit at 18 percent of GDP would push both taxes and spending below the historic revenue-maximizing point of about 20 percent.
The amendment would have to be ratified by three fourths of the state legislatures (38 states), which would take several years at the very earliest. Once the amendment is ratified, its provisions would go into effect over another five years. That’s plenty of time for a gradual reduction of spending to meet the 18 percent limit.
Conservatives who don’t like the constitutional-spending-limit idea are expressing (a) natural fear of messing with the Constitution and (b) mild horror at the concept of involving federal courts in the budget process. But (a) the Constitution is already upside down: It serves mostly to ratify every expansion in federal power no matter how clearly it violates the Bill of Rights or the whole concept of enumerated-powers constraints. And (b) while I share the horror at involving federal courts in any aspect of legislation, an across-the-board budget cut is among the least offensive genres of judicial legislation that I kind think of, and it certainly is not nearly so offensive as what we came to expect from the Warren and Burger Courts.
There are a couple more things to consider, which to my mind should be the overriding considerations. First, the Supreme Court has given sweeping scope to the federal government’s power to tax and spend “for the general welfare.” There is no limit on using that power to tax one group for the benefit of another. This creates a long-term danger that the federal government will fall into the hands of a semi-permanent coalition of rent-seekers who use the machinery of government to transfer wealth from the minority to themselves. To paraphrase one of Beaudelaire’s observations on l’amour, progressive taxation is born of a noble instinct — charity — but is quickly corrupted by the passion to possess other people’s property. A society such as ours, in which one half of the population pays no income tax and enjoys the benefits of government at the expense of the other half, is a society based more on the principle of theft than on the principle of charity. A constitutional cap on taxing and spending set at 18 percent of GDP would guarantee that a rent-seeking majority can confiscate at most 18 percent of society’s wealth. It would not eliminate progressive taxation, but it would prevent progressive taxation from swallowing the whole country.
It would also guarantee that the federal government can ruin at most 18 percent of the economy. The biggest obstacle we face to economic progress is the lack of economic freedom due to mad levels of regulation and a government that eats precious investment capital by taxing and borrowing. The United States — long among the freest economies in the world — is rapidly descending the charts of economic freedom. As Whole Foods co-founder John Mackey argued in a great piece in the Wall Street Journal, “Government is gobbling up trillions of dollars from our economy to feed itself through high taxes and unprecedented deficit spending — money that could instead be used by individuals to improve their lives and by entrepreneurs to create jobs.”
In today’s political climate, a balanced-budget amendment with strict spending limits may have dim prospects of getting the required two-thirds vote in each chamber of Congress and the required 38 states. But at some point, Americans are going to get really tired of high unemployment, anemic growth, and general malaise, and they’re going to stop believing the empty promises of those who say we need even more government to solve a problem that is clearly the fault of too much government. What made America great over two centuries was a combination of economic freedom, limited government, and self-reliance. We can only hope that those ideals will once again command the adherence of a great majority of us. At that point, ratification of a strong constitutional limit on taxing, spending, and borrowing will have a much greater chance of ratification than it does today.
Rebuilding that consensus will take time — all the more reason to start now.
— Mario Loyola is director of the Center for Tenth Amendment Studies at the Texas Public Policy Foundation.
Dim prospects? How about zero prospects. Pushed by the same politicians who make believe they can cut taxes and reduce the deficit simultaneously. Cordially, Bill
Reply to this commentLinkReport Abuse... the same politicians who believe they can cut taxts, start a new war (with Iran, no less) and reduce the deficit.
Reply to this commentLinkReport AbuseMust I point out that it was Iran who started a war with us 30+ years ago and that it's still ongoing whether we want to accept that fact or not?
Reply to this commentLinkReport AbuseIt worked for Bill Clinton, if you were paying attention.
His tax increases did nothing to diminish the deficit -- in fact, deficits rose. It was not until he agreed to slash the capital gains tax rates by more than 50% -- the top rate went from 32% to 15% -- that revenue increased sufficiently to temporarily bring the budget into balance.
Every single time tax rates have been cut since 1960, revenues have increased. And every time rates have been risen, revenue has decreased.
I'm not sure why liberals are incapable of understanding that government tax policy influences people's behavior, which directly impacts the amount of revenue the government will collect.
Given that liberals seek to use the government to influence more and more of people's behaviors, one would think they'd understand that the government actually has that ability through the policies it sets.
If not, then liberals, in the context of a tax debate, tacitly admit that all their government programs are destined to fail, since government policy cannot change how people act.
Reply to this commentLinkReport AbuseExactly.
What's been the constant companion of every single tax cut? Increased spending. Happened in the 80's, 90's, and 00's.
This country does not have a tax problem. We have spending problem. Full Stop.
Reply to this commentLinkReport AbuseIN 1993 President Clinton signed one of the largest tax hikes in our history hiking rates on the top tier of earners to 36 and 39.6%. These rates stayed unchanged thru out his presidency, and coupled with fiscally conservative spending policies resulted in federal surpluses and a robust economy. If lowering tax rates for the wealthy results in revenue surpluses and economic nirvana when do you figure the Bush cuts will kick in? Cordially, Bill
Reply to this commentLinkReport AbuseWhile I share you aversion to the high rates of government spending I fear that a constitutional spending cap based on a percentage of GDP such as you propose would not solve the problem. Rather it would simply encourage statist statisticians to play around with the GDP calculation until they reached the desired numbers. Plus congress has shown a lot of creativity inventing ways to fund things "off budget" (if only that creativity were used for more noble purposes!).
By limiting the amount that government can borrow congress would at least be forced to fund their spending today rather than borrow. Perhaps that would lead to higher taxes, although since taxes are generally unpopular I have some hope that being forced to pay for government spending (as opposed to borrowing for it) would provide some political incentives to restrain spending.
Not perfect, but better than what we have today.
Reply to this commentLinkReport AbuseI had thought that this BBA was the same one that was being discussed earlier.
Reply to this commentLinkReport AbuseI apologize for defending it.
There's already a de facto three fifths requirement in the Senate to do *anything*.
Reply to this commentLinkReport AbuseI must deny this premise:
"To paraphrase one of Beaudelaire’s observations on l’amour, progressive taxation is born of a noble instinct — charity — but is quickly corrupted by the passion to possess other people’s property. "
Progressive taxation is not born of a noble instinct. It is never noble or charitable to take other people's money to spend on charity. It is noble and charitable only if you voluntarily spend your own. I wish we could retire the notion that there is anything "generous" or "charitable" going on when some force others to pay.
Reply to this commentLinkReport AbuseAny BBA will just be an excuse to raise taxes, absent a cap on spending. As sure as the sun rises in the east there will be court ordered tax hikes in order to force compliance with the balanced budget. It will become the only part of the constitution actually followed and enforced.
Reply to this commentLinkReport AbuseThis is silly.
No actual will exists to cut the actual level of government spending, so politicians gravitate to amending the Constitution. The Constitution should not need to be amended in order for public officials to effectively manage the trillions of dollars they confiscate from us.
Periodic deficits are unavoidable, if for no other reason than the government cannot predict with certitude how much revenue they will collect. And temporary emergencies can arise which may require imbalance. But to carry large deficits every single year, regardless of circumstances, is recklessly irresponsible.
And the pols who favor a constitutional amendment to require a balanced budget are tacitly admitting that they are gutless, and cannot possibly appropriately manage our hard-earned money without an amendment to our fundamental charter. They admit their own unfitness for the offices they currently hold.
Any balanced budget amendment is a bad idea, and it's a failure of actual leadership. Worse yet, however, the text of this particular amendment is awful. It hardly achieves the desired goal.
Reply to this commentLinkReport AbuseMy thoughts exactly.
This is about the stupidest idea the GOP has ever come up with (and that's not a short list, either).
Reply to this commentLinkReport AbuseWhat on Earth are you talking about? This is not a stupid idea. In an ideal world, where politicians did what we elected them to do, we wouldn't need this. News flash! This is not an ideal world. Do you trust Dems to ever agree to balance the budget if not forced? Heck, do you think they'll even agree to the amendment? No way! There should be a very clearly defined emergency clause in any bba or cap on spending proposal. Other than that, what real negatives are there here? So they SHOULD be able to be responsible. Sorry, 1.5trillion a year in deficit spending says I won't hold my breath.
Reply to this commentLinkReport AbuseI wholeheartedly agree.
Reply to this commentLinkReport AbuseThe best thing for conservatives about proposing a BBA is that it allows them to strike a pose without having to actually accomplish something. The political reality is that a large majority of the public wants most of what the fed. gov. has to offer them - they just want someone else to pay for it. There is no political will or base to cut spending enough to balance the budget, even in prosperous times.
Doubt this? Please cite a single instance over the last three years of the GOP caucuses in Congress submitting balanced budgets for an up or down vote.
Moreover, who will enforce a BBA? Ultimately, the U.S. Supreme Court will be forced into a role of super-legislature, making taxing and spending decisions. Conservatives, is this what you want?
Reply to this commentLinkReport AbuseI want it more than 1.5 trillion dollar deficits and 100 trillion dollars of unfunded liabilities. Perhaps this particular proposal is not the right one, but the idea of forcing balanced budgets is hardly a bad one. Additionally, I find it ironic that ridicule the GOP for using this mechanism to balance the budget as an opportunity for them to "strike a pose" without doing anything. But then you turn around and ask why they haven't voted on a balanced budget since being in power when we know there is zero chance of it being accepted by the Senate. Seriously, isn't that just allowing them to "strike a pose" without accomplishing anything? What's the difference? And then you grant the Dems the endless opportunity to demagogery about conservative hate for the poor and wanting to throw grandma off the cliff.
Reply to this commentLinkReport AbuseHere is a BBA concept that I have yet to hear about: why couldn't spending for the current year be capped based upon revenues from prior years. For example, the rule could be that Congress cannot authorize expenditures in excess of the average tax receipts of the prior 7 years. This would address several deficiencies of the current (dreadful) BBA: it would link spending to historical levels of revenue, it would smooth out cyclical variations (in recessionary periods, spending could be higher because it is based on higher average revenues from previous years; in prosperous years, overspending would be restrained by the lower revenue collected in down years). It would also be numerically transparent: no messing with GDP or other nebulous statistics that are likely to be manipulated, and Congress (and the public) will have a good idea in advance (subject to adjustments from the most recent year's receipts) of what the total spending limit will be. Further, the amendment could specify that any surplus must be applied to debt reduction and cannot be spent. Obviously, this is something that would have to be fine-tuned, but is anyone aware that such a concept has been put forth?
Reply to this commentLinkReport AbuseI haven't heard about anything like this, and what you describe sounds interesting and sensible.
However, I fear that Congress doing anything sensible is oxymoronic.
Reply to this commentLinkReport AbuseThis weak BBA is a complete cave and a gift to the Dems, many will now support it. The WSJ writes about the gift today
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All the hard work to elect conservatives in 2010 and we ended up with Boehner as Speaker, for what? more caves to come, new leadership is needed. The silence of the freshman GOP speaks volumes, the establishment has put them in their place.
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