Magazine August 15, 2011, Issue

Credibility Deficit

(Roman Genn)
A balanced-budget amendment would not be enforced

Republicans have long sought to amend the Constitution to require that the federal budget be balanced. President Reagan campaigned for an amendment, and the Senate voted for it by the necessary two-thirds margin during his first term, but the Democratic-controlled House did not. The Contract with America, the House Republicans’ campaign platform in 1994, promised a vote on it, and the next year the House passed it, but this time the Senate fell short by one vote.

Having taken control of the House while inveighing against the debt, Republicans have renewed their quest for an amendment. Both House speaker John Boehner and Senate minority leader Mitch McConnell have argued that Congress should pass an amendment as part of a deal to raise the debt ceiling, and the House has approved legislation to raise the debt ceiling if one passes. Some congressmen have taken a pledge to support a higher debt ceiling only if an amendment passes. Although they are using tactics of unprecedented aggressiveness, Republicans will almost certainly fail again in their campaign to secure a balanced-budget amendment — which is a good thing.

The version of the amendment that Republicans are promoting now is significantly more conservative than the versions Congress considered in the 1980s and 1990s. The legislation the House passed says that the constitutional amendment should do more than just require a balanced budget. To pass muster, it must also set a limit on government spending as a proportion of the gross domestic product (GDP) and block tax increases unless two-thirds of each house of Congress demands them.

The Senate Republicans’ version of the amendment — all of them are co-sponsoring it — adds more specificity. Spending would be limited to 18 percent of the previous year’s GDP, and the president would have to submit to Congress a budget with spending so limited and balance expected. Congress would have to muster a two-thirds majority to pass any bill that spends in excess of receipts, or in excess of that 18 percent. Raising the debt ceiling would require a three-fifths majority of each house. The balanced-budget requirement, the spending limit, and the supermajority requirement to raise the debt ceiling would be waived if Congress has (by majority vote) declared war. Congress could also, by a three-fifths vote, waive these provisions in order to authorize deficit spending for military conflicts other than declared wars.

House Republicans have advanced two versions of the amendment. One is identical to the Senate version. The other is less stringent. It would set a spending limit of 18 percent of the current year’s GDP rather than the previous year’s (which will usually be smaller because of economic growth). It would require a smaller (three-fifths) supermajority to break the balanced-budget rule. It would waive the two-thirds-vote requirement to raise taxes during a declared war, in addition to waiving the other requirements. It would require only a majority vote to establish the existence of “a military conflict which causes an imminent and serious military threat to national security” that justifies waiving the amendment.

There are, generally speaking, five classes of objections to a balanced-budget amendment. The first is that it would result in a government too small to meet the nation’s needs. Robert Greenstein of the Center on Budget and Policy Priorities, a liberal group, estimates that we have not had a government that spent 18 percent of the previous year’s GDP since the mid-1950s. While the public generally favors smaller government, at least when the proposition is put to it in abstract terms in polls, it is hard to see 38 states — many of them reliant on federal deficit spending to balance their own budgets — ratifying such a tight limit on federal spending. If ratification could be achieved, on the other hand, presumably it would be after the development of a strong national consensus for this tight limit. So this criticism has more force as an argument for the unlikelihood of the amendment’s ever taking effect than as one for its undesirability.

#page#The second line of criticism is that the government must sometimes run deficits during peacetime. Like the amendment itself, this criticism comes in multiple versions. One — we could call it 2a — stresses that a zero-deficit rule is unnecessary, because a persistent but small deficit (say, 2 percent of GDP) is compatible with a stable and manageable ratio of debt to GDP. What is true in mathematics, however, may not be true in politics. It may be that people are incapable, collectively, of confining themselves to a 2 percent deficit rule: that once a political culture has granted itself the permission to run a deficit, it will let it grow well past that point. If so, then a simple bright-line rule might make sense.

Or it would, if not for 2b: A balanced-budget rule would require that governments greet recessions by either raising taxes or (more likely under the current Republican version of the amendment) cutting spending. Most economists believe that either step would cause more economic pain. There are two ways to avoid this scenario. One would trust the Federal Reserve to run monetary policy in such a way as to compensate perfectly for these ups and downs. That seems optimistic. Alternatively, the government could run a surplus during boom years and then shrink it during recessions. But that policy would require a degree of political discipline that, if it existed, would render the balanced-budget amendment unnecessary in the first place.

A third commonly voiced criticism is that it is improper, or somehow beneath the dignity of the Constitution, to codify within it policy goals. This is partly a matter of aesthetics, but also partly a matter of ensuring that the Constitution retains a character capable of eliciting a wholesome reverence. The more it partakes of the specificity and arbitrariness of which a traffic code must, the less it will have that character.

Fourth, this amendment could stand in the way of worthwhile reforms to the tax code. Even most liberals implicitly agree that we are better off without the Carter-era tax code, with its top marginal rate of 70 percent. But would the Reagan tax cuts have been possible had any of these balanced-budget amendments been in effect? Supply-siders make the case that cutting tax rates did not actually cause the ratio of revenue to GDP to drop, and just glancing at a graph of that ratio over time supports that case. But if the Congress of 1981 had been required to meet a constitutional requirement to keep spending and revenues tightly aligned, it would probably not have passed major tax cuts. We could well have been stuck with 70 percent tax rates for additional decades.

A conservative supporter of the amendment might respond that luckily, we do not have such high tax rates today, that the current version of the amendment will prevent them from ever rising that high again, and that cutting tax rates further is not terribly important. But is it really sensible to make a semi-permanent alteration to our basic law in response to the conditions of the political moment — to make an amendment that would have been disastrous three decades ago the supreme law of the land now? Is it really impossible to imagine a future in which the amendment would bar constructive and even necessary tax reform?

Some supporters of the amendment have hinted that they might be willing to drop the limitation on tax increases in order to win more congressional support. Needless to say, this change to the amendment would magnify the danger.

#page#So far I would score 2b and 3 as having struck at least weak blows against the amendment, and 4 as having put a real dent in it. But it is the fifth argument that seems to me decisive: There is no way to enforce the amendment that is both desirable and reliable. The Senate version of the amendment prohibits courts from raising taxes to balance the budget, but otherwise does not limit judicial power. To allow courts to cut defense spending, or otherwise set budget priorities, would be an appalling retreat from republican government. Judicial meddling would be a constant threat unless there were an explicit ban.

If judicial enforcement is off the table, though, what’s left? Several Republican congressmen who support the amendment say in interviews with National Review that they expect future congressmen to abide by it simply because it would be in the Constitution. Let us assume — for the sake of argument, and with foolhardy charity — that all our elected officials would display this degree of conscientiousness. Let’s also assume that nobody would exploit the opportunities the amendment’s wording would almost certainly create to manipulate the definition of such terms as “GDP” and “outlays” to evade its requirements. There is still the question of how to force a collective decision.

Let’s say that an unexpected collapse of inflation causes revenues to come in below expectations, as happened in the early 1980s. Each and every congressman in this scenario supports a plan to bring spending and revenue back into balance, as constitutionally required. But some want to cut program A, some want to cut program B, and some want to raise taxes. The amendment does not force Congress to adopt any of these plans; nothing happens if it fails to do so.

Both versions of the amendment under consideration attempt to address this problem by requiring supermajorities to pass spending bills in excess of 18 percent of GDP (or of revenues, or of last year’s revenues). Maybe this method would work if each year’s spending were determined by legislation that Congress voted on during that year, though even then there would be ample opportunities for mischief: The congressional leadership could schedule votes so that all the funding to keep the Pentagon and the national monuments in operation represented “excess outlays”; two-thirds of Congress would then vote for it. The president could play similar games when submitting, as he would have to do, a balanced budget.

Leave that aside too, because there’s an even bigger problem with a balanced-budget amendment. A large and increasing share of federal spending does not have to be authorized each year; in dollar amount, it does not have to be authorized ever. If we did not have so much of this sort of spending — entitlement spending — we would not be facing the future of massive debt that has inspired support for this amendment in the first place.

If Social Security and Medicare push federal spending to 25 percent of GDP, what would happen under the amendment? Would courts order the programs to be cut? If so, how? Reining in entitlements raises questions about whose answers there is no political consensus. Finding those answers is a burden from which an amendment cannot deliver us.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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