Balanced Budget Nonsense (Part II)
Let's look at the actual proposal.
As I noted in my first post on this topic, the numbers are against amending the constitution In the first place, both in terms of the thresholds, but also in terms of the current partisan breakdowns in the two chambers.
But, what of the actual proposal? Perhaps the content of the potential amendment is such that it might attract some significant bipartisan support?
Well, in word: no.
House Joint Resolution 1, as reported out of committee, is as follows:
- `Section 1. Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless three-fifths of the whole number of each House of Congress shall provide by law for a specific excess of outlays over receipts by a rollcall vote.
- `Section 2. Total outlays for any fiscal year shall not exceed 18 percent of economic output of the United States, unless two-thirds of each House of Congress shall provide for a specific increase of outlays above this amount.
- `Section 3. The limit on the debt of the United States held by the public shall not be increased unless three-fifths of the whole number of each House shall provide by law for such an increase by a rollcall vote.
- `Section 4. Prior to each fiscal year, the President shall transmit to the Congress a proposed budget for the United States Government for that fiscal year in which total outlays do not exceed total receipts.
- `Section 5. A bill to increase revenue shall not become law unless two-thirds of the whole number of each House shall provide by law for such an increase by a rollcall vote.
- `Section 6. The Congress may waive the provisions of this article for any fiscal year in which a declaration of war is in effect. The provisions of this article may be waived for any fiscal year in which the United States is engaged in military conflict which causes an imminent and serious military threat to national security and is so declared by a joint resolution, adopted by a majority of the whole number of each House, which becomes law.
- `Section 7. The Congress shall enforce and implement this article by appropriate legislation, which may rely on estimates of outlays and receipts.
- `Section 8. Total receipts shall include all receipts of the United States Government except those derived from borrowing. Total outlays shall include all outlays of the United States Government except for those for repayment of debt principal.
- `Section 9. This article shall take effect beginning with the later of the second fiscal year beginning after its ratification or the first fiscal year beginning after December 31, 2016.’.
OK, so we have here a cap on spending at 18% of GDP, a cap on the debt, and a super-majority requirement to raise taxes. Does anyone think that such a proposal can get 2/3rds of the vote in both chambers?
May I point out that anyone who thinks that building in super-majority requirements into constitutions for fiscal policy matter hasn’t been paying attention to California.* Or, really, to the legislative impasses that the filibuster has created within the US Congress itself.
Also, while the proposal allows for a waiver in the case of a declared war, that rather ignores the fact that our military escapades since WII have not been declared wars (and yet, they have still been rather expensive).
Further, none of this is as clear as it sounds. As Bruce Bartlett notes:
For one thing, the term “economic output” in not defined in the committee report. Presumably, it means gross domestic product. But this is not a term defined in law; nor could it be. GDP figures are constantly being revised as new data become available and economists change their concept of what it means.
Another problem is that Congress cannot know what GDP will be in the coming fiscal year and it must necessarily pass its appropriations bills before the fiscal year begins. This means, as a practical matter, that Congress must base its spending on forecasts of GDP, which are often wrong and sometimes by large magnitudes.
This is no minor issue. How can Congress know what GDP will be for a given year? And what measure of GDP will be used? And who gets to make the authoritative call on the issue?
Further, there is the balance question itself:
For example, until the last day of a fiscal year, it would be impossible to say, as a matter of law, that the balanced budget requirement had been violated. At that point, spending would have already occurred, and it’s not really feasible to tell people to send back some of their Social Security checks because the budget was unbalanced. And who is to say what spending was the amount that went above revenues and what wasn’t?
And there is the enforcement issue:
Lacking de facto enforcement from the rating agencies, there would have to be some mechanism whereby the courts could intervene to block spending or force tax increases for a balanced budget requirement to be operational and not just an expression of sentiment.
Do we really want the courts deciding what to do to an unbalanced budget?
Really, the notion of hardwiring specific caps is a very bad idea. Putting very specific public policy guidelines into a constitution tends to create more problems than it solves (see the Alabama state constitution for examples). Beyond that, the purpose of a constitution is to create a basic institutional framework for governance, not to set fiscal policy. One of the geniuses of the US Constitution has been its general nature. This amendment would chip away at that genius.
The proposal is also an insight into the mind of at least some Republicans. To wit, Senate Minority Leader Mitch McConnell:
The time has come for a balanced budget amendment that forces Washington to balance its books. If these debt negotiations have convinced us of anything, it’s that we can’t leave it to politicians in Washington to make the difficult decisions that they need to get our fiscal house in order. The balanced budget amendment will do that for them. Now is the moment. No more games. No more gimmicks. The Constitution must be amended to keep the government in check. We’ve tried persuasion. We’ve tried negotiations. We’re tried elections. Nothing has worked.
Source and emphasis from Think Progress Justice.
By that logic, why don’t we just sit down and choose how things should be, enshrine them in the constitution, and forget about an actual government. Surely we could just subsist on a set of written instructions without the mess of elections, negotiations, persuasion, and such, yes?
Of course, the bottom line remains that this is not going to pass.
—
*And yes, I do understand that in CA the rule was (until recently changed) for 3/5th to pass the budget and for tax increases.
An argument similar to Senator McConnell’s was made in Washington State 30 or so years ago in the process of asking voters to support a balanced budget amendment. The thought was that given no other choices, legislators would be forced to abandon pork barrel larding and partisan thinking in order to create balanced budgets that reflected the needs of the state in tough economic times.
So far, it hasn’t worked out that way. Mostly because the two sides can never manage to agree on what “reflects the needs of the state in tough economic times.”
But, gee, it sounded so appealing for about 1.3 seconds! Normal humans would be embarrassed to have taken so much time to propose something so easily proven to be idiotic, but not the leaders of today’s GOP.
So once the Tea Stains (the AstroTurf movement funded and organized by the Koch Bros and Dick Armey) have their symbolic vote will they accept the result and move on…or will they continue on their path to crash the economy? I don’t see them being placated. Crazy don’t quit. So what’s next?
That propodal has details to satisfy the core, but I think they’re diluded if they think it will appeal to the mainstream.
It isn’t a moderate balanced budget amendment, it’s a Tea Party Hail Mary pass.
If they can convince everyone to join the Tea Party they’re good, otherwise it all dries up and blows away.
The Brits have known for four years that Rupert Murdoch’s minions were hacking people’s phones, but it took the revelation that they’d hacked a murder victim’s phone to wake them up to what kind of monsters these people are.
Until the Republican make a similar mistake, they’re free to perpetrate this kind of idiocy without any consequences.
Stopping the debt ceiling being raised just might be it.
hey norm:
I think ponce answered your question: “Until the Republican make a similar mistake, they’re free to perpetrate this kind of idiocy without any consequences. Stopping the debt ceiling being raised just might be it.”
Here’s my prediction. The debt ceiling will not be raised. This will result in chaos. The GOP will be blamed, rightfully, so the further result will be big Dem victories in 11/12.
The GOP is in the process of shooting itself in the head. Something else will ultimately replace it, but that process can’t really get going until the suicide is complete.
The day the GOP votes to do this will be remembered as a major milestone in the dissolution of the GOP. It’s hard to think of another single event of comparable importance, but one example would be the day McCain picked Palin.
The two events are closely related, because they’re both about handing over the party to a bunch of nuts.
Here’s my prediction: The debt ceiling will begrudgingly be raised, just enough to see Obama through to the elections. Included in the ‘deal’ will be some, but not many, cuts to the deficit. There may be some general clauses addressing entitlements. But they will probably be more like recommendations. The balanced budget amendment will be debated, but weeded out in the final moments so all the rest can pass.
No one is going to come out of these so-called negotiations looking good. The republicans will not have gone far enough, in the eyes of their constituency. And, the democrats, Obama specifically, will have lost more credibility with moderates and indies.
There will, however, be no ‘stains’ from the tea party group, as they are a wide-based, loosely cohesive group of people who mainly have arisen out of the masses more commonly known as, ‘The Silent Majority.’ When regulations loosen, business becomes more vibrant, when government stops over- parenting the masses the tea party will once again fade until the next provocation.
If the Tea Party wish to represent the silent majority, perhaps they should shut the hell up first.
When regulations loosen, business becomes more vibrant, when government stops over- parenting the masses the tea party will once again fade until the next provocation.
No offense intended, but I hear stuff like this a lot. It is almost never accompanied by any descriptions of what regulations are the problem, and exactly how they are causing said problem. Ultimately, it demonstrates ignorance and an intellectual laziness – millions of people parroting what they hear on TV. Let me use a few examples to demonstrate how dumb this is:
#1. Seat belt regulations. How much cheaper would cars be without seat belts? How many car companies are unable to get off the ground because they have to put seat belts on the cars?
#1a. Would the country be a better place to live if we had more cars that were $50 cheaper and had no seat belts?
#2. When companies are barred via regulation from dumping mercury into rivers, what happens?
a). All companies that were doing this go out of business and mercury-byproduct industrial processes dissapear
b) The companies find other places to store the mercury and produce mostly just as much as what they were producing before, passing on a slightly higher price to customers, acting as one piece of a larger mild rise in prices that year across the economy, provoking slightly higher wages and it all balances the heck out on net.
#3. When Dodd-Frank forces derivatives to be traded on transparent exchanges, what happens?
a). Derivatives become less profitable, the economy is permanently wounded
b) Derivatives become less profitable, the banks make something else more expensive, x amount of money buys fewer banking goods and services, either this turns out to be irrelevant or else prices and wages go up a little and/or the Fed puts more money into circulation, everything balances the heck out, again. Plus one source of world-exploding financial collapses is now less likely to destroy my life, and yours.
You’re living in a fantasy. The worst a “tighter regulation” has ever done to anything is make it cost a little more money. But there’s no upper limit on the available dollars in the country. All the loosened regulations in the world won’t fix the fact that the corporations are hoarding cash. They’re not saving up until they finally have enough to pay for all them darn regulations they need to obey. They’re saving up for a nonexistent future where workers- their customers – start making money again and buying enough products to justify expansion.
propodal … heh, phone pecking will do that.
From Politico:
That’s what the amendment is, a way to set up a tough-sounding vote, in a way that they won’t have to live with. (Because it won’t happen this year, if at all.)
Congressional Democrats certainly aren’t covering themselves with glory here, and they might be hard to round up for the President’s proposal, but the GOP is actually keeping them from the fray.
Because the GOP blocks the President’s plan at the President, Congressional Democrats can do nothing but throw out the occasional line that they aren’t happy.
They can sit this out.
@glasnost: well said.
@glasnost: Your comments are full of ignorance and satire, at best.
Have you ever run a business, yourself. Set it up, gotten a business license, been run around by a progressive local or state government? Those who have done this have learned experientially what the increasing end runs that larger government does to impede, not promote a business from opening and maintaining sustainability. Red tape, endless bureaucracy is what is tying business in knots, making it less than encouraging to want to stay in business, let alone expand it, which would add more jobs to this flat job market.
Seat belts and mercury in the water have nothing to do with the regulations I was talking about. Now, the Frank/Dodd fiasco will definitely curtail lending, that is for sure. These two old democratic cronies, who were responsible for supporting lightening the qualification practices, causing much of the prime loan debacle, are like two foxes creating safety measures for the hen house in their so-called regulations.
Small business people, along with corporations are hoarding cash because they have no idea what taxing punishment is around the Obama corner. While Obama has given almost 1500 waivers to unions and democratic business cohorts, the other private sector businesses are left to fly in the breeze of the ‘unknown.’ While Obama wants to tax the ‘rich’ to pay for his ridiculous, over-reaching investments, like His health care bill, the majority of people disfavor, and high speed rail, his corporate pal, Jeffrey Immelt of G.E. mysteriously doesn’t pay any taxes. Obama basically cherry picks the rich. Those who support and donate to him are favored by jobs in his administration, private meetings, tax breaks and health care waivers. All others are put up against a political wall, and asked to empty their pockets to pay for his social projects and heel to his ideological vision.
All you guys on this blog have to do is look at Western Europe and see how well they are doing with all their social welfare programs. Greece is a metaphor for going down the tubes. And, Italy is sprinting over to their own financial crisis. Then we have Portugal, Spain, Ireland that are struggling. They have been at this longer than we have, and are merely examples of what we have to look forward to if we don’t put a stop sign up for the rising debt, now. Back in 2008 we were running a national debt 40% of GDP. Now it is 62%, with predictions of being 72% in 2012. At 90% we will become like those western European governments facing financial collapse. In 2011 we have more ‘choices’ in how to slice back our debt. But, waiting longer we may be faced with forced austerity measures, which will be much more painful and violent.
Is that what all of you want, while measuring the mercury in your water. BTW, what about all that mercury in those energy saving light bulbs??? A little hypocrisy, perhaps…..
@glasnost:
Have you ever run a business, yourself. Set it up, gotten a business license, been run around by a progressive local or state government? Those who have done this have learned experientially what the increasing end runs that larger government does to impede, not promote a business from opening and maintaining sustainability. Red tape, endless bureaucracy is what is tying business in knots, making it less than encouraging to want to stay in business, let alone expand it, which would add more jobs to this flat job market.
Seat belts and mercury in the water have nothing to do with the regulations I was talking about. Now, the Frank/Dodd fiasco will definitely curtail lending, that is for sure. These two old democratic cronies, who were responsible for supporting lightening the qualification practices, causing much of the prime loan debacle, are like two foxes creating safety measures for the hen house in their so-called regulations.
Small business people, along with corporations are hoarding cash because they have no idea what taxing punishment is around the Obama corner. While Obama has given almost 1500 waivers to unions and democratic business cohorts, the other private sector businesses are left to fly in the breeze of the ‘unknown.’ While Obama wants to tax the ‘rich’ to pay for his ridiculous, over-reaching investments, like His health care bill, the majority of people disfavor, and high speed rail, his corporate pal, Jeffrey Immelt of G.E. mysteriously doesn’t pay any taxes. Obama basically cherry picks the rich. Those who support and donate to him are favored by jobs in his administration, private meetings, tax breaks and health care waivers. All others are put up against a political wall, and asked to empty their pockets to pay for his social projects and heel to his ideological vision.
All you guys on this blog have to do is look at Western Europe and see how well they are doing with all their social welfare programs. Greece is a metaphor for going down the tubes. And, Italy is sprinting over to their own financial crisis. Then we have Portugal, Spain, Ireland that are struggling. They have been at this longer than we have, and are merely examples of what we have to look forward to if we don’t put a stop sign up for the rising debt, now. Back in 2008 we were running a national debt 40% of GDP. Now it is 62%, with predictions of being 72% in 2012. At 90% we will become like those western European governments facing financial collapse. In 2011 we have more ‘choices’ in how to slice back our debt. But, waiting longer we may be faced with forced austerity measures, which will be much more painful and violent.
Is that what all of you want, while measuring the mercury in your water. BTW, what about all that mercury in those energy saving light bulbs??? A little hypocrisy, perhaps…..
It’s funny jan. If you believed in the market then you might believe businesses are cutting back investment in the face of falling consumer spending. The market doesn’t build what the market doesn’t want.
It’s really odd for those who say they understand business to claim that it isn’t falling restaurant patronage, it isn’t falling hotel bookings, it isn’t falling car sales, it isn’t broad consumer metrics. No, businessmen would invest anyway, if it wasn’t for the uncertainty about possible, future, legislation.
If you understand business, you should get it. ROI depends on R.
So Jan has no answer as to what regulations are killing business besides, “we just know that they exist” followed by more talking points. So noted.
@john personna:
And, why isn’t there consumer spending? Could it be because people don’t have jobs, are afraid of losing their job, or are a part of the ‘underemployed’ who are not accounted for in that 9.2% stat. creating no extra money to spend on restaurants, hotels or car purchases. It’s a vicious cycle! Couple that with the sliding housing market, which still has not found it’s bottom, and there are real problems in this country!
These problems are not going to be solved by simply raising the debt ceiling. Because, just as that phrase implies, there is a ceiling eventually which will be reached where you can add no more debt. Then what? There is also a ceiling to the undefined term “rich people” too. It keeps flittering around $200,000 to a million dollars/year to qualify for this financial niche. However, when you run through these people, which is inevitable, then what? I guess it will then fall on those making $150,000, dropping to $100,000, $50,000….until it finally reaches you!
“The market doesn’t build what the market doesn’t want.” Duh! And, the market wants less when there is less to spend, and less incentives for people to even imagine it, let alone build it. There is a direct correlation with more innovation to freedom and resources to be innovative. That’s why this country so far has been the leader in the creation of new drugs, technology, etc.
I get business. I am in business. I can see you are not!
Oh, yes I can address government regulations. American businessmen are interfered with by OSHA, by Anti-trust, by the gross receipt tax, by the unemployed labor tax, by the demand for fees, permits, and licenses, and so forth ad infinitum.
To put it in context with how people used to construct a great idea, speech,philosophy here is how we have traveled the path to bureaucratic blather:
Pythagorean Theorem — 24 words.
Archimedes’ Principle — 67 words
Gettysburg Address — 286 words (compare that with some of Obama’s stem winders!)
Declaration of Independence — 1,300 words
U.S. Constitution with 27 amendments — 7818 words
U.S. Government Regulations on the sale of cabbage — 26,911 words.
Might I add that Obamacare was over 2000 pages (not words) of legalese, which no one read before passing. The Stimulus plan was equally burdensome, including that tax break for corporate jets that Obama has been flinging onto the republicans. It was his legislation that he forgot about!
@jan:
Except, no one is saying that raising the debt ceiling will improve unemployment. They are saying (and correctly so) that failure to raise the debt ceiling will have a host of rather negative effects. Indeed, profound ones that could create a global financial crisis worse than the one that happened in 2008.
Since you are in business I presume you have been in situations in which you needed to borrow to purchase materials, or perhaps meet payroll or pay bills. Tell me: what would happen if your business could not borrow at all? And, even better, let’s assume that you have bill and payroll to meet and you cannot borrow. What would happen? Would your suppliers get paid? Your employees?
@jan:
I will confess: I am not a fan of tax breaks for corporate jets.
However, how is that “burdensome” on business? And how it is relevant to a discussion that is ostensibly about regulation and the uncertainty they cause?
No one really knows the effect not raising the debt ceiling will have. There are dire predictions, that is for sure. However, much of the implications of not raising the debt ceiling lie with the president himself. If he blocks a prioritization of how the money is spent, being punitive to those who he knows will give a healthy backlash, then it can be deemed harmful. In the meantime, if obama is truly looking out for the people, he will pay the interest on the debt first to avoid default, and then go down the line with vital entitlements and military pay.
Also, a little publicized part of that meme from the rating agencies like Moody said that we should raise our debt ceiling, but more important than that was addressing our debt problem. Nary a mention of that is made except by Marco Rubio, who brought up that obscure but important facet facing our credit rating — whether it is lowered or not.
The jet tax breaks were brought up because that is what Obama emphasized over and over again in his “We’ve got to raise the taxes on the wealthy speeches,” because of those jet-setting rich guys: the implication being they were fat cat republicans. I have to laugh because democratic partisans are by far and away the wealthiest of doners. If you go through the wealth of those in Congress, the dem side is also wealthier than the republican side. The previous Speaker of the House, Nancy Pelosi, DEMANDED a jet to shuttle herself and family around with the best of liquor etc. Boehner, when he took the Speaker job, did away with the jet. Back in the days of Bush when he traveled he would stay at the home of diplomats — free — having less cost for the taxpayer. Obama and his family take over 5 star hotels for their family and huge entourages. I mean there is such a difference on how democrats and republicans allocate their resources, both publically and privately. It’s a different mind set entirely……and it involves more extravagences for themselves while railing against “other’ rich people. Again, hypocrisy out of control!
Yes, of course…just like no one really knows if evolution explains how all biological organisms have evolved…let’s say the debt ceiling isn’t raised and the results really hurt you, who will you be blaming for your troubles then?
Umm, considering that the President has mentioned how his own taxes need to be raised, your little implication is incorrect, unless of course you want to somehow accuse him of being a fat cat Republican…
@jan:
Actually, that is rather well publicized.
But here’s deal: it is a certainty that our bond rating will be downgraded if we do not raise the debt ceiling by Aug 2. Again: a certainty. This will, at a minimum, make our existing debt even more expensive to service. This will help the economy and the debt problem how?
@An Interested Party:
Just like the world was going to turn into pudding after Y2K. Nothing happened.
Or, just recently, in Los Angeles, closing the 405 was going to turn into carmageddon.
Now they’re calling it carmaheaven, because the freeways were so heavenly.
Fear is an intensely wasted emotion when it makes you either stand still or go backwards. That’s what the democrats want — to get us into further debt without any serious solutions towards decreasing it. Also, that highly praised-by-the-media 4 trillion dollar “big” deal Obama dangled was nothing but a talking point. He couldn’t even identify one tangible cut that would be included in that deal, when some courageous journalist dared ask something other than a softball question.
A totally irrelevant comment. Obama inserted the jet comment to disparage his opponents and tie-in his “Tax the rich” mantra. It’s hubris lay in the fact that such a derided tax break were a contrivance in the Obama’s own bloated stimulus package. Referring to himself as paying taxes was a way to ingratiate himself to the public as being willing to take part, himself, in this higher taxation. It was a calculated comment meant as a rhetorical distraction.
@Steven L. Taylor:
I’m glad to hear that meme received more attention than just having Marco Rubio talking about it.
You’re right that could happen. That is the risk of saying “I’m not going to take this debt any more.” It’s taking a stand that could have ill effects. However, at least in my own life experience, most gains I have made, most rectifications, did not come easily nor with any set guarantees. Almost everything worth having entails some risk. Heck, even having children is a risk!
But, again some of the inherent risks can be controlled, regarding how you prioritize the doling out of what money we do have to pay for the most important stuff. There are those who are even saying that by addressing our debt with identified solid cuts, coupled with raising the debt ceiling, would show people like Moody’s that we are a serious country and actively doing something immediately about our debt problems.
I also think it would be a positive message to the business community, in this country, that we are going to be approaching our fiscal problems in a business way rather than simply an ideological one. After all, business that is failing, cuts their costs, rather than simply spend, or as Obama would say, ‘invest’ more money on inventory.
@jan:
I think you really should have addressed this as a debt driven recession, the problems of the consumer balance sheet, and the pain associated with further consumer deleveraging.
I think that would actually be a more market-aware explanation.
@jan:
This is the fatal flaw in your position. Not raising the debt ceiling is not saying “I’m not going to take this debt any more.” The debt will still be there. Further, by having the bond ratings of the US lowered it will make serving the existing debt even more expensive. How you can throw out your business acumen and not understand this fact raises questions about said acumen.
Steve
We’ve been going back and forth and I really haven’t stated my full position on the debt ceiling. I support raising the debt ceiling, contingent upon an equal amount of cuts being addressed — serious not superficial ones. The Bowles/Simpson commission held promise in addressing viable bipartisan cuts and reforms.
I do not, however believe, nor support, raising any taxes (other than closing some needed tax loop holes), alone or in concert with cuts in raising this debt ceiling. If Obama won’t support anything that doesn’t contain more taxes on the rich, then I would support taking the risk and not raising the debt ceiling. If things get worse, then that may be what will have to happen in order to wake people up.
The balanced budget amendment, while commendable, will probably not go anywhere.
“If Obama won’t support anything that doesn’t contain more taxes on the rich, then I would support taking the risk and not raising the debt ceiling.”
WTF? The rich have gotten repeated tax cuts in recent history. Now, with the country hurting and budget problems becoming more pronounced, your position is no higher taxes on the rich or bust? That’s utterly ridiculous.
As for regulations, they should always be subject to review and alteration if they’re not doing what they’re meant to do. I’m fine with that, and I’d wager everyone else who has commented in this thread would agree. Regs are a tool and can be badly designed or misused.
Can you explain what’s wrong with, for instance, OSHA? Have there been changes recently that have made it especially burdensome?
You also mentioned “anti-trust”, two taxes (not regulations) and fees (likely tied to regs, but effectively those are taxes too). Therefore, I see your complaint boiling down to: OSHA, anti-trust laws and taxes. The anti-trust laws go way back, as I recall. Why are they a problem now, specifically?
Income tax rates have gone down since 2000*, corporate tax rates haven’t changed, and yet here we are. Have you seen a dramatic increase in fees?
I don’t find the taxes argument persuasive, since we’ve had plenty of economic growth in the past with the same or higher levels of taxation.
It seems to me that the big issue is household debt. Consumer demand is depressed and will remain so until people have paid down their debts. Once demand picks up again, we’ll probably see unemployment drop back down to more reasonable levels, taxes and regulations notwithstanding.
* at the federal level – some states have just recently (as in this year) raised taxes to deal with their budget problems, my own state included
Than why do you support raising the debt ceiling under any circumstances? I mean, if it’s no big deal…
Umm, considering he supports tax increases, and those increases would directly affect him, it’s a little more than how you choose to characterize it…