While Economic Experts On Both Sides Have Said A Balanced Budget Amendment Would Make Recessions Worse And Harm The Economy ...

Former George H.W. Bush Treasury Official: Amendment “Would Force The Federal Government To Make Economic Recessions Worse.” Bruce Bartlett wrote in a Fiscal Times column that a balanced budget amendment “would force the federal government to make economic recessions worse. Since federal revenues fall and spending rises automatically in economic downturns, it would force spending cuts and tax increases at precisely the point when the economy is reeling, potentially turning a modest downturn into a depression.” [The Fiscal Times, 8/27/10]

AEI's Ornstein: Balanced Budget Amendment Is “About The Most Irresponsible Action Imaginable.” CNN.com reported:

Striving to achieve a balanced budget by way of a constitutional amendment would be “irresponsible,” according to one seasoned congressional observer.

“It is about the most irresponsible action imaginable,” said Norman Ornstein, a resident scholar at the conservative American Enterprise Institute. “It would virtually ensure that an economic downturn would end up as a deep depression, by erasing any real ability of the government to pursue countercyclical fiscal policies and in fact demanding the opposite, at the worst possible time.” [CNNMoney, 3/29/11]

EPI: If Balanced Budget Amendment Was Already In Effect, It “Would Depress Our Nascent Recovery.” From a briefing paper prepared by the Economic Policy Institute:

While a BBA would force budget balance, it would have negative economic effects in both the short and the long run. Indeed, as with concerns about a global spending cap, one of the most troubling aspects of a BBA is the constraint imposed on countercyclical fiscal policy at times of economic downturn. During economic downturns, revenues fall while public expenditures automatically rise. A BBA would require the federal government to reduce its spending to match reduced revenues, or impose tax hikes in the midst of a recession, forcing a fiscal policy that would exacerbate the recession. Indeed, premature fiscal retrenchment was tried in 1937, causing a double dip in the Great Depression.

If previously in effect or if implemented today, a BBA would depress our nascent recovery. This policy would deprive government of the ability to step in and act during a recession, that is, at a time of exceedingly low consumer and business demand. The policy would in fact force the opposite--a pullback in federal demand for goods and services. With 14 million people still unemployed, a return to prerecession unemployment rates by 2016 is unlikely absent policies that work to fill the gap in private-sector demand for goods and services. The most promising policy lever to fill this gap in the near term is expansionary fiscal policy (Bivens 2011). A BBA would restrict the government's capacity to pursue expansionary fiscal policies in times of economic crisis, and derail any recovery: For example, closing the current trillion dollar budget deficit projected for next year through any combination of spending cuts or tax increases would devastate the economic recovery.[[9]] [Economic Policy Institute, “Why Spending Caps Are Poor Policy”, 6/22/11]

CBO Director Elmendorf: Balanced Budget Amendment “Risks Making The Economy Less Stable, Risks Exacerbating The Swings In Business Cycles.” During his January 2011 testimony to the Senate Budget Committee, Congressional Budget Office Director Douglas Elmendorf said of a balanced budget amendment:

Amending the Constitution to require this sort of balance raises risks that you're aware of. The -- the automatic stabilizers that the government has, the federal government has, the fact that taxes fall when the economy weakens and that spending and benefit programs increases when the economy weakens, in an automatic way, under existing law, is an important stabilizing force for the aggregate economy; the fact that state governments need to work, as you said, against those effects in their own budget, need to -- need to take action to raise taxes or cut spending in recessions undoes the automatic stabilizers, essentially, at the state level.

Taking those away at the federal level risks making the economy less stable, risks exacerbating the swings in business cycles. [CQ Transcriptions, 1/27/11, via Nexis]

CBPP: Amendment “Would Threaten Significant Economic Harm.” The Center on Budget and Policy Priorities explained why a balanced budget amendment “would be a highly ill-advised way to address the nation's long-term fiscal problems”:

It would threaten significant economic harm while raising a host of problems for the operation of Social Security and other vital federal functions.

The economic problems are the most serious, and they would pertain to any version of a constitutional balanced budget amendment. By requiring a balanced budget every year, no matter the state of the economy, such an amendment would raise serious risks of tipping weak economies into recession and making recessions longer and deeper, causing very large job losses. That's because the amendment would force policymakers to cut spending, raise taxes, or both just when the economy is weak or already in recession -- the exact opposite of what good economic policy would advise.

When the economy slows, federal revenues decline or grow more slowly and spending on unemployment insurance and other social programs increases, causing deficits to rise. Rather than allowing the “automatic stabilizers” of lower tax collections and higher unemployment and other benefits to cushion a weak economy, the amendment would force policymakers to cut spending, raise taxes, or both. That would launch a vicious spiral of bad economic and fiscal policy: a weak economy would lead to higher deficits, which would force policymakers to cut spending or raise taxes more, which would weaken the economy further.

The fact that states must balance their budgets every year -- no matter how the economy is performing - makes it even more important that the federal government not also face this requirement and thus further impair a faltering economy. [Center on Budget and Policy Priorities, 6/6/11]

OMB Watch: Balanced Budget Amendment “Could Impede Economic Recoveries.” According to OMB Watch:

Over the past 30 fiscal years, the federal government has run a surplus only three times. In the past three years, the government has seen deficits totaling almost $3.5 trillion, and the Congressional Budget Office's (CBO) baseline prediction shows deficits for at least the next decade. With such a history and with the recent rise of the Tea Party and its fiscally conservative contingent in Congress, it is unsurprising that balanced budget amendments to the Constitution are once again finding their way to the national agenda. While forcing Congress to balance the books through a constitutional mandate may be appealing to many fiscal hawks, a balanced budget amendment could impede economic recoveries following Wall Street meltdowns and other calamities. [OMB Watch, 1/25/11]

Klein: Balanced Budget Amendment Would “Make Future Recessions Worse.” Washington Post columnist Ezra Klein wrote:

Another problem: In a recession, tax revenue plummets and GDP stops growing, but spending has to be sustained, or even increased, to a) give people unemployment insurance and Medicaid and other services they need and b) keep the economy from contracting violently. This amendments includes no provisions for recessions, meaning that when the economy contracted, the government would have to contract as well. That is to say, we're still not out of one of the deepest recessions in American history, and every Senate Republican has co-sponsored a constitutional amendment to make future recessions worse. It's just breathtaking. [The Washington Post, 4/1/11]

Progressive And Good Government Organizations: Balanced Budget Amendment “Would Damage The Economy.” A letter co-signed by 247 progressive and good government organizations sent to Congress stated:

A balanced budget constitutional amendment would damage the economy, not strengthen it. Demanding that policymakers cut spending and/or raise taxes, even when the economy slows, is the opposite of what is needed to stabilize a weak economy and avert recessions. Such steps would risk tipping a faltering economy into recession or worsening an ongoing downturn, costing large numbers of jobs while blocking worthy investments to stimulate jobs and growth and address the nation's urgent needs in infrastructure and other areas.

[...]

In short, this amendment is a recipe for making recessions more frequent, longer, and deeper, while requiring severe cuts that would harshly affect seniors, children, veterans, people with disabilities, homeland security activities, public safety, environmental protection, education and medical research. [Mother Jones, 7/13/11]

... And That A Balanced Budget Amendment Would Force Drastic Cuts To Major Government Programs

Bartlett: If Already In Force, Balanced Budget Amendment Would Have Cut More Than $300 Billion From Social Security And Medicare in 2009. Bruce Bartlett, former George H.W. Bush Treasury official and Reagan domestic policy advisor, wrote in a Fiscal Times column that: “It's doubtful that BBA supporters really understand the composition of federal spending. In fiscal year 2009, we would have had to abolish every discretionary spending program, including national defense, to balance the budget and that still wouldn't have been enough without higher revenues. We would have had to cut more than $300 billion out of Medicare and Social Security as well.” [The Fiscal Times, 8/27/10]

CBPP: A Balanced Budget Amendment “Would Inexorably Subject Social Security And Medicare To Deep Reductions.” From the Center on Budget and Policy Priorities:

The measure does not cut Social Security or Medicare in 2012. And it does not subject them to automatic cuts if its global spending caps are missed. It is inconceivable, however, that policymakers would meet the bill's severe annual spending caps through automatic across-the-board cuts year after year; if they did, key government functions would be crippled.

Policymakers would have little alternative but to institute deep cuts in specific programs. And as noted elsewhere in this statement, before the debt limit could be raised, Congress would have to approve a constitutional balanced budget amendment that essentially requires cuts even deeper than those in the Ryan budget. Reaching and maintaining a balanced budget in the decade ahead while barring any tax increases would necessitate deep cuts in Social Security, Medicare, and Medicaid. After all, by 2021, total expenditures for these three programs will be nearly 45 percent greater than expenditures for all other programs (except interest payments) combined. Big cuts in these programs would be inevitable. [Center on Budget and Policy Priorities, 7/16/11]

EPI: “Not Even Eviscerating Medicare, Medicaid, And Social Security” Would Meet Goals Of A Balanced Budget Amendment And Spending Cap. The Economic Policy Institute analyzed a plan to cap spending and institute a balanced budget amendment:

In short, not even eviscerating Medicare, Medicaid, and Social Security would generate adequate savings to meet the balanced budget amendment global spending cap within 50 years.

Put differently, the balanced budget amendment would require more than twice the deficit reduction proposed in the Bowles-Simpson Fiscal Commission report, but over a considerably shorter time horizon and with all deficit reduction placed on spending cuts. (The Bowles-Simpson report was widely criticized at the time for cutting roughly $2 in spending for every $1 in revenue raised). Again, this cap is a political non-starter. [Economic Policy Institute, 3/31/11]

Klein: Entire Reagan, Bush Administrations Would Have Violated Amendment's Spending Cap. Washington Post columnist Ezra Klein noted:

Not a single year of the Bush administration would qualify as constitutional under this amendment. Nor would a single year of the Reagan administration. The Clinton administration would've had exactly two years in which it wasn't in violation.

Read that again: Every single Senate Republican has endorsed a constitutional amendment that would've made Ronald Reagan's fiscal policy unconstitutional. [The Washington Post, 4/1/11]

Still Fox News Has Lobbied Aggressively For A Balanced Budget Amendment

Fox Anchor Camerota Promoted Balanced Budget Amendment During Live Coverage Of GOP Press Conference. Guest hosting America Live, Alisyn Camerota covered live a press conference organized by Republicans to introduce a balanced budget amendment. During the segment, she repeatedly suggested that Democrats would look bad politically by opposing a balanced budget amendment. [Fox News, America Live, 7/14/11]

Hannity: “The Country Needs” A Balanced Budget Amendment. During a panel discussion on his Fox News show, Sean Hannity said of the balanced budget amendment: “It's a great idea. It's the best idea,” and that it would be his “first choice” for dealing with the national debt. [Fox News, Hannity, 7/13/11]

Morris: GOP Is On “Exactly The Right Track” By Proposing Balanced Budget Amendment." On The O'Reilly Factor, Fox News contributor Dick Morris said of the debt ceiling negotiations, “I believe that the Republicans are on exactly the right track of opposing additional taxes, supporting spending cuts, and demanding constitutional reform of a balanced budget amendment with spending caps on the federal government in return for a debt limit increase.” [Fox News, The O'Reilly Factor, 7/13/11]

Hannity: “I Think We Can Get The Balanced Budget Amendment.” On his Fox News show, Sean Hannity said:

All right. I like the idea that is being pushed in Congress, if it is done right, cut, cap, and balance. But cut -- when they say cut, it's got to be now, not five years from now, not 12 years from now. When they say, a no new taxes got to be part of that, none, zero, zip, we are overtaxed already. When they say cap spending, cap, I want a real cap on what they spend in Washington. And the third thing is, I think the country right now is ready. I think state houses all across the country. I think we can get the balanced budget amendment to the constitution. [Fox News, Hannity, 7/11/11, via Nexis]

Fox's Tracy Byrnes: Balanced Budget Amendment Is “So Logical.” Fox Business' Tracy Byrnes supported a balanced budget amendment while guest hosting The Willis Report:

TRACY BYRNES: Now you are a member of the Cut, Cap and Balance Pledge coalition. Can you just quickly tell people what it is about?

COLIN HANNA, LET FREEDOM RING PRESIDENT: Sure. The Cut, Cap and Balance Pledge said that there should be three preconditions before the pledge signers would agree to any debt ceiling increase. That would be substantial cuts in the immediate budget, a cap on federal spending similar to Gramm-Rudman cap but this time pegged to the percentage of the economy which the federal spending would represent and then finally a balanced budget amendment, one with real teeth in it. Those are the three elements. The Cut, Cap and Balance Act is a little different however.

BYRNES: Now what is interesting is that all three things that you just mentioned are so logical and I think this is a problem that a lot of Americans are having lately. We have heard this before. We've been here before. And many of us are worried we're going to be here again because we're going to pass some sort of short-term deal just to get us through this August 2nd deadline. [Fox Business, The Willis Report, 7/11/11, via Nexis]

Fox's Mike Gallagher: Balanced Budget Amendment Is A “Practical Chance” To Diminish Debt. When Fox News host Eric Bolling raised the issue of a balanced budget amendment, Fox News contributor Mike Gallagher said:

It's a practical chance. I mean, Eric, that's the point. Americans are demanding answers and for too long we've heard Republicans say, you know, talk the talk and be full of rhetoric until Republicans bring forth plans, whether it's Paul Ryan, whether it's Toomey's, we're not going to move anywhere. [Fox Business, Follow the Money with Eric Bolling, 7/6/11, via Nexis]

Cavuto: Balanced Budget Amendment Is “Too Reasonable” And “Makes Too Much Sense.” When Fox News contributor Mike Huckabee appeared on Fox's Your World With Neil Cavuto to tout the balanced budget amendment, host Neil Cavuto said: It's too reasonable. It makes too much sense. So it's going to go nowhere. [Fox News, Your World with Neil Cavuto, 6/24/11, via Nexis]

Hannity: “I Fully Support” Balanced Budget Amendment. From Sean Hannity's interview with Sen. Jim DeMint (R-SC):

HANNITY: The Republicans did fail on the 2011 budget, I hate to tell you, Senator. And it disappointed a lot of conservatives, including myself. This is a very key moment that they hold the line. And I think walking out of this meeting today was pivotal. We see what's happening in Europe. We see what is happening in Greece, what's about to happen in Spain. I mean, really, all throughout the European -- all throughout Europe, all European countries now are suffering under debt. Do you foresee -- what is the worst-case scenario you see for America?

DEMINT: Well, Sean. The worst-case is that we already have a debt level that if interest rates return to their historical averages, we can't even pay our debts now. And they are talking about taxing the economy more, which means bringing more money to Washington, taking it out of the private sector, this president doesn't know how the American economy works. We've got to do everything we can to stop him. To elect someone who understands American exceptionalism. But frankly, we can't wait a year and a half to stop the spending. If we pass a balanced budget amendment now, it will change the whole paradigm in Washington. Next year's election will be all about a debate for 50 states, ratifying this constitutional amendment.

HANNITY: Absolutely.

DEMINT: That's why we need to take this debate.

HANNITY: I don't think Congress or future Congresses can control themselves, this is the insurance policy we need. I fully support it. I think it's a good idea to make it a big campaign issue. And let the Democrats take the right side or wrong side at their own peril. Senator, good to see you. [Fox News, Hannity, 6/23/11, via Nexis]

Hannity: “I Want A Balanced Budget Amendment. I Think We Need It.” After interviewing Sen. Jim DeMint (R-SC), Hannity said to Fox News contributor Karl Rove: “I like what DeMint is pushing and Orrin Hatch. I want a balanced budget amendment. I think we need it. I think it should be part of the debate in 2012.” [Fox News, Hannity, 6/23/11, via Nexis]

Fox Anchor Nauert On Balanced Budget Amendment: “We Would Definitely Love For That To Be Able To Happen.” From America's Newsroom co-host Heather Nauert's interview with Rep. Jim Jordan (R-OH):

REP. JIM JORDAN: Look, here's the bottom line. We've got to change our course. We've got to cut spending. We actually have got a plan out there.

Heather, we cut cap and balance, cut spending, cap it as a percentage of GDP, and for the first time in American history, let's actually get through the House and get through the Senate a balanced budget amendment to the Constitution and force politicians to do what we should have been doing all along, only spend what we take in.

Those are the kind of bold things that we need to do. And the CBO report underscores this. It says the sooner we cut spending the sooner we're going to get economic growth and that's the bottom line.

HEATHER NAUERT: Well, and that all sounds great and we would definitely love for that to be able to happen, and you're actually taking a step forward in that direction, you have this cut, cap, balance pledge that you're having people take?

JORDAN: Right. Yes, and we started -- we had a press -- yesterday we've launched this online, conservative groups from across the country are supporting it. We've already got dozens of members of Congress to sign off and all kinds of citizens from around the country.

It's the kind of bold action we have to take in the context of this debt ceiling debate. This is the leverage we have to fundamentally change America, to put in place those polices that will put us on a sustainable fiscal path, which is what the CBO talked about. Getting on a sustainable path.

Right now we're on an unsustainable path. To get us there, we've got to take the bold actions we outlined in our cut, cap, cut and balance pledge. We need those things to happen. And we're going to push for those and try to get them done in the context of this debt ceiling debate. [Fox News, America's Newsroom, 6/23/11, via Nexis]