Sometimes the government needs to spend more money than it receives in a given year to respond to a crisis, such as war, natural disaster or recession. In the case of recession, for instance, federal tax revenue automatically falls as the economy shrinks and businesses and individuals earn less. Under a balanced-budget requirement, this situation would require Congress to slash federal spending, raise taxes or both.
Which is exactly the opposite of what economists prescribe during a recession, when you want the government to plug the hole left by a contracting private sector.
Had a balanced-budget amendment been in effect in fiscal 2012, as the economy was still recovering from the Great Recession, for example, it would have nearly doubled the unemployment rate, the research firm Macroeconomic Advisers forecast at the time.
Nonetheless, good economy or bad, Republicans claim to want fiscal discipline. I say “claim” because to date this commitment remains purely, laughably theoretical.
Every time they’ve had the opportunity to go on a fiscal diet, they’ve pigged out instead.
In December, at a time when a reasonably strong economy actually could absorb some fiscal belt-tightening, Republicans passed massive, deficit-financed tax cuts. Then, come 2018, they enacted major spending increases.
Laws passed since June 2017 alone are expected to add $2.7 trillion to deficits over the next decade, the CBO says. These legislative changes, plus rising interest costs, mean our federal debt will nearly overtake the size of the entire economy by 2028.
That’ll put our debt-to-economy ratio at its highest level since 1946 — that is, after we’d just racked up a huge bill fighting World War II.
These projections, by the way, are all probably too optimistic. That’s because Congress’s official scorekeepers used two relatively favorable assumptions.
First, the CBO was required to assume that Congress will stick to the laws on the books, which are full of gimmicks to make the Republican agenda look cheaper than it is. For instance, the CBO assumed that the GOP’s individual-side tax cuts will expire in 2025, as existing law says, even though Congress will almost certainly extend them.
If you instead believe that current policy, rather than current law, continues, that adds $2.6 trillion more to deficits over the next decade.
Second, the CBO assumed that the economy will remain relatively strong for the entirety of the next decade. Which also seems unlikely, given that we’re already far into one of the longest expansions on record. If in fact we fall into serious recession, the fiscal picture will be worse, for the reasons I explained earlier.
All of which is to say that it’s astonishingly hypocritical for Republicans to champion a balanced-budget amendment. Not that anyone actually expects this effort to succeed; attempts at similar amendments at the federal level have always failed.
Even so, there’s another reason this fiscal pageantry is especially galling. Congress historically can’t even get its act together to pass a budget, any budget at all, let alone a deficit-free one.
In literally every year over the past two decades, lawmakers have failed to pass a full spending package before the next fiscal year begins.
Instead, they’ve kept the government running for weeks or months with stopgap spending bills and duct tape, with the occasional shutdown. And lately they’ve become even more reliant on stopgaps.
This year looks no different: The statutory deadline for passing the rough outlines of a budget for fiscal 2019 — called a budget resolution — is Sunday. There’s still no budget in sight. Plus President Trump has indicated he’s planning a showdown on the budget for the next fiscal year come September.
If Republicans are truly jonesing for a constitutional amendment, and want to demonstrate that they’re even the tiniest bit fiscally responsible, maybe they should set their sights a little lower. Rather than pitching a balanced-budget amendment, how about just a budget amendment? That is, a requirement that Congress have a budget in place come Oct 1.