Why a balanced budget amendment won't work

Regular readers will recall a previous piece I blogged where Thomas E. Mann and Norman J. Ornstein explained why Republicans are to blame for our current Congressional gridlock in Washington. They now have a follow up article looking at possible solutions to the gridlock.

It should be read in full. They propose solutions such as mandatory voting, which other countries mandate, but the most important point they make is about something that won’t work and will in fact make things worse. That being a federal balanced budget amendment that Republicans have been pushing for years now. Here’s why it’s a disastrous proposal:

In fact, the states’ balanced budgets are the best reason to avoid one at the federal level. When a downturn occurs, basic economic theory tells us that we need “counter-cyclical” policies to inject adrenaline into a fatigued economy — meaning more government spending and/or lower taxes. States do the opposite: A downturn means less revenue and more demands from unemployed residents, so they cut spending and raise taxes to preserve their balanced budgets. The fiscal drag from states in the recent Great Recession amounted to $800 billion, which the Obama administration’s stimulus plan barely offset. A federal balanced-budget amendment would only have aggravated the downturn — the economic equivalent of bleeding an anemic patient.

The latest House Republican proposals for a balanced-budget amendment would limit spending to 19.9 percent of gross domestic product and make any tax increases contingent on a two-thirds majority vote in both chambers of Congress. Because federal revenue is now at barely more than 15 percent of GDP and spending is at 24 percent, balancing the budget under these conditions would essentially eliminate all of the government other than the big entitlement programs such as Social Security and Medicare — or would require cutting those programs severely.

Indeed, if we had a federal balanced budget mandate going into this last recession, our government would have been effectively shut down by now. And I’d note that we need look no further than California to see what a disaster the 2/3 requirement for budget decisions creates. It’s at the root of their budgetary problems now. Some years ago, the California state legislature had hammered out a budget proposal that would have avoided a major crisis but had just less than 2/3 support and a minority of conservatives were able to block that solution which set California on the downward spiral it’s struggling with now.

As Mann and Ornstein point out, our federal government managed to balance the budget and in fact create a surplus in the 1990s under the existing rules. Of course back then, the GOP hadn’t fully embraced constant obstructionism and deliberate gridlock as a political strategy, as they have today. Which of course suggests, that the real solution is for Republicans to stop their partisan gamesmanship and start working in good faith for all Americans instead of catering only to their own political interests. [via]