On Sunday, Senator Rand Paul (R-KY) suggested that he might vote for an increase in the debt ceiling if it came attached to a balanced-budget amendment to the Constitution. The latter has been a goal of fiscal conservatives for some time, but in my latest column at The Week, it’s a trap in two key ways. Not only will it take years to pass, but the effect may be far from what conservatives intend — and in the end, it leaves us with the same problem:
But let’s assume that all the stars align for a balanced budget amendment, one that the states approve and that actually forces Congress to put spending in sync with revenue. What then? Our current deficits come not from discretionary spending, but entitlements. Non-mandatory spending in fiscal year 2011 was $1.3 trillion, which means that Congress could have redlined every last dime of defense, homeland security, and other discretionary spending — and we would still have a $300 billion deficit. That problem becomes worse each year, too, as entitlements expand while running on autopilot.
Passing a balanced budget amendment would still require entitlement reform, unless we choose to raise taxes instead. That’s the trap. Congress wants to say yes to its constituents, and that means spending money. Once a constitutional requirement to balance the budget gets imposed on Congress, they will have to choose between raising taxes and cutting services every year, while voters want neither to happen. If we hear nothing but class-warfare demagoguery now on budget issues, just wait until Congress can no longer kick cans down the road. Every budget will end up with new surtaxes on the “wealthy,” which will drive investors overseas, which will eat into revenues, and which will prompt more surtaxes on the wealthy.
If Paul wants a trade for his debt-ceiling vote, he should get something of real value for it — a change that will make an actual difference. We need entitlement reform to get to the root of the real driver of the deficit, and more discipline from Congress on discretionary spending so that they stop aggravating the problem. We can achieve those goals much more quickly than a balanced budget amendment to the Constitution, which doesn’t address the main problem, and might add a few more obstacles to fiscal reform instead.
Byron York warned yesterday that we’re going to find ourselves playing chicken again on the debt ceiling:
But here’s the problem for Republicans. They control the House of Representatives. The debt ceiling has to be raised — Boehner has always conceded that — and the party in power has to do it. Even as Boehner demands spending concessions as the price of raising the ceiling, the White House knows that in the end he will have to pass a bill. “Our bargaining power derives from our controlling the House but is also limited by it,” says a House GOP source.
In the Senate, on the other hand, minority Republicans will be free to oppose any debt ceiling bill that isn’t to their liking, because in the end it will be the Democrats’ responsibility to pass it. Protest-minded Republicans are heartened by Obama’s recent admission that his own vote against raising the debt ceiling in 2006 was “a political vote as opposed to doing what was important for the country.” …
The bottom line is, the debt ceiling issue won’t be settled before an extended game of chicken, one in which Republicans will undoubtedly win some concessions but will, in the end, have to give in.
If we want to address the real issue, then the concessions should be entitlement reform, not a Constitutional amendment that may or may not get ratified by states still looking for federal handouts. Passing a debt-ceiling hike on the promise of a balanced budget amendment is, well …
Update: One source on the Hill tells me that the BBA would have a requirement of 2/3rds majority for tax increases, which would stop most from happening — but that doesn’t explain what will happen when mandatory spending creates deficits. Congress would have to rewrite entitlements on the spot, or raise taxes, to meet a constitutional requirement for balance. We’re still in the same spot, and entitlement reform addresses the actual issue.
Update: One more note on this. The specifics of the BBA proposal floating on the Hill caps federal spending at 18%. I doubt seriously that this will get a 2/3rds margin in either chamber of Congress, although it’s absolutely the right idea. But even with that, perhaps especially with that, we would still have to do entitlement reform first.