Posted July 28, 2014

Henry J. Aaron, a Senior Fellow, at the Brookings Institute, testified before the House Judiciary Committee on July 24th, providing five very sound reasons why a Balanced Budget Amendment to the Constitution was not viable solution to the U.S.’s escalating deficits. His summary of his comments is as follows:

Balanced budget amendments have been around a long time. They appeal to the universally recognized virtue of fiscal responsibility. Still, Congress has never sent one on to the states for ratification. Congress should not do so now, despite the relatively high levels of current government debt and the budget challenges that the nation faces in the future. There are at least five reasons.

First, budget deficits are sometimes beneficial. These times include not only declared wars but also economic slowdowns. Had either H.J. Res 1 or 2 been in effect during the recent financial crisis, each would have required either tax increases or spending cuts that would have greatly intensified unemployment and the fall of GDP. The constitutional amendments proposed in these resolutions would have become automatic destabilizers threatening perverse tax and expenditure policy that would raise unemployment and destabilize financial markets unless avoided by super-majority votes. To require super-majority votes to avoid catastrophic policy is folly.

Second, requiring a super-majority to raise the debt ceiling or to run a deficit is a veritable summons to political extortion by an intransigent minority. The consequences of a failure to raise the debt ceiling would be intrinsically catastrophic and could trigger a constitutional crisis. A mere two-fifths of either House could demand as ransom for its votes enactment of legislation on which it insists. This threat has no political allegiance. It could be wielded in the service of small government or large government, lower taxes or higher taxes, lower spending or higher spending.

Third, the deficit and debt ceiling provisions of H.J. Res. 1 and 2 would prevent access to the Social Security trust fund to sustain benefits unless the rest of the government was not just balanced but running a surplus…unless, that is, three-fifths of the whole membership of both Houses of Congress agreed to sustain pensions for the elderly and disabled. A similar problem could stymie important government activities vital to combat financial panic just when they are most needed.

Fourth, a Congress, constrained by the limits in H.J.Res.1 and 2 but anxious to accomplish some agreed objective would inevitably resort to all manner of devices that would circumvent those limits in ways that led to inefficient government. Spending could become tax credits (seeming to lower both spending and revenues) or unfunded mandates on state governments. No one interested in good and honest government should increase incentives for elected officials to find devious ways to accomplish objectives dear to them.

Finally, Mr. Goodlatte, I must note that just three years ago, the version of H.J. Res. 1 reported out of committee, which you sponsored, proposed to limit government spending to 18 percent of economic output. Now you propose a limit of 20 percent of economic output. Just three years ago you endorsed a bill that would have made such spending a violation of the Constitution. Is it not possible that at some future date you might conclude, in light of new and better information, that a different percentage is desirable? Does not this change in what would be a cap written into the Constitution raise questions about the wisdom of locking into the Constitution an economic variable you are willing to change based on facts and circumstances?

Click on the following link to read the testimony at the Brookings website:  “Constitutional Solutions to Our Escalating National Debt: Examining Balanced Budget Amendments” to read the full text of Mr. Aaron’s testimony.