It often seems that Blue Dog Democrats, along with a handful of Senate moderates, are the only people in Washington who are serious about fiscal responsibility. Chasing the will-o-the-wisp of a balanced budget amendment, however, seems more likely to distract from than advance that essential cause.
The idea is seductively simple: The only way to restrain deficit spending in Washington is to make it unconstitutional. That's how the states keep their books balanced, and there's no reason the federal government shouldn't do the same.
In fact, there are several. Consider that today's federal deficit is about 12 percent of GDP. It's going to go down as the economy recovers, but the spending and tax adjustments that would have to be made to get it all the way down to zero would be unduly draconian and disruptive. Also, unlike state mandates, a federal balanced budget amendment for accounting reasons would not distinguish between capital investment and consumption. But government borrowing to invest in public infrastructure or higher education, for example, makes economic sense, because it will generate more economic activity and amortize itself over time.
What's more, the federal government acts as the nation's fiscal safety valve, or strategic reserve. During severe economic downturns, the only way many states can provide services while preserving their fiscal virtue is to get counter-cyclical assistance (or revenue sharing) from Washington. A constitutional ban on deficits could prevent Washington from responding to emergencies of all kinds.
In truth, we don't need a balanced federal budget -- we need a disciplined federal budget. Congress would be better off adopting Sen. Mike Bennett's (D-CO) sensible suggestion that federal deficits be held first to four percent, then to three percent of GDP each year. At that level, they'd be gradually whittled down by economic growth, and the government could borrow without swelling the national debt.
A balanced budget amendment, moreover, is a blunter instrument than we need to deal with overspending and undertaxing in Washington. It doesn't hone in on the real problem, which is the automatic and unsustainable growth in entitlement spending. A better idea, from the Brookings-Heritage Fiscal Seminar, is to bring Medicare, Medicaid and Social Security on budget, which would require Congress to periodically reconcile income and spending to keep the programs solvent.
Finally, a balanced budget amendment is just too damn difficult to enact. Congress has to approve Constitutional amendments by a two-thirds vote, well nigh inconceivable given how hard it is to muster the 60 votes needed to break a filibuster. Then three-fourths of the states would have to approve an amendment.
Demanding a balanced budget amendment thus is more of a symbolic gesture than a real solution to America's fiscal crisis. Recall that it was a key plank in the GOP's 1994 Contract with America, but Republicans quickly lost interest once they won control of Congress. Nonetheless, Newt Gingrich has endorsed the amendment in a bid to recapture the old magic for this year's midterm elections.
Unlike the Republicans, of course, the Blue Dogs have real street cred when it comes to fiscal rectitude. They fought successfully to resurrect "pay go" rules that require Congress to offset new spending with tax hikes or budget cuts. And key Blue Dog leaders like Rep. Jim Cooper (D-TN) have led the charge for a bipartisan commission to get entitlement spending under control.
It's vital, though, that progressive deficit hawks not let the holy grail of a constitutional amendment deflect them from the gritty, day-to-day battles in Congress to get America's exploding deficits and debts under control.
This item is cross-posted at Progressive Fix.
"If you cut 26 percent of the welfare now given to the rich you have instantly balanced the budget."
"If you cut out wealthfare, you could pay off the national debt in 11 years."
http://www.corporations.org/welfare/
The $150 billion for corporate subsidies and tax benefits eclipses the annual budget deficit of $130 billion. It's more than the $145 billion paid out annually for the core programs of the social welfare state: Aid to Families with Dependent Children (AFDC), student aid, housing, food and nutrition, and all direct public assistance (excluding Social Security and medical care)."
"After World War II, the nation's tax bill was roughly split between corporations and individuals. But after years of changes in the federal tax code and international economy, the corporate share of taxes has declined to a fourth the amount individuals pay, according to the US Office of Management and Budget."
http://en.wikipedia.org/wiki/Corporate_welfare#Corporate_welfare_as_corrupt_subsidies
According to the Cato Institute, the U.S. federal government spent $92 billion on corporate welfare during fiscal year 2006. Recipients included Boeing, Xerox, IBM, Motorola, Dow Chemical, and General Electric.[6]
Alan Peters and Peter Fisher have estimated that state and local governments provide $40-50 billion annually in economic development incentives,[7] which many critics characterize as corporate welfare.
For instance, a government official has a clear fiduciary responsibility to get the best possible deal for the taxpayers in terms of work done for money spent on wages and benefits. Does anyone really think that when pols get involved with unions that's at all realistic? Hell no, these folks will give away the store to buy union votes, which is why over half of all unionized employees in the US are now government employees. (See cadillac healh insurance tax as applies to unions).
Do we think regulators can really be permitted to do their jobs with corporate types when big Wall St. and other money is in play?
And on ethics, how many violations did Charlie Rangel need to commit before finally embarrassing even Pelosi and Dem leadership? You could say the same for Tom Delay and Repubs.
We now live in a country where constituents want to be told that they can get something from government for nothing. We get what we vote for.
http://thomas.loc.gov/cgi-bin/query/z?c111:H.J.RES.78:
When you issue a 30-year bond, only a small portion of the value of the bond is the repayment of principal at maturity. Under this amendment, the government would have an incentive to shift its borrowing to contrived financial instruments that pay artificially low interest rates and high amounts of principal. So they could "balance" the budget by excluding much of the cost of servicing the debt from the accounting.
That's bad. Giving the government an incentive to lie is always bad, but it's worse than just that.
Currently, we cannot incrementally monetize (inflate away) the debt because it turns over too fast. If we raise expected inflation rates, we have to pay a higher rate on the t-bills and notes that are continually maturing and being re-issued. The increase in expected inflation can happen faster than the actual inflation that would let us default on part of the real value of the debt. Our creditors know this. That's part of why they lend to us at such low interest. An amendment that undermined that confidence would increase the rates we have to pay, which in turn would blow a hole in our budget that would be worse than the deficit increase caused by the current state of the economy.