A specter is haunting the political establishment--the specter of the balanced budget/tax limitation amendment. Some of this group purport to be offended by the prospect of cluttering the Constitution with an amendment that may be evaded or ignored. This argument reflects a cynicism about the Constitution and our political processes that indicates that we may have much larger problems than fiscal irresponsibility.
Others claim that it is wrong to include fiscal and economic restraints in the Constitution. This argument overlooks the present restraints on spending and tax powers (in Article I, Sections 8 and 9), on state restrictions on interstate commerce (Article I, Section 10), and on the taking of private property (in Amendments 5 and 14). Some people have made both arguments, maybe without recognizing that both cannot be correct; an amendment that is not enforced is not an effective restraint. The proper focus of public debate is whether the proposed amendment represents an appropriate restraint on federal spending and taxation.
The central argument for the proposed amendment is that the decision to plan a deficit or allow an increase in the federal spending and tax share of national income should not be made by our normal political processes. The primary reason to be concerned about a federal deficit is that it shifts the burden of financing current spending to a future generation of taxpayers. The current group of federal officials should not be expected to be sufficiently concerned about future taxpayers, because of the combination of two-to-six-year election cycles and the probability that current voters do not fully reflect the concerns of future taxpayers. The proposed amendment would reduce this bias by requiring that a planned deficit be approved by 60 percent of the total membership of each House. An actual deficit (or surplus) would be allowed if actual revenues were lower (or higher) than expected revenues. This provision would restore a feature of our effective fiscal constitution, except during wartime, during the first 150 years of our history as a nation.
Similarly, the primary reason to be concerned about the federal spending and tax share of national income is that our normal political processes are probably biased toward too much spending, especially for programs that benefit only the majority or collections of special interests. From 1965 to 1980, for example, total federal spending increased from 18 percent to 23 percent of GNP, even though the defense share declined from 7 percent to 5 percent. Most of the increased spending was for transfer payments and special interest programs, many of which do not require an annual appropriations vote. Once these programs were in place, much of the rapid increase in spending "just happened" without any recurrent test of political approval. The proposed amendment would reduce this bias by requiring that any increase in spending and taxation relative to the percentage increase in national income during a prior base period be approved by a majority of the total membership of each House plus the president. The proposed amendment would permit a continued increase in the spending and tax share of national income, but only by a formal vote supported by a broad majority of our political representatives.
One final note: many of my economist colleagues oppose this amendment on the grounds that it would reduce the flexibility to use the federal budget to manipulate the economy. That observation, and the economic record of the last two decades, may be the best argument for the proposed amendment.