The constitutional amendment to force a balanced budget reflects several different kinds of serious errors of judgment. As we have argued previously, the insistence on a continuous balance, under all circumstances, in boom and in recession, is extremely dangerous as economic policy. A subsidiary objection, but not a trivial one, is the attempt to write an economic statistic, the national income, into the Constitution.
The national income accounts are very good statistics, but they don't belong in basic law. Congress has occasionally written statistics into statutes in recent years, and the results would not encourage sensible people to expand the practice. In one notable case, Congress pegged Social Security to the consumer price index, innocently intending to protect retired people from inflation. But the index then began rising much faster than inflation because of a peculiarity in the formula. The effect was to increase Social Security benefits a good deal faster then inflation, at the expense of people who were still working--a thing that Congress never intended. Economic indicators are complex and, in unexpected conditions, will often react in unexpected ways.
The question arises because the proposed amendment tries to prevent bracket creep--the process through which inflation raises revenues by kicking taxpayers into higher brackets. Federal revenues could not constitutionally rise faster than the previous year's national income, under this amendment, unless Congress explicitly enacted legislation permitting it. Since revenues automatically rise faster than incomes in a business boom, Congress would have to pass tax legislation in every boom year.
The Commerce Department periodically revises its national income accounts. Under the amendment, the revisions would threaten to put the government retroactively in violation of the Constitution, by lowering the figures for past years' income.
This amendment is an extreme example of the impulse to take all discretion out of economic policy, at whatever cost to rational government. Its purpose is to put the economy under an automatic pilot, guaranteed to be impervious to changing circumstance and necessity. It is an impulse hostile to the principle of democratic representation, as Congress embodies it. It attempts to substitute a computer and a number. But the economic statistics are designed only to serve people who make decisions, not replace them.