Proposed Balanced Budget Amendment Is a Fraud

Posted July 18, 2011 at 5:55pm

It’s hard to believe that the House is planning to debate yet another proposed balanced budget amendment to the Constitution, an idea that was so discredited so long ago that it is typically discussed by constitutional scholars, economists and budget experts in tones and words that at best indicate ridicule, scorn and contempt.

I have two mock horror movie posters in my office from previous balanced budget debates that, with great artwork and a real flair for sarcasm, show the proposed amendments from those times are anything but serious policymaking. Both posters include quotes from across the political spectrum that show a total lack of respect for what was being considered.

One quote, from David Brinkley, asked, “Has there ever been a bigger hoax in Washington?” Another, by Judge Robert Bork, said the amendment was “ineffective or damaging, and perhaps both.” A third, from conservative icon (at least at the time) James J. Kilpatrick, called the amendment “preposterous.”

These posters were from debates that took place 20 or so years ago. What makes consideration of another balanced budget amendment even worse than the ones from previous years is that, from any reasonable point of view, the proposed amendment itself is much worse than all those that have come before it.

Start with the most basic element of all: H.J. Res. 1, the proposed balanced budget amendment to the Constitution approved by the House Judiciary Committee on June 23, doesn’t actually require that the federal budget be balanced. Instead, it’s a spending and tax limitation that could — and in my estimation likely would — lead to the federal budget not ever being balanced. The name of the proposed amendment so incorrectly describes what it would do that it must be considered to be intentionally misleading.

Then move on to what has always been one of the biggest sticking points with every balanced budget amendment — the difficulty in delivering what’s promised.

H.J. Res. 1 would limit spending to 18 percent of something called “economic output,” a term that it doesn’t define and has no agreed-upon meaning in the economic, budget or legal worlds. Equally as important, even if there was a common assumption about what economic output really means or enough legislative history for the courts to conclude that gross domestic product is what Congress really meant (and so far there is neither), there is nothing to stop changes being made in how the GDP is determined so that complying with the amendment’s provisions is easier.

There’s also the practical problem that, as Bruce Bartlett wrote in Tax Notes on July 11, the “Bureau of Economic Analysis did not publish complete GDP data for the previous year until March 25 (of the next year), which is typical.” (Full disclosure: Bartlett and I blog together at Capital Gains and Games.)

The other standard practical problem with balanced budget amendments in general and this one in particular is that the vast majority of what the federal government spends and collects each year is an estimate that is exceedingly difficult to make with any degree of certainty.

The same is true for “economic output” (there’s that completely undefined term again). As we’ve especially seen in recent years when it comes to economic forecasting, wishful thinking and prayers just don’t get you where you want to go.

As a result, it’s not hard to envision a situation where the president submits a budget and Congress passes a budget resolution that complies with the spending and revenue limits but, either because spending and revenues turn out to be far different from what was estimated or the economy performs differently than expected, the actual numbers end up violating the amendment.

It’s not at all clear that there would be any legal remedy to this situation. The result would be an amendment that would have trillions of dollars in promise and zero cents delivery.

Finally, add a few more problems with the measure that the House will consider.

For example, H.J. Res. 1 would require the type of supermajorities on most budget issues that have created extreme fiscal chaos in California. The only exception would be tax cuts, which would still require just a simple majority. In other words, the proposed constitutional amendment that supposedly would balance the federal budget actually makes it easier for the budget to lose revenues and, therefore, not be balanced.

Like every other balanced budget amendment, H.J. Res. 1 also promises something that, even in the highly implausible event it were adopted by the required two-thirds of the House and Senate, is extremely unlikely to be approved by the three-quarters of the states needed for it to be ratified. The reason is simple: The states would be among the biggest losers if federal spending were cut as the proposed amendment requires.

Finally, there’s the most basic problem of all. Congress and the president need the ability to use fiscal policy for economic reasons and to respond to natural and man-made disasters when they occur. The appropriate sanction should be retribution at the next election if voters don’t like what was done rather than arbitrary limits and procedural roadblocks that make it impossible to deal with such situations.

Congress will be debating a balanced budget amendment that doesn’t actually require a balanced budget, that can’t actually deliver the spending limits the proposed amendment says it will put in place, that in many situations will make it impossible for Congress and the president to do what voters want them to do, that will put in place procedures that could create California-like fiscal mayhem in the country as a whole, and that in spite of all the fire and brimstone isn’t likely to be ratified anyway.

If the proposed amendments considered in previous decades were thought of as hoaxes, that makes this one something closer to a scam.

Stan Collender is a partner at Qorvis Communications and founder of the blog Capital Gains and Games. He is also the author of “The Guide to the Federal Budget.”