And So it Begins

Senator Elect Mike Lee, the Tea-Party backed guy who loves the constitution more than you do, has proposed the first of his constitutional amendments.  The Balanced Budget amendment, which means that Congress, will not be able to spend one dollar more than they bring in.  This sounds like it makes sense on the surface.  There will be easy to predict unforeseen consequences to passing this amendment.  You simply have to look at the states that have a balanced budget amendment to their constitution to figure it out.  Here is the proposed text that came one vote short in the Senate back in the 1990s:

Section 1. Prior to each fiscal year, the Congress shall adopt a statement of receipts and outlays for that year in which total outlays are no greater than total receipts. The Congress may amend such statement provided revised outlays are not greater than revised receipts. Whenever three-fifths of the whole number of both Houses shall deem it necessary, Congress in such statement may provide for a specific excess of outlays over receipts by a vote directly to that subject. The Congress and the President shall ensure that actual outlays do not exceed the outlays set forth in such statement.

Section 2. Total receipts for any fiscal year set forth in the statement adopted pursuant to this article shall not increase by a rate greater than the rate of increase in national income in the last calendar year ending before such fiscal year, unless a majority of the whole number of both Houses of Congress shall have passed a bill directed solely to approving specific additional receipts and such bill has become law.

Section 3. The Congress may waive the provisions of this article for any fiscal year in which a declaration of war is in effect.

Section 4. The Congress may not require that the states engage in additional activities without compensation equal to the additional costs.

Section 5. Total receipts shall include all receipts of the United States except those derived from borrowing and total outlays shall include all outlays of the United States except those for repayment of debt principal.

Section 6. This article shall take effect for the second fiscal year beginning after its ratification.

Here is a list of unforeseen consequences with the text as it is written:

1. When balancing the budget, Congress will only have two options, cut spending or raise taxes.  It is much easier to raise taxes.  Look at the states that have a balanced budget amendment: Oregon and Vermont, for example, are some of the higher taxed states in the US.
2. The US will be able to have no military action unless Congress formally declares war.  (Article 3)  This will make it difficult to fight terrorism as many terrorist organizations, like al-Qaida, are non-governmental and receive much of their financial support from extra-governmental activities.  Congress may also use a declared war as an excuse to spend like there is no tomorrow and use deficit spending to fund activities that are in no-wise needed to fight the war.
3. The US government will be powerless to fight even minor recessions.  A major recession, such as the current recession is probably beyond what deficit spending can cure; other recessions such as the post-9/11 recession were handled well by a minor economic infusion of borrowed cash.  Think about your family situation; sometimes the answer to an unexpected expense such as a car repair is to whip out the old Visa.  It does not resolve every problem and it is a bad habit to get into, but sometimes it is the answer.
4. There is no provision to pay down existing debt.  It is specifically excluded.  Congress may be able to roll over our current debts forever. (Section 5)  Interest payments are taking a big chunk of our federal budget now, and one way to balance the budget will be to pay down existing debt and relieve us of the onerous interest payments.  Passing this amendment may result in a mad flurry of borrowing in the fiscal year before it takes effect. 
5. Because this amendment would take place two years after its ratification, if it were passed today, the economic consequences would be disastrous.  (Section 6)  Remember that Harry Reid is still in control of the Senate and he has no qualms about raising taxes due to his desire to be compassionate.  Passing this amendment in this Congress will result in increased taxes.

There are also versions of this amendment that exempt Social Security and other old-age benefits such as medicare.  If the amendment has too many holes in it, it will be no good.

Of course, we do not know what Mike Lee’s Balanced Budget amendment contains.  I would like to see the text of his amendment. These objections were raised by one of Lee’s competitors for the GOP nomination.  And it may have been that objection that cost her nomination at the convention.  We don’t need a balanced budget amendment if it is written like this.  We need a congress that has the courage to balance the budget.  That is what we though we were electing Mike Lee to do.  Look at what our own state has done.  Utah is considered the best fiscally managed state in the US, and we do not have a balanced budget amendment in our state constitution.

Even though this blog does not support this balanced budget amendment,  we do support a balanced budget.  We believe that a line-item veto is the proper constitutional tool to fight extreme deficit spending.  We also like the idea that bad legislation could die due to lack of funding.