The Corner

Re: Simplify the Balanced Budget Amendment

Ramesh hits on an issue that will doom the chances of any balanced-budget amendment if conservatives can’t agree among themselves what the best approach is.

Conservatives mostly agree that a balanced-budget amendment of some kind is necessary. The question is, should it be the simple one generally preferred by House Republicans, which would just eliminate the government’s capacity to run deficits? Or should it be the complex belt-and-suspenders approach devised by the Senate, which requires super-majorities for increasing taxes and running deficits, and limits taxing and spending to no more than 18 percent of prior-year GDP.  

Grover Norquist was implacably opposed to the former, warning House Republicans that support for it would break their tax pledge. Norquist argued that a “weak” balanced-budget amendment (i.e., one that merely prohibited running deficits) would just result in a massive automatic tax increase — and no spending restraint. 

I was initially swayed by this argument, but two considerations have led me to conclude that Norquest is wrong. The simpler one is that those who vote for big government should get a taste of how much it actually costs. Obama’s State of the Union speech was within the ballpark of sanity only in a world where there is no limit or consequence to deficit spending. Alas, Americans have come to believe, or at any rate vote as if they believe, that there is no problem with letting the federal government mortgage the nation into insolvency. If Americans were forced to feel the pain of what all this government intemperance actually costs, they would quickly demand budget discipline.  

I can just hear Rich Lowry saying, “Jee, Mario, that’s so high-minded of you,” but there’s an even more compelling consideration. Before the 20th century, the federal government’s sources of revenue were severely constrained, and as a result, so was its ability to borrow. But the 16th Amendment, which gave Congress, power to levy income taxes without apportionment among the states, vastly increased its taxing power, and hence also its ability to borrow.

Though the size of the federal government ballooned dramatically, some combination of political constraints and Hauser’s law have kept federal tax revenue under 19 percent of GDP since WWII. Meanwhile, over the last 30 years, Congress has run deficits averaging 3.4 percent of GDP. Nearly all of this deficit revenue has been transferred to state governments in order to inflate all of their budgets far beyond what they could ever afford, thereby reducing them to servile dependents of Congress. As Michael Greve observes, nearly all of the modern expansion in the American public sector has occurred at the state and local level, a result of Congress engorging state budgets with borrowed funds.

Here is the proposition to be proved for proponents of the simple balanced-budget amendment: If Congress were not able to mortgage the nation’s future in order to purchase control of state governments, the result would be sustainable budget discipline and lean government at both the federal and state level. If that is correct, then a simple balanced-budget amendment would necessarily result in a dramatic and permanent reduction in the size of the American public sector.

I have been strongly supportive of the Senate’s comprehensive approach. But I am increasingly inclined to agree with those who think it might be too complicated to work. The best constitutional amendment since the Bill of Rights — “the 18th Amendment is hereby repealed” — was a marvel of clarity and simplicity. Its proponents didn’t try to accommodate critics by adding layer upon layer of complexity. Instead, they focused on winning the underlying argument. That’s what we have to do here. 

 Mario Loyola is director of the Center for Tenth Amendment Studies at the Texas Public Policy Foundation.

Editor’s Note: This post initially incorrectly identified the amendment repealed by the 21st Amendment as the 19th Amendment.

Mario Loyola — Contributing editor Mario Loyola is senior fellow and Director of the Center for Competitive Federalism at the Wisconsin Institute for Law and Liberty. He began his career in corporate ...

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