IF YOU LIKE THE NATIONAL DEBT CEILING, THEN YOU WILL LOVE THE BALANCED BUDGET AMENDMENT — Part 2

By Anthony W. Hawks

The Balanced Budget Amendment (BBA) last made a serious appearance in 1995, when it was part of the Contract with America during the 1994 campaign and passed by new Republican House majority in January 1995, only to fall one vote short in March 1995 of the requisite two-thirds majority in the Senate. Despite four years of budget surplus in 1998-2001, the BBA has never gone away, and today is being sponsored in the House by Rep. Bob Goodlatte (R-VA) (House Joint Resolution 1) and in the Senate by Sen. Orrin Hatch (R-UT) (Senate Joint Resolution 10).

Both BBA versions contain the traditional requirement that “total outlays” not exceed “total receipts” and supermajority votes to increase taxes or raise the national debt ceiling, as well as a provision requiring the President to propose a balanced budget each year. What is new about the BBA is that both the Goodlatte and Hatch proposals would now prohibit government spending above a certain level of gross domestic product (GDP) for the preceding year (18% in the Senate and 20% in the House).

Thus, under either version there are now three circumstances where a future White House could be faced with the same situation that President Obama will face on August 2, 2011 (Secretary Geithner’s threatened “drop-dead” date for defaulting on federal obligations) if a deal on raising the current debt ceiling is not reached:

(1) it becomes apparent, presumably late in the fiscal year, that “total outlays” will exceed “total receipts” before the end of such fiscal year;

(2) it becomes apparent (as now) that the debt ceiling has to be raised to allow for additional borrowing; and

(3) it becomes apparent that “total outlays” will exceed the requisite percentage of GDP, presumably 18% or 20%.

If the first situation occurs, then the President will have to delay or withhold payments from the Treasury until tax revenues become available, unless of course they never become available during the fiscal year, in which case any unpaid obligations will be left in default. To do otherwise, the President would no longer be faithfully executing the constitutional requirement that “total outlays” not exceed “total receipts.”

If the second situation occurs, then the President must deal with the same debt ceiling battle we are seeing now, except that a three-fifths supermajority would be needed to raise the debt limit. Just as now, the President would be limited to two stark choices: (1) either let defaults occur randomly (following a first owed, first paid payment rule); or (2) assert the unprecedented power to decide what gets paid in what order on a case-by-case priority basis. With no payment priority plan in place, the same fears of fiscal uncertainty being raised in the current debt ceiling debate will occur again and again.

The third situation is worse of all. If it is unconstitutional to spend more than 18% (or 20%) of GDP, what happens when the GDP threshold is reached, say, nine months into the fiscal year? The logic of enforcement would mean that no monies at all could be spent for the rest of the entire fiscal year. This would be the ultimate government shutdown. Not only would all government checks stop going out, but even “essential” personnel would stop being paid to keep the government running, no matter how much money was in the Treasury to pay them!

Of course, no one expects any of these doomsday scenarios to occur for the simple reason that the BBA has a built-in set of waivers. Thus, Congress can always authorize deficit spending, or an increase in the national debt, or spending above the GDP threshold by a supermajority vote. Similarly, there are waivers for times of declared war or “imminent and serious military threats.”

In all these cases, the BBA is converted from a constitutional amendment that is supposed to bind future Congresses into a statutory requirement (like the debt ceiling) that any Congress can waive at anytime. The only difference between these BBA waivers and the current debt ceiling limit is the type of voting majority required to enact the waiver or increase the debt ceiling. Under current law, a simple majority will suffice, while under the BBA some type of supermajority vote (three-fifths or two-thirds) would be needed. Does this truly make a difference?

Copyright © 2011 Anthony W. Hawks. All rights reserved.

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About Radnor Reports

Ken Feltman is past-president of the International Association of Political Consultants and the American League of Lobbyists. He is retired chairman of Radnor Inc., an international political consulting and government relations firm in Washington, D.C. Feltman founded the U.S. and European Conflict Indexes in 1988. The indexes have predicted the winner of every U.S. presidential election beginning in 1988, plus the outcome of several European elections. In May of 2010, the Conflict Index was used by university students in Egypt. The Index predicted the fall of the Mubarak government within the next year.
This entry was posted in Anthony W. Hawks, Balanced Budget amendment, Federal budget, National debt, Thought-Provoking Analysis and tagged , , . Bookmark the permalink.

One Response to IF YOU LIKE THE NATIONAL DEBT CEILING, THEN YOU WILL LOVE THE BALANCED BUDGET AMENDMENT — Part 2

  1. Molly McG says:

    Nice Blog with excellent information. I do not agree with you but I saee your argument. You make it very clear and persuasive.

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