A Balanced Budget Amendment: A Bad Idea

by | Jul 15, 2003

With federal budget deficits rising, pressure is on once again to enact a balanced budget amendment to the Constitution. On June 25, a discharge petition was initiated to force a vote in the House on H.J. Res. 22, the latest in a long line of legislative efforts to bring this about. Such an amendment has […]

With federal budget deficits rising, pressure is on once again to enact a balanced budget amendment to the Constitution. On June 25, a discharge petition was initiated to force a vote in the House on H.J. Res. 22, the latest in a long line of legislative efforts to bring this about. Such an amendment has always been a bad idea. A recent Supreme Court case in Nevada shows more clearly than ever before why this is the case.

Congress has within its power the ability to enact a balanced budget any time it so chooses. And the Budget Act of 1974 provides mechanisms and procedures that make such a result relatively easy, as long as the will exists to accomplish it.

So what purpose is served by a constitutional amendment? The theory is that it would stiffen Congress’ spine and encourage it to stand up to those who benefit from the government’s largess.

The beneficiaries of spending or special tax breaks are well organized and deeply determined, whereas those who favor a balanced budget are disorganized and less committed. This allows special interests to get spending or tax breaks on their behalf year after year, even though a majority of voters probably opposes them. After all, the cost to any individual taxpayer of a particular tax or spending provision is trivial, whereas the benefit to those on the receiving end can be very high.

Thus, as in war, discipline and motivation by a smaller force can often overcome the superior numbers of an opposing force. In part, that is what allowed Robert E. Lee to hold a much larger Union army at bay for several years during the Civil War. So, too, in politics.

The idea is that if the constituencies favoring more spending were forced to compete against each other because the spending pie is capped by a constitutional amendment — rather than all working together to raise overall spending — then the forces of restrain would be strengthened, offsetting the inherent advantage of the spenders.

This is a good theory, but one that has always fallen apart on the rocks of actual practice. Congress has enacted any number of laws and rules over the years to control its own behavior in this area, such as the Gramm-Rudman law. But since such restraints require only a majority vote to implement, they need only a majority vote to abolish. Whenever push has come to shove, Congress has always given in to the spenders — although it has often required amazing dexterity and skill to jump through the budgetary hoops. But, where there is a will, there is always a way.

Since Congress cannot be forced to do something against its will, the only solution is to have some way whereby the courts can intervene. But how is a court to decide which spending goes above the limit and what does not? If it only looked at the last spending to be approved before the start of a fiscal year, Congress would simply wait until the last minute to pass the most necessary and politically popular bills.

This is exactly what happened in Nevada recently, where the education bill was deliberately held until the very end of the session. Like most states, it operates under a constitutional balanced budget requirement. But it also has a provision in its constitution requiring that there be a two-thirds majority in the legislature to raise taxes. When these came into conflict, the state Supreme Court decided last week that the balanced budget provision superceded the two-thirds requirement and ordered that the legislature raise taxes.

A tax increase endorsed only by a simple majority can now become law even though it lacks the requisite two-thirds vote, the court decided. Indeed, it is possible that the court itself could impose new or higher taxes on its own, as happened in Kansas City a few years ago, should the legislature fail to act. Apparently, the option of having the court invalidate spending was not seriously considered.

Does anyone think the U.S. Supreme Court would act differently? After all, even with a majority of Republican appointees, the current court has thrown the Constitution out the window whenever some “higher purpose” demanded it. No doubt, the same majority that just found constitutional protection for racial preferences in college admissions, in blatant violation of the 14th amendment, would also see the need for higher taxes if a balanced budget is not achieved after enactment of an amendment requiring it.

In my view, a balanced budget amendment will mainly lead to higher taxes — whether imposed by Congress or possibly by the courts. The negative effects of the higher taxes will overwhelm whatever conceivable benefits might be achieved by eliminating deficits. A federal balanced budget amendment is a very bad idea that should be rejected.

Bruce Bartlett is a Senior Fellow with the National Center for Policy Analysis (NCPA).

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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