Balanced Budget Proposal: Common Sense, or Recipe for Disaster?


President Obama considerably raised the stakes Tuesday in the already-heated debate over raising the U.S. debt ceiling, saying he cant guarantee seniors will get their Social Security checks if Congress doesnt act ahead of the administrations Aug. 2 deadline.

As that debate has escalated in Washington, D.C., so have calls for an amendment to the Constitution that would require legislators to rein in debt and pass a balanced budget.

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Its a simple enough premise and supporters make the very reasonable argument that 49 of the 50 U.S. states (Vermont is the only exception) operate under such constitutionally imposed fiscal restrictions, as do millions of U.S. businesses and households.

So why not Congress?

Congress has been running annual budget deficits for decades. That record proves to the average person that they are incapable of balancing a budget. We need to put constitutional handcuffs on them or this country is going to fall off a fiscal cliff, said Andrew Roth, vice president of government affairs for the Club for Growth, a Washington, D.C.-based advocacy group thats pushing hard for a balanced budget amendment.

Republicans and Democrats have said no agreement to raise the debt limit will be reached without provisions to lower the staggering U.S. deficit. Polls say Americans are increasingly concerned with the $14.4 trillion national debt and fear that covering the interest payments alone will stifle American economic growth.

But the politicians cant agree on how to scale back spending and pay off the debt. Democrats say spending cuts should be paired with new taxes so that social programs and so-called entitlements such as Medicaid and Medicare arent gutted. Republicans are opposed to raising taxes on anyone for any reason.

As this debate swirls and proposals are batted back and forth, an increasingly vocal number of mostly-conservative Republicans have called for the balanced budget amendment. For instance, Tea Party-supported freshman Senator Rand Paul (R-Ky.) is demanding that no debt ceiling/budget deficit plan go forward without a balanced budget amendment.

Republicans should reject any debt ceiling deal that does not include a Balanced Budget Amendment and spending cuts, Paul wrote recently in an open letter to his GOP colleagues. A Balanced Budget Amendment doesn't even require the signature of the President. It simply needs Congress to stand up and act.

(What it does need is a two-thirds majority vote in both the House and the Senate, and then ratification by at least 38 states.)

The Club for Growth concurs with Rands sentiment, adding that any bipartisan deal struck by the Obama administration and Republican leaders in Congress to address the deficit wont go nearly far enough in curbing law makers habitual practice of spending more tax dollars than they take in.

Without a balanced-budget amendment, nothing will prevent future congressional Democrats and liberal Republicans from raising the debt ceiling again and erasing any spending cuts made now. The amendment is the key to keeping government spending, debt, and taxes in check, the group wrote in a widely syndicated column earlier this week.

The current dustup over the federal deficit is hardly the first time fiscal conservatives have proposed a balanced budget amendment that would ostensibly eradicate the problem permanently. In fact, theres almost always some piece of balanced budget legislation floating around Congress waiting to gain momentum. In 1995, as Republicans held sway in Congress during the heyday of the Contract With America, a federal balanced budget amendment missed passing by a single vote in the Senate.

And the idea is widely supported by U.S. voters, who evidently identify with the notion that if they have to balance their checkbooks so should Congress. A recent Mason-Dixon poll found that 65% of Americans support the idea.

Opponents of a constitutional amendment shake their heads at these numbers and argue that supporters oversimplify the issue in an effort to push through potentially dangerous economic reforms.

Its a terrible idea, said Gus Faucher, director of macroeconomics at Moodys Analytics.

Particularly now, according to Faucher, as the U.S. struggles to pull itself out of the worst economic downturn since the Great Depression. A constitutional amendment limiting spending and freezing new taxes would be devastating to an economy in the midst of a recession, he said, because it would deny the lawmakers the flexibility needed to boost the economy during a downturn.

It would require contractionary fiscal policy and thats the last thing you want during a recession, he said.

Besides, in good economic times theres no need for a balance budget amendment, Faucher observed. We have an example of how you balance the budget. The U.S. did it back in the 1990s. You cut spending and you raise taxes. Its not any more difficult than that, he said.

Faucher said theres virtually no chance Congress will pass such an amendment.

Roth begs to differ, arguing that the amendment would gain much-needed momentum if Republican leaders such as Speaker of the House John Boehner, Congressman Eric Cantor and Senator Mitch McConnell in other words, the ones who get the most media attention demanded it as a requirement to any agreement to raise the debt ceiling.

They have talked complementary of the balanced budget but they havent made it a requirement, Roth said. If they did it would put the full force of the Republican Party behind the amendment, he said.

Roth dismissed any notion that a constitutional amendment requiring a balanced budget was radical or extreme. To the contrary, its actually one of the most common sense proposals out there. This is wildly popular with U.S. voters.

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