The danger of a “clean” balanced budget

Seven months ago, I warned that a balanced-budget amendment could turn into a trap that would give Congress carte blanche to hike taxes when spending outstripped revenues.  At the time, friends on Capitol Hill and in the BBA advocacy movement insisted that this would never happen, as a BBA would include hard caps on spending and perhaps even a supermajority requirement to raise taxes.  Unfortunately, that’s not what this Congress will be passing:

The House will vote next week on a balanced budget amendment that could win some Democratic votes.

Republicans have been battling over whether to move one of two different balanced budget bills.

One version would require a two-thirds vote by Congress to raise taxes and is favored by conservatives. The other, a so-called “clean” bill, would only require a majority vote to raise taxes.

What makes Option B “clean”?  No spending caps, no supermajority requirement, and essentially no controls over Congressional tax-and-spend impulses.  Rep. Bob Goodlatte insists that this won’t result in massive tax increases, and says that the need to pass a BBA — any BBA — outweighs those concerns.  Americans for Tax Reform and other conservative groups strongly disagree:

A coalition of conservative interest groups, spearheaded by Americans for Tax Reform (ATR) sent a letter to GOP leaders on Wednesday, imploring them not to vote on the clean version of the balanced budget amendment.

“Unless tax hikes are taken off the table, reckless lawmakers will increase taxes to pay for these new bloated spending levels, rather than bring spending in line with revenues. A “clean” BBA provides the excuse big spenders seek to raise taxes and grow government,” the letter, signed by 32 conservative groups, asserted.

This aims at the wrong problem, too.  The supermajority requirement really isn’t the biggest issue.  Tax increases are already unpopular enough that even Democrats couldn’t push them through Congress when they controlled both chambers and the White House.  They knew that passing direct tax increases, as opposed to the hidden taxes in ObamaCare, would be political death.

The real problem in a “clean” BBA is the absence of a spending cap.  The versions championed by Jim DeMint and other Republicans had caps tied to GDP, ranging from 18% to 20%, depending on the version.  Without that, Congress can continue to expand spending, and then blame the BBA for the massive tax increases that follow — which is exactly how politicians in both parties will attempt to escape the political consequences of tax hikes. Democrats did this with their Pay-Go rule (which they ignored when inconvenient to their purposes); this is Pay-Go on steroids.

Plus, there is a very large Constitutional danger inherent in the clean BBA.  What happens if Congress fails to produce a balanced budget?  Lawsuits could be brought in federal court to challenge the constitutionality of an annual budget in any fiscal year.  Not only would that add even more delay and uncertainty to a budget process that has already gone off the rails in the last couple of years, it puts federal judges in position to amend budgets and require tax increases.

We have done an excellent job of selling the concept of a balanced-budget amendment.  We have to make sure, though, that we don’t make our problems exponentially worse by having that effort pay off in a Constitutional amendment that puts the judiciary in the budgeting process, and allows members of Congress to escape responsibility for their tax increases.

Update: Milton Friedman saw the same danger almost 30 years ago.  In an article for The Atlantic in 1983, the legendary economist warned that the real problem is spending rather than imbalance:

The key problem is not deficits but the size of government spending. … Which is why I have never supported an amendment directed solely at a balanced budget. I have written repeatedly that while I would prefer that the budget be balanced, I would rather have government spend $500 billion and run a deficit of $100 billion than have it spend $800 billion with a balanced budget. It matters greatly how the budget is balanced, whether by cutting spending or by raising taxes.

Blowback