Balanced budget amendment: A trap for fiscal conservatives

CNN’s Candy Crowley recently asked Sen. Rand Paul (R-Ky.), one of the many new Republicans on Capitol Hill, whether Paul could bring himself to vote for a raise in the statutory debt ceiling, an issue rapidly approaching the new Tea Party-influenced Congress. Paul’s Tea Party supporters are vocal about their opposition to allowing room for more borrowing and more deficit spending, and perhaps no other freshman senator, other than Marco Rubio, has more prominent ties to the grassroots movement. Countering that pressure is the obvious and critical issue of avoiding a default on U.S. debt service and other obligations, a potential crisis point was driven home by Monday’s warning from Standard & Poor’s on America’s bond rating.

Paul allowed that he would vote for a debt-ceiling hike as a one-time fix — but only if he could guarantee it would be the last debt ceiling hike the U.S. needed. “I would vote to raise the debt ceiling,” Paul told Crowley, “if we passed a balanced budget amendment to the Constitution and say from here on out, this is the last time we're doing it, we are going to act responsibly.”

Putting aside the merits and demerits of a debt-ceiling hike, the balanced-budget demand is a trap — one that will end up cornering fiscal conservatives in the unlikely event Paul gets what he demands.

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Passing a balanced budget amendment would still require entitlement reform, unless we choose to raise taxes instead. That’s the trap.

First, by the time the U.S. successfully amended the Constitution to require that the government spending does not exceed income, we would likely need several more debt-ceiling raises. To succeed, an amendment must get a two-thirds vote in both the House and Senate, and then must gain the approval of three-fourths of the states. (Interestingly, the president has no formal role in the process at all.) These requirements pose more than a few obstacles, but the main problem for Paul is time. The process of gaining consent from 38 states would take months, and perhaps years, assuming this Congress could even pass the amendment with the requisite votes.

The U.S. will run up against a debt-ceiling hike within the next several weeks. Paul and others in Congress who offer this as a trade would either have to be clairvoyant to see whether the amendment would succeed, or go on faith alone that Congress and the states would fulfill that part of the bargain Paul demands.

Next, several levels of self-interest will interfere with this amendment. The main intent of this proposal is to limit Congress from overspending — but Congress likes overspending. It’s their favorite pastime, and I’m not just talking about Democrats. Before such an amendment passed, it would have to include caveats that would allow the legislature to overspend in extraordinary circumstances, such as during wartime. And, hey, we’re at war now! Take your pick: We have a war on terror, a war in Afghanistan, a war on drugs, a war on poverty, and a war on obesity. Depending on Congress to define the exceptions is functionally no different than the blank check they have now. And let’s face it: If we could get two-thirds of both chambers to agree to limit spending to actual revenue received, we wouldn’t need a balanced-budget amendment in the first place.

The states would love a constraint on federal spending, though — right? At any other time, maybe. At the moment, most states face fiscal crises of their own, thanks to underfunded public pensions, souring or stagnant economies, and spendthrift legislatures. A number of them will push for congressional bailouts, aided by a White House hoping to protect the public sector from layoffs. The states will think twice before imposing a cap on Congress and cutting off a potential lifeline.

But let’s assume that all the stars align for a balanced budget amendment, one that the states approve and that actually forces Congress to put spending in sync with revenue. What then? Our current deficits come not from discretionary spending, but entitlements. Non-mandatory spending in fiscal year 2011 was $1.3 trillion, which means that Congress could have redlined every last dime of defense, homeland security, and other discretionary spending — and we would still have a $300 billion deficit. That problem becomes worse each year, too, as entitlements expand while running on autopilot.

Passing a balanced budget amendment would still require entitlement reform, unless we choose to raise taxes instead. That’s the trap. Congress wants to say yes to its constituents, and that means spending money. Once a constitutional requirement to balance the budget gets imposed on Congress, they will have to choose between raising taxes and cutting services every year, while voters want neither to happen. If we hear nothing but class-warfare demagoguery now on budget issues, just wait until Congress can no longer kick cans down the road. Every budget will end up with new surtaxes on the “wealthy,” which will drive investors overseas, which will eat into revenues, and which will prompt more surtaxes on the wealthy.

If Paul wants a trade for his debt-ceiling vote, he should get something of real value for it — a change that will make an actual difference. We need entitlement reform to get to the root of the real driver of the deficit, and more discipline from Congress on discretionary spending so that they stop aggravating the problem. We can achieve those goals much more quickly than a balanced budget amendment to the Constitution, which doesn’t address the main problem, and might add a few more obstacles to fiscal reform instead.