Political posturing reached a state of frenzy Feb. 6 when the GOP-controlled House of Representatives passed a bill requiring President Obama to submit a budget that balances the government’s books.
While Republicans said the bill is designed to pressure the White House into dealing with our nation’s deficit problems, Democrats called the legislation a political gimmick.
My first impression after hearing this was it now seemed clear House Republicans had failed eighth grade civics class, as the United States Constitution delegates the responsibility of the budget to Congress, not the President.
It’s called The Require a Plan Act.
“The Require a Plan Act is another common sense step towards getting Washington on the path to a balanced budget and giving American families the certainty and transparency that they deserve,” said Louisiana Rep. Steve Scalise, R-Jefferson.
On the surface, it seems logical that our government — like any family — should live within its means. It is tempting to think that if only we could come up with some clever budgetary solution, fiscal prudence will follow.
Unfortunately, this is not the case, and this legislation won’t help solve our current fiscal dilemma.
Implementing a balanced budget amendment would not only fail in its objective to discipline government, but also impose potentially catastrophic side effects to our economy.
First, a balanced budget amendment would encourage elusion and distortion.
Most states have laws or constitutional provisions that favor a balanced budget, which has “driven a lot of activity into independent authorities,” said former director of the Congressional Budget Office Rudolph Penner in a statement before the House Budget Committee in 2011.
Essentially, states are able to “cook the books” and make it appear as if they are complying with their balanced budget mandate.
Put in concrete terms, the U.S. has more than 30,000 independent agencies and off-budget accounts at the state and local level that are not subjected to a balanced budget requirement, according to the 2010 census.
So, if states use budget gimmicks and accounting tricks to evade their balanced budget requirements, what’s stopping the federal government from doing such a thing?
Perhaps the strongest argument against a balanced budget amendment is how it would force the government to worsen an economic slump.
During a recession, people get laid off. This causes both tax revenues to fall and incomes to decline.
Alternatively, government spending increases during a recession because of unemployment insurance and other benefits.
These above-mentioned automatic stabilizers can, in fact, turn budget surpluses into budget deficits. A balanced budget amendment would force Congress to raise taxes and cut spending, which would further prolong the recession.
To anyone other than a conservative zealot, it is obvious this mechanism would inevitably make our economic downturns much worse.
Even most right-leaning economists will acknowledge the appropriate reaction to an economic slump is to allow the deficit to expand, first by allowing the automatic stabilizers to kick in, then by lowering taxes or increasing spending to re-stimulate the economy.
OK, what conclusion can be draw from these insights?
The Require a Plan Act is the most convoluted method for going about to reduce the budget deficit — and it probably won’t even work.
House Republicans passed this bill strictly because it was advantageous to do sow. It makes them look genuine. It makes them the party of common sense reform. It makes them the good guys.
They shouldn’t be taken seriously.
