Why a federal Balanced Budget Amendment will never happen, and why that’s a good thing

[This post has been changed slightly from the original. An earlier version questioned SoonerPoll’s reliability without providing evidence to back up that claim.]

As part of the agreement to raise the federal debt ceiling, Congress will vote on a Balanced Budget Amendment this fall. Every Republican Senator has endorsed it. So have many Oklahoma state legislators.

So what’s the problem with a Balanced Budget Amendment?

#1: The BBA endorsed by Senate Republicans is not really about balancing the budget.

In fact, this amendment would make it much harder if not impossible to balance the budget, because it would require any tax increases to have a two-thirds majority in both houses of Congress.

On top of that, it says total spending cannot exceed 18 percent of GDP. To understand how radical this is, we should realize that not a single year’s budget under the George W. Bush or Reagan administrations would be constitutional under this rule. Even Rep. Paul Ryan’s budget plan, which included cuts so unpopular that they were quickly abandoned by Republicans, would have spent too much under this amendment.

There are problems with using GDP as a metric in the first place. Calculating GDP is not an exact science, and it is constantly revised, sometimes retroactively. Nor is government spending as a percentage of GDP useful as a measure of anything. The size of government fluctuates over time to reflect age demographics (older populations require more government services), an evolving economy (as health care becomes a larger part of the overall economy, the public sector will grow), and democratic will (generations of Americans have voted in the social safety net that we have today).

That brings us to…

#2: The Balanced Budget Amendment is undemocratic.

The appropriate size of government has been contentiously debated for decades, and Americans remain split on this issue. By creating supermajority requirements for tax increases and putting arbitrary limits on budget size, the Amendment attempts to make an end run around this debate in favor of a minority’s desire to shrink the public sector.

In some cases, it is important to protect minority rights against an overweening majority. That is the motivation behind the First Amendment, which protects the freedom of speech and religion even for unpopular beliefs. These and other rights are the principles we have elevated above democratic influence.

However, we should be very cautious about creating new rights. Those who want smaller government should not have the right to enforce that desire outside the normal democratic process. The BBA is just an attempt to fix the game.

Besides, when inevitable disagreements arise over how to define “balanced” or which revenue projections to use, it is unclear how any requirements will be enforced. Do we really want the courts to take over government budgeting?

#3: State-level balanced budget requirements only work because of federal help.

A common argument made by supporters of a BBA is that most states, including Oklahoma, have a balanced budget requirement, so the federal government should be able to have one too. However, states are only able to balance their budgets during bad times because the federal government does not. This chart provides a clear example:

Oklahoma avoided disastrous cuts during the recession by using federal relief from the stimulus bill (shown in yellow) to supplement state appropriations. In 2010, that federal money accounted for more than 12 percent of all state appropriations. The picture is the same nationwide – without an influx of counter-cyclical federal spending, we would have seen devastating job losses in the public sector that almost certainly would have sent the economy into a severe depression.

Even during good years, federal money makes up a significant part of the state’s budget and the overall economy of Oklahoma. The federal government spent $38.5 billion in Oklahoma last year, which works out to $10,256 for each resident. The budget has never been balanced without federal help.

The Takeaway

The fact that the proposed balanced budget amendment was written with such obvious flaws should tell us something: it was only ever a political ploy. Certainly it’s important to pay attention to our debt over the long-term, but almost no budgets are balanced year-to-year in this way. Even individual households routinely take on debt for a mortgage or auto loan. A shoddily constructed BBA allows politicians to claim credit for supporting “balanced budgets” while knowing it will never pass.

At least we should hope so, because the prospect that they believe their own rhetoric about this terrible idea is even scarier.