Former GOP Budget Official Says Balanced Budget Amendment Is A Terrible Idea

Speaker John Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.)Pete Marovich/Zuma

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


This week, Congress is expected yet again to take up a balanced budget amendment (BBA) proposal. The measure would require Congress to submit a balanced budget every year, no matter how the economy is faring. (Robert Greenstein and Richard Kogan of the Center on Budget and Policy Priorities (CBPP) have the details.)

An earlier BBA reported by the House Judiciary Committee in June would have limited federal spending to 18 percent of economic output (which is never clearly defined) without a three-fifths vote in both the House and Senate, and would require a two-thirds vote to raise taxes.

Bruce Bartlett, a former budget advisor for Ronald Reagan and George H.W. Bush, reminds us that there’s a reason why a balanced budget amendment has never been able to garner enough Congressional support to become law: it’s a terrible idea. As Bartlett explains, 18 percent of GDP (if that’s what economic output refers to) is a completely arbitrary number, one that couldn’t be reached this year even by cutting every federal program other than Social Security, Medicare, national defense, and paying interest on the debt.

The balanced budget concept dates back to the country’s early years, when the Founding Fathers’ concerns over rising deficits and the potential for catastrophic hyperinflation led them to assume that the notion of not spending more than you take in was, essentially, self-evident. As a result, the budget was more or less balanced until the 30s, when the Great Depression made balanced budgets impossible and Keynesian economic theory brought deficit spending into vogue.

Ever since, conservatives have railed against big spending liberal policies as a “vast expansion of government. . . financed by seemingly costless deficits.” Bartlett is sympathetic to that view, arguing that “[i]f people knew their taxes would go up or they would lose government benefits whenever spending increased, we would have a lot less spending.” But then:

Unfortunately, conservatives intentionally destroyed the remnants of the implicit balanced budget constraint in the 1970s so they could cut taxes without having to cut spending at the same time. Finding enough spending cuts to pay for big tax cuts would have doomed their efforts, so they concocted a theory, “starve the beast,” to maintain a fig leaf of fiscal responsibility.

Under this theory, deficits are intentionally created by tax cuts, which puts political pressure on Congress to cut spending. Thus, cutting taxes without cutting spending became the epitome of conservative fiscal policy. Unfortunately, it didn’t work.

We gave starve-the-beast theory a test during the Reagan administration, but as I have shown previously, when push came to shove, Reagan was always willing to raise taxes rather than allow deficits to get out of control.

We gave starve-the-beast theory another test during the George H.W. Bush and Clinton administrations. They both raised taxes and, according to the theory, this should have caused spending to rise, because tax increases feed the beast. But they didn’t. Spending as a share of the gross domestic product fell to 18.2 percent in 2000 from 22.3 percent in 1991, according to the Congressional Budget Office.

We gave starve-the-beast theory another test during the George W. Bush administration. Taxes were slashed, but spending rose – again, the exact opposite of what the theory said should have happened. The economist Bill Niskanen asserted that the result was not surprising because the Republican position on taxes effectively reduced the tax cost of spending.

Nevertheless, conservatives like Grover Norquist insist that starve-the-beast theory works, which is why they relentlessly push for still more tax cuts despite the obvious failure of previous tax cuts either to stimulate economic growth or restrain spending, and oppose even the most trivial tax increases no matter how big the deficit.

Bartlett’s conclusion: if the GOP cared about balancing the budget, it would back commensurate policies, like higher taxes and stricter controls on tax cuts—the same measures that brought spending in line in the 1990s.

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate