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Controlling the US debt | Renée Loth

Danger in the balanced budget amendment

By Renée Loth
August 13, 2011

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THE INK was barely dry on the distasteful “solution’’ to the debt-limit crisis when Republicans started touting their next scheme to throttle the economy: a balanced budget amendment to the US Constitution. Tea party activists and Republican regulars alike are calling for “August Action’’ during the congressional recess. “It’s time to take over the town halls again,’’ Glenn Beck exhorts his listeners, directing them to a list of talking points that starts with getting a ban on deficits written into the Constitution.

It’ll never happen, you say, because the authors of the Constitution were careful to make amending it exceedingly difficult, and therefore rare.

I wouldn’t be so sure. Three times since the 2010 elections, Republicans in Washington have used brinkmanship to advance their agenda of tax breaks for the wealthy and fewer government services for the rest of us. The two-year extension of the Bush tax cuts in December, the threat of a government shutdown in April, and the debt ceiling crisis all started out looking like remote “nuclear options’’ that would never get traction.

The debt-ceiling deal President Obama signed last week already requires both houses of Congress to vote on a resolution supporting a balanced budget amendment sometime between Sept. 30 and the end of the year. It may be non-binding, but it still elevates a fringe idea to mainstream debate. And a resolution is more likely to pass with big majorities, easing the way for the real thing next year.

Plus, the amendment is superficially popular with voters. Most states have balanced budget requirements, voters say, and responsible families don’t spend more than they take in. Why can’t the federal government do the same?

Here’s why. The amendment would limit federal spending to the amount of revenue taken in that same year, and cap overall spending at 18 percent of GDP. (Compare that to the 22 percent averaged under Ronald Reagan.) When the economy slows down and unemployment rises, the federal government must be able to spend on safety net programs and job creation. This amendment forces just the opposite response: more cuts to match lower tax revenues.

The amendment would require a three-fifths supermajority of Congress for any deficit spending (except in wartime), and two-thirds for any tax increase. That means just 34 senators could stop even a modest effort at raising revenue, fewer than the 41 members needed to launch a filibuster now. Such a high bar would likely perpetuate the $1.1 trillion in special tax breaks enjoyed by corporations and the rich. Standard & Poor’s cited concern that the Bush-era tax cuts wouldn’t expire when it downgraded the nation’s credit last week.

Deficit spending is what American families do every time they take out a mortgage or student loan.

As for the states, they can achieve balanced budgets precisely because they count on the federal government for about a third of their revenue. And they can borrow for capital spending on schools and roads, which the amendment would prohibit for Washington.

The Democratic response to this radical idea has been little short of craven. Democratic leaders have not echoed the seven Nobel Prize-winning economists who say the amendment would harm economic growth and “mandate perverse actions in a recession.’’ They have not agreed with Norm Ornstein of the conservative American Enterprise Institute, who called it “about the most irresponsible action imaginable.’’ They have not pointed out that no other major country puts its economy in such a straitjacket.

Instead, Democrats in Congress have offered their own kinder, gentler version of the amendment, one that doesn’t link spending to a specific percentage of GDP. But it still would require super-majorities to approve deficit spending, and it still cedes the very idea of a constitutional lid on spending. It’s like letting the other team start the game on your 30-yard line.

Meanwhile, referee-in-chief Obama seems content to wait until the two-minute warning to say anything, and by then the game is lost.

The American people are angry and scared. Such conditions have led to extreme measures before. The president needs to start explaining now why this amendment would be a disaster, and not when a vote looms and positions have already hardened.

Renée Loth’s column appears regularly in the Globe.