UNITED STATES

A timely balancing act

Michael Posner August 9 1982
UNITED STATES

A timely balancing act

Michael Posner August 9 1982

A timely balancing act

UNITED STATES

Michael Posner

Were 1982 not an election year, it would be safe to say that the notion of a constitutional amendment to balance the federal budget would never have appeared on the political calendar. But, with congressional elections looming and the budget deficit soaring to once unthinkable heights, U.S. politicians have been championing the amendment as a talisman against economic iniquity. Their disciples are everywhere—in President Ronald Reagan’s Oval Office, on Capitol Hill, in 31 states whose legislatures have already called for a constitutional convention on the issue and, perhaps most tellingly, among an electorate increasingly disillusioned with high interest rates caused by government spending and with the nation’s trilliondollar debt.

Opposed by many Democrats and moderate Republicans as a device for gutting federal entitlement programs and denounced by many others as a cheap fraud—built with enough escape hatches to allow Congress to ignore the requirement—the amendment has nonetheless captured the momentum of the pre-election season. Some 63 senators—only four short of the number needed to pass it—have endorsed the measure. In the House of Representa-

tives another 220 congressmen have signed on. Last week supporters defeated several attempts to dilute the proposal, and the full Senate is expected to vote this week in the affirmative.

If approved by Congress and subsequently ratified by not less than 38 states, the 27th amendment to the Constitution would take effect in the second fiscal year after ratification. It would then compel Washington to balance the budget by ensuring that outlays do not exceed revenues. It would also limit taxreceipt increases to the rate of national income growth, unless Congress voted explicitly for new taxes. Only a declaration of war or a three-fifths vote of both houses would permit Congress to create budget deficits.

In the view of Senator Orrin Hatch (R-Utah), the measure would thus eliminate the spending bias that has caused deficit budgets for 22 of the past 23 years. With the amendment, Congress would be forced to stand up and vote for increased taxes or deficit budgets.

But opponents claim the amendment’s effects would either be negligible—when necessary, Congress would simply vote to set it aside; or disastrous-resulting in massive cuts in social programs or defence spending. Significantly, however, most of the opposition comes from senators not seeking re-election this fall.

Whatever the amendment’s fate, it is clear that a new sense of fiscal discipline will be needed to revive the economy. Although the prime rate dipped to 15 V2 per cent last week, the Congressional Budget Office (CBO) issued a revised forecast, projecting deficits at roughly $147 billion over the next three years—much higher than the administration’s own predictions.

At his news conference last week— his 12th since taking office—Reagan insisted that more budget cuts are coming. “We’re still determined that we’re going to balance this budget. We can’t do it this year or next or maybe the one after that, but we’re working toward that goal.” In the meantime, there is a certain air of unreality on the political stage. The president, who submitted the largest deficit budget in history, is campaigning for a constitutional amendment to balance the books—“like W.C. Fields embracing prohibition,” gibes Senator Alan Cranston (D-Cal.). And one year after legislating the largest tax cut in U.S. history, Congress is about to pass—in the middle of a recession—the largest peacetime tax increases ever: $99 billion over the next three years.

This policy confusion breeds simple, if not simplistic, ideas. Like the nuclear freeze proposal, a balanced budget amendment is politically popular and therefore difficult to resist. Where reelection is concerned, the reflex of politicians seems to be to sign now and worry about consequences later. £>