Balanced Budget Amendment a Distraction


The craftsmanship of our forefathers at Philadelphia seems to come under attack every time modern politicians screw up. Rather than accepting responsibility for electing incompetent leaders, it is easier to blame the Constitution. If we could only come up with a formula by which public policy could be predetermined by constitutional amendments, we would be free to elect whatever scoundrels and incompetents we chose.

That sentiment erupts periodically in efforts to amend the Constitution to mandate a balanced budget. But such proposals present a number of problems. One is that fiscal policy is not the only priority of effective governance.

[See a collection of political cartoons on the budget and deficit.]

If Abraham Lincoln had allowed budget policy to be the dominant concern in his administration, the United States would today be two or more countries. If Franklin Roosevelt had weighed the need to keep the Treasury in the black with concerns about Hitler, we would belong to a very different world order. If Dwight Eisenhower had decided that the increased risk of running budget deficits should outweigh the economic benefits of the interstate highway program, we would not have the transportation backbone that allowed our economy to grow fivefold in half a century.

Further, attempting to balance the budget can at times be terrible fiscal policy. A painful example is Franklin Roosevelt's ill-fated attempt to balance the 1938 budget. When it was adopted in 1937, the economy was weak, factories were operating at 83 percent of capacity, and unemployment was 14 percent. The austerity that brought the 1938 budget close to balance had cataclysmic economic impact. By late 1938, the economy had shrunk 3 percent and unemployment soared to 19 percent. Ill-timed budget balancing caused a second depression.

America needs common sense, not simple-minded formulas, to restore sound fiscal policy. In the first three decades following World War II, we demonstrated how effective common sense can be. In 1946, our public debt was 109 percent of gross domestic product—75 percent higher than the current level. We ran deficits in 20 of the next 28 years, but still whittled the debt down to 24 percent of GDP by 1974 by keeping deficits relatively small in all but the worst economic years, and moving into surplus in good years.

[Read: GOP Frosh Slam "Hypocrisy" from Democrats on Balanced Budget Bill.]

We now face what seems an intractable struggle over fiscal policy. Most of the budget goes to the care of our elderly, and that portion of our population is growing rapidly. As a result, federal spending will equal 23 percent of GDP for most of this decade, rather than the 20 percent average we have experienced in recent decades—even if severe restraints are placed on all nonretirement programs.

That leaves us with three choices: (a) We can cut back benefits to seniors, (b) we can raise taxes to cover the cost of current benefits, (c) we can do a combination of the two.

Rep. Paul Ryan's budget has given us a clear picture of what option (a) is all about. Option (b) would require all Americans to pay more in taxes—not just the wealthy. A lot of people won't like that, but most of them may like losing Medicare benefits and the long-term care protection of Medicaid a lot less.

So it is likely that we will end up with some version of option (c). A constitutional amendment requiring balanced budgets won't help us get there. It will simply serve as a distraction that will be used by elected officials who wish to avoid accountability on the real choices we face as a nation. We can't afford that distraction, given the seriousness of the choices.

Scott Lilly

About Scott Lilly Senior Fellow at the Center for American Progress

deficit and national debt
federal budget

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