Will Congress Vote for Economic Catastrophe By Adopting a Balanced Budget Amendment?
[Note: I have corrected an error in the original post regarding Rep. Kurt Schrader's position on a balanced budget amendment.]
In early August, Congress approved a last-minute deal to raise the debt ceiling and avoid a national default. The deal’s immediate $900 billion across-the-board budget cut and creation of a “super committee” tasked with coming up with an agreement for further deficit reduction garnered the most attention. But the agreement also included a requirement for Congress to vote on a balanced budget amendment to the U.S. Constitution before year’s end.
It appears that the U.S. House may vote on a balanced budget amendment as early as Wednesday. If so, let’s hope for a quick and certain defeat.
Back in June, OCPP explained why the balanced budget amendment is a dangerous proposal. The amendment, we said,
would sew into the Constitution an economic straitjacket that would leave our nation largely helpless in fighting recessions. Why? Because in a recession, consumers and businesses cut back their spending out of necessity or fear, stunting economic activity. The only entity with the ability to stimulate the economy is the federal government . . . unless a balanced budget shackles its ability to spend.
And because tax collections plummet during a recession, balancing the nation’s budget would require Congress to slash spending, raise taxes or both — just when the economy is weak. Deep spending cuts in a recession are the exact opposite of what good economic policy would advise. The result would be deeper and longer recessions, greater unemployment and more misery for the American people.
But you don’t have to take OCPP’s word for it.
A balanced budget amendment’s impact on the economy would be “catastrophic,” according to Macroeconomic Advisers, which provides nonpartisan analysis to corporations and government entities such as the President’s Council of Economic Advisers (under Presidents of both parties) and the Congressional Budget Office. Although Macroeconomic Advisers' recent analysis appears in a password protected site, the Center on Budget and Policy Priorities has published a short paper summarizing Macroeconomic Advisor’s analysis of the impact of a balanced budget amendment. The paper notes
If the 2012 budget were balanced through spending cuts, those cuts would have to total about $1.5 trillion in 2012 alone, which the report estimates would throw about 15 million more people out of work, double the unemployment rate from 9 percent to approximately 18 percent, and cause the economy to shrink by about 17 percent instead of growing by an expected 2 percent.
A doubling of the unemployment rate and the shrinking of the economy by about 17 percent seem catastrophic, indeed.
There are many versions of the balanced budget amendment being discussed. But they all share in the same flaw — making it more difficult for Congress to help the country in an economic emergency.
Thus, it is unfortunate that several members of Oregon’s congressional delegation support some version of a balanced budget amendment.
Rep. Greg Walden is a co-sponsor of HJR 2, a version of the amendment that would require a three-fifths majority to eliminate the need to balance the budget in case of a national emergency.
Rep. Peter DeFazio, one of the House Democrats’ most ardent supporters of a balanced budget amendment, is also a co-sponsor of HJR 2.
According to his staff, Sen. Ron Wyden has not ruled out voting for a balanced budget amendment that would exclude Social Security, provide for a waiver during a declared war or when the U.S. is involved in a military conflict that threatens its national security, and provide Congress with "the flexibility" to waive the requirement if three-fifths of both chambers of Congress vote to do so.
It’s hard to take comfort in any provision that would give a minority (two-fifths plus one) in Congress the ability to block an effort to suspend the restrictions of the balanced budget amendment in case of an economic or other emergency.
Didn’t this summer’s raise-the-debt-ceiling showdown confirm that a minority of lawmakers are willing and able to hold our economy hostage and threaten economic Armageddon for political ends?
We thank Sen. Jeff Merkley and Rep
s. Kurt Schrader and Earl Blumenauer for expressing that they do not support a balanced budget amendment , though we remain concerned that Schrader supports a spending-cap measure that would also unwisely impose an economic straitjacket on the nation.
[Correction: I erroneously included Rep. Kurt Schrader among those expressing opposition to a balanced budget amendment. This is incorrect. Rep. Schrader is a co-sponsor of HJR 81, labeled by its primary sponsor a balanced budget constitutional amendment. That proposed amendment would require a cap on spending (relative to recent revenues adjusted for population growth and inflation) rather than a balanced budget per se. It would take a two-thirds vote to suspend the restriction due to an emergency. Spending caps also unwisely impose an economic straitjacket on the nation.]
The only responsible choice for members of Oregon’s congressional delegation is to reject any proposal that would hamper the ability of our nation to respond to an economic crisis.
This post was originally published on www.blueoregon.com on November 14, 2011. The original post can be found at http://www.blueoregon.com/2011/11/will-congress-vote-economic-catastrophe-adopting-balanced-budget-amendment/.