Balanced-budget amendment: A path to economic ruin

Posted: July 11, 2011

By Leonard Boasberg

There they go again. The Senate Republican leadership has again proposed a constitutional amendment to require that the federal budget be balanced every year.

And here I go again. This idea is crazy. Irresponsible. Unworkable. Irrelevant. Foolish. Did I say crazy?

The push for a balanced-budget amendment comes amid the artificial crisis over raising the debt ceiling - a crisis caused by the Republicans' obstreperous refusal to countenance anything that can be called a tax increase, as well as their threat to let the U.S. government default on its obligations if they don't get their way.

"A balanced-budget amendment would require that lawmakers stop spending money that we don't have," said Senate Minority Leader Mitch McConnell (R., Ky.).

Funny, he never brought up the notion when the Bush administration was spending billions of dollars that we didn't have by slashing taxes, especially for the rich, in the midst of two wars, paid for on credit, that have cost $1.3 trillion and counting.

Simplistic rationale

The Founding Fathers never even considered the notion of requiring a balanced budget. I've read the Federalist Papers and found nary a mention of it.

So what is our current leaders' rationale for forcing Congress to balance the budget every year? Republican Sen. Dean Heller of Nevada explains it in simplistic terms: "Families and businesses across the country work within a budget. It is time the federal government did the same. Our government needs a balanced-budget amendment to force Washington to live within its means."

Does the distinguished senator believe that when people buy an automobile, they always pay cash on the barrelhead? Or do many of them take out loans of, say, three or five years? Do most people pay cash for a house? Does Senator Heller believe most college students pay their entire tuition each year without loans? And what business making a major capital investment doesn't borrow money over a period of time?

According to Sen. Jim DeMint (R., S.C.), balancing the federal budget is more important than job creation and economic recovery. It may be to him, but it sure isn't to the 14 million Americans looking for work.

Public-opinion polls show jobs are Americans' top concern right now, while balancing the federal budget ranks far down the list. To the great majority of us, budget-balancing is an abstraction - a game politicians are playing in Washington. But unemployment is a reality.

Under the proposed constitutional amendment, any new tax or increase in an existing tax would have to be approved by a two-thirds vote of each chamber of Congress. That is a fine recipe for minority rule - which, again, is not what the Founding Fathers had in mind.

Financial straitjacket

What would have happened in 2008 if, as the economy was about to plunge over a cliff, the federal government were trapped in a fiscal straitjacket? According to Republican dogma, it would have had to balance the budget by massively slashing spending on everything - Social Security, Medicaid, food safety, national parks, cancer research, defense, and more. There certainly wouldn't have been any money to rescue the banks, and economic collapse would have likely ensued.

In The Great Crash, John Kenneth Galbraith wrote, "In the months and years following the [1929] stock market crash, the burden of reputable economic advice was invariably on the side of measures that would make things worse."

At the time, all the supposedly sound and responsible advisers, and both political parties, agreed that the federal budget had to be balanced. The Democratic platform of 1932 called for an "immediate and drastic reduction in expenditures to accomplish at least a 25 percent decrease in the cost of government," Galbraith wrote. It ultimately took the massive spending of World War II for the country to emerge from the Great Depression.

Today, to paraphrase the philosopher George Santayana, those who fail to remember that disastrous response to a downturn are condemning us to repeat it.


Leonard Boasberg is a retired Inquirer editorial writer

and reporter who lives in Wayne. He can be reached at lboasberg@gmail.com.

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