This is a graph of U.S. gross federal governme...

US Fed­eral debt, 1940–2010 as % of GDP

As part of the deal that raised the debt ceil­ing and cre­ated the deficit super­com­mit­tee, Con­gress must vote on a Bal­anced Bud­get Amend­ment. The House is sched­uled to do so on Fri­day. The Sen­ate will take up the bill within the next two weeks.

The text of the bill before the House, S.J.Res.10, can be found here. The Amend­ment it pro­poses (the text of which is included in the bill), is a stun­ningly bad idea. The con­cepts it embod­ies are based on eco­nomic the­o­ries already proven false. It has no viable enforce­ment mech­a­nism. It imposes impos­si­ble require­ments. It con­tains lim­its on the bud­get that can­not be real­is­ti­cally deter­mined. It makes pos­si­ble (and even likely) some cat­a­strophic sit­u­a­tions. It is a dan­ger­ous piece of destruc­tive propaganda.

To show you what I mean, let’s exam­ine some of its more obvi­ous fail­ings by going through its pro­vi­sions, one at a time.

Sec­tion 1 of the pro­posed Amend­ment lim­its fed­eral out­lays (not pro­posed spend­ing in a bud­get, but the actual out­lays) to the “total receipts” for that fis­cal year. This isn’t quite the same as a “bal­anced bud­get,” but maybe that’s nit­pickey; regard­less of the bud­get, if some­thing unex­pected comes up, or if there are cost over­runs in any given pro­gram, spend­ing stops when the money runs out. I sup­pose peo­ple get laid off, or go with­out Social Secu­rity checks, or something.

This sec­tion does allow Con­gress to exceed this limit with a two-​​thirds roll call vote of the full mem­ber­ship of both Houses, but we’ve seen how often that happens.

Sec­tion 2 lim­its the size of a year’s total out­lays (note: not the bud­get, but the actual spend­ing) to 18 per­cent of the pre­vi­ous year’s GDP. It does not, how­ever, define GDP. This is a real prob­lem. GDP is actu­ally a constantly-​​evolving con­cept, and every year, the fac­tors used and the way they are cal­cu­lated changes. There is no reli­able way to deter­mine what “GDP” actu­ally means, with the accu­racy that this Sec­tion demands. This pro­vi­sion alone is likely to cre­ate a con­stant stream of fed­eral lawsuits.

Note also that this Sec­tion is intended, not to enforce a “bal­anced bud­get”, but to write into the Con­sti­tu­tion a favorite Repub­li­can pol­icy — a limit on the size of gov­ern­ment. It is a pol­icy pro­vi­sion, noth­ing more, intended to enshrine in stone a spe­cific con­ser­v­a­tive talk­ing point. (Like Sec­tion 1, this Sec­tion can also be over­rid­den in a par­tic­u­lar year by a two-​​thirds roll call vote from the House and Senate.)

Sec­tion 3 requires the Pres­i­dent to annu­ally sub­mit to Con­gress a pro­posed bud­get that meets the cri­te­ria of Sec­tions 1 and 2. Note that in its entirety, this pro­posed Amend­ment effec­tively repeals Arti­cle 1 Sec­tion 8 of the U.S. Con­sti­tu­tion, which spec­i­fies that spend­ing and tax­a­tion is con­trolled by Congress.

I’ll skip Sec­tion 4 for a moment. We’ll come back to it.

Sec­tion 5 dis­al­lows any increase in the Fed­eral debt limit, with­out a three-​​fifths roll call vote from both Houses of Con­gress.  (Note that this repeat­ing insis­tence on “roll call votes” is intended to cre­ate talk­ing points for the oppo­si­tion in reëlec­tion cam­paigns.) On Log­a­rchism, we have pre­vi­ously dis­cussed the dis­as­ter that would ensue from a Fed­eral default. This year, we have seen Amer­ica come close to default, and have seen how dif­fi­cult it can be to over­come ide­o­log­i­cal blind­ness on this issue; con­sid­er­a­tion of this very Amend­ment, as absurd as it is, was man­dated by the deal struck to raise the debt limit. This Sec­tion alone could cause eco­nomic dis­as­ter the likes of which Amer­ica has never seen.

Note that low­er­ing the debt limit still only requires a sim­ple major­ity vote. Con­gress could sim­ply declare all its debts null and void, lower the debt limit to zero, and be dis­al­lowed from ever bor­row­ing more money.

Sec­tion 6 allows Con­gress to set aside Sec­tions 1, 2, 3, and 5 (in other words, any­thing described above this) on a sim­ple major­ity roll call vote of both Houses, in any year in which a “dec­la­ra­tion of war against a nation-​​state is in effect.” Sec­tion 7 allows a sim­i­lar loop­hole in years when there is “a mil­i­tary con­flict that causes an immi­nent and seri­ous mil­i­tary threat to national secu­rity” (in other words, some­thing like Amer­ica being attacked, but no war has been declared), pro­vided three-​​fifths of both Houses, on a roll call vote, agree this sit­u­a­tion exists. Both Sec­tions require Con­gress to specif­i­cally state the spe­cific amount of extra spend­ing. There can be no imme­di­ate emer­gency response to an emer­gency situation.

Notice that Sec­tions 6 and 7 make no allowance for nat­ural dis­as­ter. In respond­ing to any­thing like that, Amer­ica is lim­ited to what has already been bud­geted, or what can be stolen from else­where. Amer­ica is left with no source of emer­gency funds for a Kat­rina or a major west-​​coast earth­quake. (Let them die.)

Let’s now go back to Sec­tion 4. It states that any attempt to increase tax rates, or to increase the amount of tax rev­enue by any means, will require a two-​​thirds roll call vote of both Houses. Reduc­ing rates or rev­enue, how­ever, still requires only a sim­ple major­ity. This nearly insures that the Fed­eral gov­ern­ment will be forced, over the years, to shrink with­out limit. Within a few decades, social pro­grams will evap­o­rate. The abil­ity of the United States to respond to nat­ural emer­gen­cies will van­ish. Domes­tic spend­ing of any sort will be choked out of exis­tence. Enti­tle­ment pro­grams, sup­port pro­grams, edu­ca­tion, food inspec­tions — gone. We’ll be back to pre-​​1930s Amer­ica with old peo­ple starv­ing, yet with med­ical costs still unchecked, and increas­ing num­bers of Amer­i­cans will die of pre­ventable and treat­able diseases.

Sec­tion 4 does allow rev­enue increases “result­ing from the low­er­ing of the statu­tory rate of any tax” — in other words, it writes into the Con­sti­tu­tion the dis­proved idea that reduc­ing tax rates will per­cep­ti­bly increase tax rev­enue. Even if this idea is true, Sec­tions 1 and 2 already limit gov­ern­ment spend­ing to 18 per­cent of GDP, so Amer­ica would be unable to take advan­tage of such wind­falls; Con­gress would be required, by this pro­vi­sion, to reduce tax rev­enues in later years, to pre­vent spend­ing from exceed­ing the lim­its of Sec­tion 2.

Tem­porar­ily skip­ping Sec­tion 8, Sec­tion 9 says that pay­ing off prin­ci­pal on the fed­eral debt is exempt from the spend­ing limit in Sec­tion 2 (in other words, we can pay off some of the fed­eral debt if we hap­pen to find money lay­ing around, though we can’t raise taxes to do it); and money that is bor­rowed isn’t counted as “rev­enue” for the pur­poses of Sec­tions 1 and 4 (so we can bor­row money, so long as that doesn’t result in spend­ing of over 18% of GDP, and doesn’t require rais­ing the debt ceiling).

There is some hope for escape from this non­sense, even if, through a col­lec­tive national insan­ity, the Amend­ment gar­ners a two-​​thirds vote in both Houses and is rat­i­fied by three quar­ters of the States, as is nec­es­sary for it to be enacted. First, Sec­tion 11 allows five years before the Bal­anced Bud­get Amendment’s pro­vi­sions go into effect, giv­ing us time to repeal it, after see­ing what shred­ding it does to the nation to even begin prepar­ing for it to take effect. Bet­ter still, there is a total escape clause.

Sec­tion 8 says, “No court of the United States or of any State shall order any increase in rev­enue to enforce this arti­cle.” Sec­tion 10 states, “The Con­gress shall have power to enforce and imple­ment this arti­cle by appro­pri­ate leg­is­la­tion, which may rely on esti­mates of out­lays, receipts, and gross domes­tic prod­uct.” In other words, Con­gress is fully in charge of enforce­ment, and no court may do any­thing to enforce this Amend­ment if doing so costs any money that hasn’t already been bud­geted for enforcement.

Fur­ther­more, since Con­gress may rely on “esti­mates” of “out­lays, receipts, and gross domes­tic prod­uct,” it can set those “esti­mates” to any arbi­trary num­ber it wants, whether absurdly high or ridicu­lously low, and no court can say any­thing about that.

It would seem that if Con­gress decides to ignore the Bal­anced Bud­get Amend­ment, and allo­cates no money to pre­vent it from ignor­ing the Amend­ment, then Con­gress may freely pre­tend the Amend­ment doesn’t exist. All it has to do, for exam­ple, is to “esti­mate” that last year’s GDP was twice what it really was, and under Sec­tions 1 and 2, it may set taxes and spend­ing to 36 per­cent (twice 18) of last year’s actual GDP. Since this Amend­ment doesn’t spec­ify how Con­gress is to come up with these “esti­mates,” it may be sim­ply a mat­ter of the Speaker of the House (for exam­ple) declar­ing it so.

The Amend­ment is an absurd and dan­ger­ous bit of unen­force­able pro­pa­ganda, and would do untold dam­age to our nation if it actu­ally was fol­lowed. It is non­sense of the worst kind.

For a reveal­ing dis­cus­sion of the philo­soph­i­cal basis for this nut­ti­ness — from Bruce Bartlett, some­one who was in the room when the under­ly­ing crazy ideas were being dis­cussed back in the 1980s — see here.

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