Despite Packed Agenda, Congress Returns To Radical Balanced Budget Amendment

November 14, 2011 1:01 a.m.

Congress is busy. It has to extend federal funding for all federal agencies before November 18, or else the government will shut down, and the deficit Super Committee has to recommend a big package of budget cuts to the House and Senate by November 23, or set in motion dramatic automatic spending cuts to defense programs and Medicare providers. But it’s still suffering a hangover from the debt limit fight. And so this week House GOP leaders will fulfill one of the terms of the debt limit law, and appease some conservatives, by holding a vote on a Constitutional Balanced Budget Amendment.

There’s a bit of a strife among Republicans — and even among some Democrats — over the details of such an amendment. But almost any version would constitute a radical policy shift for the country, and threaten key safety net programs as the country ages and the cost of health care soars. It would lead to dramatic swings in U.S. fiscal policy, and at a time of high unemployment, would cost the economy dearly.

Don’t believe me, here’s what analysts at Macroeconomic Advisers said about it.“If actually enforced in fiscal year (FY) 2012, a BBA would quickly destroy millions of jobs while creating enormous economic and social upheaval,” reads an October commentary. “However, we believe no responsible policymaker would push the implementation of a BBA when the projected federal deficit is $1 trillion and the Fed is unable to offset much fiscal drag.”

The principle underlying all BBAs is that Congress shouldn’t be able to spend more than it collects in tax dollars. This makes for excellent politics. And conservatives love the it both because of those politics, but also because they see it as a way to force the government to shrink, whether the country wants it to or not. But even if you ignore the ideological undercurrents here, the policy risks are severe. If it were ratified tomorrow, the government would have to raise taxes and cut spending by a total of about $1 trillion right away. And even if it were ratified during boom times, with the government running surpluses, it would make crucial economic stabilizers like unemployment insurance unconstitutional, exacerbating even small recessions.

But the terms of the debt limit law hold that both the House and Senate must vote on a version of it. That’s a heavy lift — especially because in recent weeks, supporters of different version of the BBA have been fighting amongst themselves over which to bring to the floor.

There are three main species:

  1. The right’s fantasy BBA contains provisions that would force government spending down to near-historic lows, and make it functionally impossible for Congress to ever raise taxes. This would serve in essence as a way to make social insurance and other key government functions unconstitutional — even if the economy grew and tax revenues climbed on their own, the government couldn’t use the money.
  2. The old-fashioned BBA would make it unconstitutional for outlays, not including interest payments on the debt, to exceed revenues in any given fiscal year — unless three-fifths of the members of both the House and Senate agreed. Conservatives aren’t fond of this version because it doesn’t explicitly limit taxing and spending. But it appeals to Republicans politically because a similar version passed the House — and nearly passed the Senate — in 1995 with the help of plenty of Democrats, some of whom are still in Congress. That’s why House GOP leaders will bring it to the floor this week. Those will put some Dems in a tough spot, but Minority Whip Steny Hoyer (D-MD) told reporters recently “At this point in time I would not support it.”
  3. BBA-lite would get substantial Democratic support, but alienate a lot of Republicans. It contains exemptions for Social Security and national emergencies, as well as provisions targeting wealthy Americans that the GOP hates. A version along these lines will likely come to a vote in the Democratic-controlled Senate after Thanksgiving.

Deep down, Republicans know the the policy danger BBA’s pose — it was never a priority for them when they ran Washington under George W. Bush, and only became their marquee issue when Obama and the Dems came to power. But now they see it as a political win-win: if by some miracle it passes Congress and gets ratified by the states, both parties will share the consequences. If it fails, Republicans can blame Democratic opposition.

That sort of logic underlay the debt limit fight and most key legislating on Capitol Hill in the first half of this year. But those politics proved disastrous with voters, and now that the country’s more clearly focused on unemployment and economic inequality there’s likely much less upside for the GOP.

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