Conservative economists: America does NOT need a balanced budget amendment

[KingOrfeo]

From this article about the recent RW push for a constitutional convention:

Common Cause recently sent out an alert warning that Wyoming had become the 29th state to call for an Article V convention to enact a balanced budget amendment, leaving activists just five states short of reaching the constitutionally required 34-state goal. Article V dictates that a constitutional convention can be called in one of two ways: Through a two-thirds vote in both houses of Congress, or by legislative majorities in two-thirds of the states. It is not just an idle threat.

“After a number of states passed balanced budget amendment calls in the ’70s and ’80s, the movement stalled for many years,” Scott Swenson, the vice president of communications for Common Cause, told Salon. Recently the idea has once again gained “serious financial backing from a few very wealthy special interests who find democracy inconvenient,” he went on. They have used vehicles like the American Legislative Exchange Council (ALEC), which Swenson described as “a group that gets corporations to launder money as dues that are deductible, to then turn and lobby state legislatures to pass model bills that give corporations more power.”

Common Cause sounded the alarm last year with a detailed report, “The Dangerous Path: Big Money’s Plan to Shred the Constitution,” which managed to attract some attention amid the tumultuous presidential campaign. As In These Times reported, the ALEC-affiliated Balanced Budget Amendment Task Force (BBATF) has gained ground rapidly since it was formed in 2010: “BBATF has since passed resolutions in Alabama (2011), New Hampshire (2012), Ohio (2013), Georgia, Tennessee, Florida, Michigan, Louisiana (2014), South Dakota, North Dakota, Utah (2015) and West Virginia (2016), bringing the total to 28.”

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The balanced budget amendment (BBA) is a perennial conservative favorite that sounds good on the stump, but in the real world would spell disaster. Don’t take this wild-eyed liberal’s word for it. Listen to Macroeconomic Advisers, a group of conservative-leaning economists that has advised the Reagan and George W. Bush administrations and generally supports reducing the budget deficit.

In an October 2011 blog post, MA said that if a BBA had been in place at the time, “the effect on the economy would be catastrophic. … nstead of forecasting real GDP growth of 2% or so for FY 2012, we’d mark that projection down to perhaps -12% and raise our forecast of the unemployment rate from 9% to 16%, or roughly 11 million fewer jobs.” The shrinking economy would then produce … another massively unbalanced budget! D’oh!

Even in the best of economic times, the BBA would cause needless widespread suffering, as another analysis from the Center on Budget and Policy Priorities pointed out: “Social Security could not draw down its reserves from previous years to pay benefits in a later year but, instead, could be forced to cut benefits even if it had ample balances in its trust funds, as it does today. The same would be true for the military retirement and civil service retirement programs.”

The BBA is particularly dangerous because it sounds so good to so many people that it could actually get passed, while its actual economic impact would be so destructive that it could cripple any ability to correct the mistake. In that case, the entire structure of constitutional government would be at risk.

 

[KingOrfeo]

Balanced Budget Amendment:

The Balanced Budget Amendment is a mostly right-wing populist proposal to pass an amendment that would force the United States federal government to always maintain a balanced budget. It's one of the few policy proposals that both many right and left leaning economists can agree is a very bad idea,[1] though it maintains some popularity with those who conflate microeconomics with macroeconomics (such as comparing the debt of the U.S. to the debt held by an individual household).

The main problem with the idea is that during a recession the government would be forced to make ends meet by raising taxes and drastically cutting spending, which would make recessions much longer and more brutal than necessary.[2][3]

Some of its support stems from the belief that allowing substantial deficit spending will, if unchecked, inevitably cause a global economic collapse. Running a deficit will not cause problems by itself, as long as the economy improves faster than the debt increases, i.e. the debt as a percentage of GDP decreases in the long term. The financial system as we know it is more robust than these doomsayers believe, given that the brouhahas of the Great Depression and the Great Recession did not destroy it. In both of those cases, the solution to the crisis was to stimulate the economy through spending, a measure that forcing the budget to be balanced would prevent. Rather than deficit spending leading to a spiral of debt that destroys the economy, it can actually prevent a spiral of runaway economic contraction.

A balanced budget amendment would deprive the government of one its key tools to mitigate recessions. The ideal situation would be for the government to run a deficit in recessions and a surplus in booms, mitigating the boom/bust cycle, but it takes greater testicular fortitude than most politicians possess to call for reductions in spending when the economy is doing well. Excessive government borrowing has some well-documented problems, but it does not follow that eliminating borrowing entirely is a better idea than allowing a modest amount. Many arguments in favour of balanced budgets amount to Greece-baiting, predicting inevitable disaster as long as the scourge of deficit spending is allowed to endure.

 

[Rightguide]

Nothing sensible is ever needed, just totalitarian outcomes that fit your ideological endgame.

 

[KingOrfeo]

Nothing sensible is ever needed, just totalitarian outcomes that fit your ideological endgame.

A BBA is not sensible, and deficit spending is not a "totalitarian outcome."