By Anthony W. Hawks
The House of Representatives began floor debate yesterday on the Balanced Budget Amendment (BBA), which ended in an unsurprising 261-165 defeat this afternoon. (290 votes were needed for the two-thirds vote required by Article V.)
As predicted here, the Republican leadership chose the path of least resistance by backing the most traditional BBA proposal H.J. Res. 2. Where I guessed wrong was in thinking that a vote would be allowed on an alternative proposal that contained a spending cap like H.J. Res. 1, which was the actual version reported by the House Judiciary Committee this summer (H. Rep. 112-117) and which was amended to include an 18% of GDP spending limit.
With two exceptions (one ministerial, one substantive), H.J. Res. 2 is identical to the versions that were voted on and nearly passed in 1994 (S.J. Res. 41), 1995 (H.J. Res. 1), and 1997 (S.J. Res. 1). The ministerial difference in H.J. Res. 2 was simply the change in the effective date (following ratification) that must be updated with each new Congress. The substantive change involved a new limitation to the military conflict waiver provision in Section 5 and reflects the only attempt by the House leadership to correct a flaw in H.J. Res. 2. (NOTE: To avoid confusion, the reader should be aware that the version of H.J. Res. 2 found on the THOMAS and GPO websites has not been updated to include these two changes.)
Whereas the original H.J. Res. 2 allowed an absolute majority of each chamber to waive the BBA outright “for any fiscal year in which the United States is engaged in military conflict which causes an imminent and serious military threat to national security,” the revised version requires the waiver to “identify and be limited to the specific excess or increase for that fiscal year made necessary by the identified military conflict.” This change is important because it makes clear that an enactment like the post-9/11 “Authorization for Use of Military Force” Resolution (Public Law 107-40) would be insufficient to trigger the waiver in Section 5.
Despite this one improvement, multiple technical and substantive flaws remain in H.J. Res. 2, not least of which is that it neither requires nor enforces a balanced federal budget. I have previously discussed most of these flaws here, but today I want to focus on the tax provision found in Section 4 of H.J. Res. 2, which reads as follows: “No bill to increase revenue shall become law unless approved by a majority of the whole number of each House by a roll call vote.”
Similar tax provisions began showing up in BBA proposals during the 100th Congress (1987-1988), but it become a permanent part of the bipartisan consensus BBA in 1994 with S.J. Res. 41. The reason is understandable: if deficit spending requires a super-majority vote, and increasing revenue does not, then there is a built-in bias towards increasing revenue, which Congress would doubtless attempt to achieve through higher taxes.
Tougher BBA proposals corrected this imbalance with a three-fifths or two-thirds voting requirement to increase revenue, but H.J. Res. 2 does not. Rather it requires an absolute majority of each chamber, which is better than a simple majority of those present and voting, but still leaves an imbalance in place since three-fifths remains the super-majority requirement for deficit spending.
Procedural issues aside, the real objection to Section 4 is the meaning of “No bill to increase revenue,” which is not addressed at all by the supporters of H.J. Res. 2. Presumably this phrase was intended to mean actual tax legislation, but virtually any bill aimed at economic growth could be construed as a bill to increase revenue, and the last thing we need is a super-majority requirement to enact pro-growth legislation.
Let’s assume though that it only applies to bills that are specifically designed to raise tax revenue in some direct fashion. This would surely encompass the creation of new types of taxes, as well as increases in current tax rates, but it would also apply to any repeal of a special interest tax loophole. This in turn means that efforts to increase economic growth through simplification of the tax code could be stymied by Section 4, unless the reform included the repeal of other taxes and/or an accompanying decrease in the tax rates.
But now the constitutional issue of whether a super-majority vote is required for a particular bill turns on the arcane issue of how the proposed legislation is “scored” and the accuracy of the estimates of the tax revenue being raised. Such estimates are notoriously inaccurate and malleable, particularly when you are trying to determine projected revenues over a long time period. Moreover, how do you answer questions like: (1) Whose estimates would be used? (2) Could the majority in each House pick and choose among alternative estimates, and if so, what if different parties controlled each House? (3) How many years into the future must be estimated when permanent legislation is being proposed? (4) How do you factor in the possibility that current tax legislation might expire in the meantime?
The House leadership could and should have fixed this provision by changing the phrase “No bill to increase revenue …” to “No bill to create any new type of tax or increase rates in any current tax …”, but it failed to so and now the issue is unlikely to be raised again in Congress for years to come.
Still, these issues are all very timely, not just because the BBA came up for a House vote today, but also because of the gridlock now being experienced by the congressional “super-committee” tasked with proposing at least $1.2 trillion in deficit reduction by Thanksgiving. Just last week, one of the “super-committee” members, Senator Pat Toomey (R-PA) made a serious tax reform proposal designed to raise $340 bil lion in revenue above the current baseline over ten years, while cutting the top personal income tax rate from 35% to 28% and achieving tax simplification that would also certainly promote economic growth. (Senate Toomey after all is the former president of the Club for Growth).
As I read H.J. Res. 2, the Toomey proposal would clearly fall within the scope of Section 4, which of course would make it harder to pass. True, an “absolute majority” is only slightly more stringent that a simple majority, but keep in mind that anti-tax conservatives like Grover Norquist have been pushing for a two-thirds voting threshold to raise revenue, which would certainly doom the Toomey proposal even if it began to attract bipartisan support.
The irony here is that, while the Toomey proposal has been attacked by 72 House dissident members, it has also been endorsed by Speaker Boehner, who of course is promoting H.J. Res. 2 – apparently without realizing that his version of the BBA would make it more difficult to pass anything resembling the Toomey proposal. To make matters worse, some variation of the Toomey proposal is needed to achieve another top priority sought by Republicans (including the 72 dissidents), namely an extension of the Bush tax cuts.
Opponents of higher taxes can reasonably differ over whether the Toomey proposal is, on balance, a good deal for fiscal conservatives, but it should at least be on the table for discussion. This may not be possible if there is widespread fear among Republicans that Toomey has violated the American for Tax Reform (ATR) “Taxpayer Protection Pledge”. This raises the enduring issue of what, if any, trade-off is compelling enough to justify breaking the Tax Pledge. Senator Toomey obviously believes that $340 billion in higher tax revenue (over 10 years no less) is a favorable exchange for cutting tax rates, closing anti-growth loopholes, and eliminating the Bush t ax cuts as the Democrats’ strongest bargaining chip.
Indeed, it is the pending expiration of the Bush tax cuts that is making enforcement of the Tax Pledge problematic for ATR. The first part of the pledge requires opposition to “any and all efforts to increase the marginal income tax rates for individuals and/or businesses.” But no “efforts” by Democrats are needed to make the Bush tax cuts expire, so that there is nothing to “oppose” under the Tax Pledge. To be sure, a refusal to support legislation that extends the Bush tax cuts would violate the purpose and spirit of the Tax Pledge, but strictly speaking it would not violate its literal language.
The inability of the Tax Pledge to accommodate the Toomey proposal and clearly address the expiration of temporary tax cuts may account for the growing split and confusion among Republicans over tax policy in the continuing battle over federal deficits. The Tax Pledge has been very successful in creating an anti-tax brand for the GOP, but Republicans should now be asking themselves whether the Tax Pledge is an obstacle to advocating smaller government itself.
In this regard, I am sympathetic to the Toomey proposal, but would go one step further. The Toomey proposal apparently remains fluid and is not tied to a specific amount of spending cuts, but suppose it was contingent on, say, $340 billion in spending cuts from the current FY 2011 baseline of $3.8 trillion. This would not only result in deficit reduction, but actually result in a smaller government. It is one thing to oppose tax hikes aimed at financing bigger government, but quite another to oppose tax increases that are offered in exchange for smaller government. The ATR Tax Pledge quite properly prohibits the former, but if it also prohibits the latter, then it is counter-productive and needs to be revised, as I previously suggested here.