Opponents of a constitutional mandate for a balanced budget (Senate Joint Resolution 58) argue that it is not a comprehensive solution to our fiscal problems. It does not cover every contingency. Efforts will be made to evade it. Some will succeed. Some of the subterfuges will involve more than trivial social costs. Debate, confusion, litigation are sure to be involved. The amendment will not enforce itself. All these charges have been made. All are correct. Yet the amendment, far from perfect as it is, still represents a distinct improvement over current arrangements.
Small, special interest groups always enjoy an organizational advantage over large, unorganizable groups of citizens and taxpayers. It is economically rational for special interests to lobby for appropriations that benefit a narrow segment of society. If the costs of the program are sufficiently diffused, it is not rational for its victims to resist.
What this means is that there is a structural asymmetry in budgeting, one that is practically impossible to alter short of constitutional change. The weak, exploited group, the taxpayers, are more effective at holding down the level of taxes than the level of spending. Even though the portion of personal income going to federal taxes has risen steadily, the politically irresistible claims on spending have risen even faster. The result has been chronic deficit spending at ever higher levels.
Today, most people are glad that the Founders decided, as an afterthought, to protect freedom of speech, freedom of the press, freedom of religion and our other freedoms from the tender mercies of the legislative process. Although the guarantees that the Bill of Rights provide are far from perfect, few would argue that we do not enjoy more personal liberty today than we would have done had these amendments never been enacted.
One provision that did not make it into the Bill of Rights, but was suggested for inclusion by Thomas Jefferson, among others, was a balanced budget amendment. The question is whether we would today be in more sound fiscal and economic shape had such an amendment been adopted at the time it was first contemplated. I believe that the answer is yes. Not because any amendment could completely thwart the temptations to political excess, but because evidence suggests that even small changes in procedure can produce, over time, large changes in outcome.
Almost any balanced budget requirement, and S.J. Res. 58 in particular, would raise the costs of deficit spending.
First of all, the mere fact that the Constitution mandated fiscal balance would itself involve a change of circumstances. Other things being equal, the congressman who voted for spending in excess of revenues would be under a greater political obligation to justify departing from the constitutional norm than he is for incurring deficits today.
It is reasonable to believe, however, the proposed Balanced Budget-Tax Limitation Amendment is more subtle and comprehensive than a simple budget balancing requirement. It establishes new budgetary procedures that unambiguously raise the costs of deficit spending. S.J. Res. 58 does not ban deficits outright. But it does require an extraordinary consensus, in the form of a super majority vote, to allow Congress to adopt deficits. Statement expenditures may not exceed receipts. The allowable growth of receipts is tied to the growth of the economy in the previous fiscal year. If Congress wishes to raise taxes in order to balance the budget, it must do so with an explicit vote by a constitutional majority in both houses. It is more costly in political terms to obtain an open majority vote for a tax increase than it is to program automatic increases in revenues such as the "taxflation" we have been experiencing in recent years.
It is completely predictable that the amendment would encourage political subterfuge. It is an unamendable fact of life that politicians will prefer to disguise the costs of what they do insofar as possible. But that does not mean that they will succeed in offsetting all the social savings that constitutional restraint would otherwise produce. In this respect, the experience of state budget balancing requirements has been instructive. It is true that some states have allowed gaping loopholes, which permitted a proliferation of off- budget authorities, each of which was empowered to borrow against the public credit. This can produce situations in which every ditch and light pole is financed by a separate authority. A bad system, I agree.
I do not wish to see such procedures proliferate at the federal level. This is exactly why the amendment defines federal receipts and expenditures in a comprehensive way. If S. J. Res. 58 is adopted, federal off-budget expenditures would be eliminated because all spending (other than payments to reduce the national debt) would fall within the meaning of the amendment. The report that accompanies the proposed amendment, and which established congressional intent, makes this clear.
Efforts by Congress to work around the balanced budget requirement cannot be totally forestalled. A reasonable effort in that direction has been made. But it will still be possible for members of Congress to substitute one form of political imposition for another. Congress may attempt to impose regulatory burdens that have the effect of substituting for budgeting expenditures. Whatever the total social costs such impositions may prove to be, they will almost certainly be lower than the cost for current deficits.
It is reasonable to believe, as I do, that the passage of S. J. Res. 58 would effectively alter outcomes. Over time, we can expect fewer and smaller deficits with lower taxes and less spending than we would have had in the alternative. In an untidy world, that may be the best that we can hope.