Today the Republican Senators in the US Senate announced their version of a Balanced Budget Amendment. The Republicans in the US House of Representatives have already agreed on their own version of a Balanced Budget Amendment. This article discusses the pros and cons of a Balanced Budget Amendment.
The first issue I have is the ability to fight the war on terror. Our war on terror has been financed by China and Japan. We are presently embarking on a third war in Libya and many politicians advocate a fourth war with Iran and a fifth war with North Korea. There are many areas of the world where our vital interests are being threatened. A balanced budget amendment would seriously impede our military readiness for a new war. It would mean that Congress would have to struggle to come up with funds for the new war. That means our soldiers might have to wait for or go without badly needed artillery, air support and naval support.
We all know how long it takes Congress to generate and send a bill to the President even when the majority of Congress agree with the general goal of the bill. Two versions of the bill are introduced; one in the House of Representatives and one in the Senate. Then committees and sub-committees begin their work analyzing, researching and questioning experts on the bill. The Congressional Budget office is handed incomplete versions of the bill in order to project costs. Months pass before the bills are debated on the House and Senate floors. More debates result in more amendments to the bills on the House floor and the Senate floor. Finally both bills are passed and sent to a Conference committee where a compromise is hammered out and a final bill generated. The Congressional Budget Office is busy throughout this whole process determining the cost of implementing the respective bills and the final bill. Finally, after months of debate and amendments added, the bill passes in both the House and the Senate and is sent to the President.
Our soldiers simply cannot wait. So for at least the first year, the war will be fought on borrowed funds or the war will cease until Congress generates the funds. This might put our soldiers at great risk.
My second concern is in times of recession. For years our government has advocated the Keynesian theory of economics which states that Federal debt incurred during during a recession will be payed during times of a strong economy. This is not possible if the national budget must be balanced each and every year. The tax cuts needed to pull us out of a recession would not be passed by Congress because Congress would not be able to agree on how to finance those tax cuts. An annual balanced budget amendment requires that the national budget be balanced each year. That means the tax cuts have to be accounted for each year they are effective.
Last but not least is what I believe is the major reason the Republicans are pushing for a balanced budget amendment. It supports their ideology and gives them reason to chop the government programs they don’t like. This puts our poor, our disabled, our elderly, our environment, our consumer protection and our workers at risk. Massive cuts in grants to the states would mean cutting police forces, libraries, and all other services the states provide. It would also hurt private contractors who do work for the state governments.Hence there would be strong lobbying against any cutting of funds. This is the reason why in either a recession or a war, our Congress will not be able to provide funds nor balance the budget. The Democrats and the Republicans would be fighting most of the time. And there would be more filibusters in the Senate then ever before. The only option would be to increase taxes!
And if a bill (to balance the budget, pay for a war or stimulate the economy) slashes social programs like Welfare, Medicare and Medicare, or Health Reform; President Obama will certainly veto it. Again, that leaves Congress with no choice but to raise taxes.
To make matters worst, during the first year the balanced budget amendment is effective, taxes will definitely have to increase because, given the scenario above, nothing else stands a chance of being becoming law. At this point, there will be significant public support for repealing the balanced budget amendment.
In conclusion, I think any balanced budget amendment would hold shocking surprises for everyone. It is a bad idea. The best idea is to trim the budget while taking steps to buffer the fragile economy from the effects of those budget cuts.