Monday, July 25, 2011

A Balanced Budget Amendment Proves Once and for All, Republicans don't have an Economic Clue.

I'm so angry about the phony debate about the debt ceiling, that I refuse to talk to my conservative friend about it.  Once the GOP/tea party brought out their horrific "balance budget" gimmick, I went into a deep funk. Even the dumbest ass should get this one. But they refuse too, and went so far as to embraced the idea.  The following is one of many long dissections and analysis clearly stating why such an amendment would take down the country in short order.

Years ago, Prime Minister Margaret Thatcher declined to institute the "shock doctrine*," because she claimed a democratic system of government, and voters, wouldn't let it happen. Thatcher was wrong....

EPI: A balanced budget amendment would mandate perverse actions in the face of recessions. In economic downturns, tax revenues fall and some outlays, such as unemployment benefits, rise. These so-called built-in stabilizers increase the deficit but limit declines of after-tax income and purchasing power. To keep the budget balanced every year would aggravate recessions. Unlike many state constitutions, which permit borrowing to finance capital expenditures, the federal budget makes no distinction between capital investments and current outlays. Private businesses and households borrow all the time to finance capital spending.

A balanced budget amendment would prevent federal borrowing to finance expenditures for infrastructure, education, research and development, environmental protection, and other investment vital to the nation's future well being.

A balanced budget amendment would invite Congress to enact unfunded mandates, requiring states, localities, and private businesses to do what it cannot finance itself. It also invites dubious accounting maneuvers (such as selling more public lands and other assets and counting the proceeds as deficit-reducing revenues), and other budgetary gimmicks.


Disputes on the meaning of budget balance would likely end up in the courts, resulting in judge-made economic policy. So would disputes about how to balance an unbalanced budget when Congress lacks the votes to inflict painful cuts.


Balanced budget amendment proposals typically contain escape hatches, but in peacetime they require super-majorities of each House to adopt an unbalanced budget or to raise the debt limit. These provisions are recipes for gridlock.

An overall spending cap, which is part of some proposed amendments, would further limit Congress’s ability to fight recessions through either the built-in automatic stabilizers or deliberate changes in fiscal policy. Even during expansions, a binding spending cap could harm economic growth because increases in high-return investments — even those fully paid for with additional revenue — would be deemed unconstitutional if not offset by other spending reductions. A binding spending cap also would mean that emergency spending (for example on natural disasters) would necessitate reductions elsewhere, leading to increased volatility in the funding for non-emergency programs.

A Constitutional amendment is not needed to balance the budget. The budget not only attained balance, but actually recorded surpluses and reduced debt, for four consecutive years after Congress enacted budget plans in the 1990s that reduced spending growth and raised revenues. This was done under the existing Constitution, and it can be done again.

No other major nation hobbles its economy with a balanced-budget mandate. There is no need to put the nation in an economic straitjacket. Let the President and Congress make fiscal policies in response to national needs and priorities as the authors of our Constitution wisely provided.

*That practitioners of the shock doctrine tend to seek a blank slate on which to create their ideal free market economies, which inevitably requires a usually violent destruction of the existing economic order.

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