Monthly Archives: August 2010

Riding the Tiger

Apparently, the Republicans are going to bring up the balanced budget amendment again this fall, conveniently prior to the elections. Although I don’t really believe that this actually has any chance of passing, either now or after the election, I thought I’d make a couple comments, one purely based on political sensibility, the other on more neutral economic grounds.

I’ll start just by noting that, of course, we do need to balance the budget and reduce national debt, via both spending cuts—where appropriate—and tax increases—in some cases, significant ones. It isn’t going to happen without both. Anyone who says otherwise is most assuredly either delusional or given over entirely to mendacity.

On its face, pushing for a balanced budget amendment is not necessarily a bad thing. However, ¬†unless properly conceived with exceptions for certain circumstances, it makes the government’s job that much more difficult when the economy or country as a whole is in duress. If we fall into a recession and tax revenues decline, does one really want the government to less able to fund “safety net” programs, or national defense, or any of a number of other items? Would it be possible for the government to, say, implement a national “rainy-day” fund to bolster federal spending during a recession? Yes, it would be possible, but how long would such an idea last before someone says, “Why should the government get to hold more of my money than it needs?” At that point, the lower-taxes-now crew would come in and propose refunds for any tax revenue that exceeds spending, and the fund would be gone.

Could we rely on people’s common sense to show them that such a fund would be in everyone’s interest? I would doubt it. Let’s look at how people think of government spending now. Many people would suggest that there are lots of things that the government could cut, but, as it turns out, we’ve been to this dance before–for the most part, people want cuts in things that we don’t spend any significant amount of money on. If people are unable or unwilling to understand what needs to go into cutting the federal budget, are they really going to understand what needs to go into supporting it during lean times? I’m not optimistic on it.

As for political sensibility, a balanced budget amendment would be quite a challenge. How would we get from the current budget to a balanced budget? Would there be a grace period, or would it come in effect in one fell swoop? Do the Republicans (and the Blue Dogs who also seem to be supporting this) really think that they can balance the budget, not raise taxes, and still get re-elected after they make either the large cuts in national defense spending or in Medicare/Medicaid/Social Security that would be required? Would there be exceptions in the case of a national emergency resulting from terrorism, or natural disaster, or war? Would certain programs be able to be supported above-budget? If any of these are true, how many exceptions are too many? At what point would such an amendment become so many meaningless words?

In the current situation of imbalance, no one wins politically by carrying through a balanced budget amendment. It is great to campaign on, because people love to hear about it, but it would be politically disastrous for the first majority party that actually has to deal with it. Thus, I’m not altogether convinced that this isn’t just campaign bluster to capitalize on our current Tea Party zeitgeist—riding the tiger of fiscal reform. If such an amendment actually passes, the riders may very well become the tiger’s lunch.