As a constitutional balanced budget amendment has once again become a real possibility, many on the left are hypothesizing economic Armageddon if passed.
Progressive think tanks such as the Center on Budget and Policy Priorities characterized the balanced budget amendments currently being considered in the House of Representatives as “extremely dangerous” and claimed that they would “make recessions more frequent, longer, and deeper.”
As is typical for the left, the claims made against the amendment have no basis in reality, and are centered on knee-jerk reactions with no underlying rational or economic logic. One of the amendments currently being considered in the House, introduced by Rep. Justin Amash, R-Michigan, contains a whopping 284 words and takes up all of one half of a page.
The primary attack lobbied at Amash’s amendment is the claim that it forces the government to slash spending during a recession, making output fall still further. This statement is patently false. The amendment stipulates that outlays for the current fiscal year cannot exceed the average revenue collected in the preceding three years. What this means is that if the government collected an average of $2.5 trillion dollars in tax revenue over the past three years, it could spend $2.5 trillion dollars this year, regardless of current tax revenue.
If revenues for the current year were lower due to the recession, this would tie into the three-year average and lower the amount the government could spend next year. It also contains a provision that if revenues are higher than outlays allowed under the current year, the remaining revenue must be used to pay down the country’s outstanding public debt. In this way, the government’s spending ability is strictly limited, providing a smoothing effect in terms of outlays and preventing politicians from blowing through extra cash that could be used to reduce the nation’s debt.
President Obama has claimed publicly that the US doesn’t need such an amendment for the budget to be balanced. However, history paints a different picture. In 1997, a Balanced Budget Amendment easily passed the House of Representatives but failed in the Senate by a single vote. At that time, the national debt stood at $5.36 trillion dollars. In the following 14 years, the debt has skyrocketed to $14.34 trillion dollars, an increase of 167 percent. The most tragic part of this story is the nation has nothing to show for it, save rating agencies’ threats to downgrade our credit because Congress has no credible plan for reducing our debt and chronic overspending.
Given the fact that the founding fathers created the greatest blueprint for a constitutional republic in all of human history, we can forgive them for failing to foresee presidents and congressional leaders that would have no problem borrowing 44 cents for every dollar they spend, indebting America’s citizens at a rate of $168 million dollars per minute. Left with no alternative, we have little choice but to follow the advice of Thomas Jefferson and “bind Congress down from mischief by the chains of the Constitution,” before its actions further ruin our economy and our liberties.
Steven Christopher is a graduate finance student in the C.T. Bauer College of Business and may be reached at [email protected].
