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Sample Balanced Budget Amendment

January 23, 2014

Amendment 28:

Beginning in 4 years from the date of date of ratification of this amendment, the following Balanced Budget Amendment shall go into effect.

The Congress and President of the United States shall, each year, pass a budget in which the national debt as a percent of the gross domestic product is projected by the Congressional Budget Office to decrease by some amount larger than zero. If the Congress and President fail to pass such a budget, the President shall apply reductions in discretionary spending on a percentage basis equally across all federal agencies so that the Congressional Budget Office shall project a decrease in the national debt as a percent of gross domestic product for that year.

The mandate above may be waived if and only if (1) 2/3 of both Houses of Congress issue a declaration that a national fiscal emergency exists requiring an increase in the national debt as a percent of gross domestic product and (2) the President signs the declaration of national fiscal emergency. Each declaration of national fiscal emergency shall apply for a single budgetary year and each such declaration must be voted on by Congress and signed by the President.

End of amendment.

Before 1980, we regularly lowered the ratio of debt to gdp. There were a few minor exceptions during recessions but, for all intents and purposes, we paid down the debt every year. The government’s books were not only balanced, they were better than balanced. Almost every year.

This occurred even though we ran small deficits most years because economic growth meant an increasing gdp and so our debt burden dropped and dropped even though the raw number of dollars of debt increased. To understand this, imagine a kid working a low-wage job earning 12,000 dollars a year. Suppose he has 5,000 dollars of credit card debt. Fast forward 20 years, he’s earning 100,000 dollars a year and has 12,000 dollars on his credit card. In another 20 years, the kid has done well and now earns a million dollars a year and has 30,000 dollars on his credit card.

The kid technically has ever-increasing debt, but since it now represents only a tiny fraction of his income, he has nothing to worry about and can easily pay it off.

That’s the way it used to be with the our national debt. We argued about how much to tax and how much to spend, but we regularly made our debt a smaller and smaller fraction of our economy. If we hadn’t fallen off the wagon in 1980, we would have had an insignificant national debt in 2008 when the derivatives monster bit us in the ass. We’d still be in a little bit of a hole now, but nothing like the one we’re in.

The course change Republicans made in 1980 was nothing less than historic. Previously, they had been focused on balanced budgets. Old-fashioned Republicans preferred limited spending, but if Democrats were in power or if roads needed building, these guardians of fiscal responsibility could be counted on to insist on sufficient taxes to pay for whatever spending Congress approved.

Indeed, these Republicans strenuously opposed tax cuts in the absence of a balanced budget. And it never even occurred to them to cut taxes while increasing spending.

By 1980, Republicans were apparently afraid that the public had an unlimited appetite for tax and spend and they abandoned their fiscally responsible stance in favor of deficit spending. Republican strategists thought (for reasons that are difficult to comprehend today) if they could hold the line on taxes, enormous deficits would somehow force the government to spend less.

By 2000, a Democrat in the Whitehouse and a largely Republican Congress had balanced the budget again, but it was short-lived and only made a small debt in the massive “starve the beast” debt. There followed four years of Republican control of both the Presidency and Congress. “Starve the beast” had mutated into a bizarre policy meme requiring low taxes and big spending. Tax rates were slashed and there were big increases in both entitlement and military spending. The national debt resumed its climb.

It was a beast all right, but it sure as hell wasn’t starving. Even after the derivatives crisis of 2008 pushed the national debt above 100% of gdp, there was no substantive change in Republican policy.

A 2010 bill to create a deficit reduction commission died when Republicans voted against their own bill because they were afraid tax increases might be part of a deficit reduction plan. In 2013, Republicans abandoned the sequester, which made small cuts in discretionary spending, apparently because they feel deficits are a better deal in an election year.

The Republicans of 2014 clearly would NOT support a balanced budget amendment even though the one proposed above is exactly what they say they want. To keep “starve the beast” going, they would have to pay lip service to any proposed amendment while quietly trying to kill it. Remember, we had a long string of balanced budgets after WWII and these Republicans are the loyal philosophical grandchildren of those who abandoned the whole idea of balanced budgets basically because they were allergic to any and all tax increases.

Let’s get it straight. Low taxes? Yes, definitely. Increase spending? Sure, okay by me. Cut discretionary spending? No, too unpopular. Cut entitlement spending? Only if Democrats do it. Reduce the deficit? No, that would take the pressure off.

I’m a little baffled, but then I have been since 1980. In fact, I’m still reeling from the Republican debt clock at their 2008 convention. Were they bragging?

The modern (read: not conservative by any reasonable definition of the word) Republicans’ quiet wait for a full-blown fiscal crisis that would allow them to get what they want seems more than a little risky to me. They’re like Linda Hamilton at the end of the first terminator movie: she knew the storm was coming, it was just a matter of time.

I’ll tell you something. I don’t like it. I don’t like it one bit.


From → Politics

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