Wednesday, June 28, 2017
Red State Dems Kentucky

The Problems With An Annual Federal Balanced Budget Amendment via Greg Leichty

This is a guest post from US Senate Candidate Greg Leichty. Mr. Leichty is running for United States Senate in the 2014 Kentucky race.

Greg Leichty

An annual balanced budget amendment in a constitution is a very popular idea.  Most states have one.   A balanced budget at the federal level, however, is a very bad idea.

During times of economic contraction, we rely on the federal government to pick up for the drop off in demand in the private sector.   Requiring balanced budgets on an annual cycle would only serve to make recovery from any economic downturn longer and more painful it needs to be. The current economic recovery has been anemic because the fiscal stimulus that was employed in 2009 was inadequate.  The stimulus was smaller than leading economists such as Paul Krugman recommended.   More importantly it included features such as tax cuts that had a much smaller immediate stimulus effect than other forms of spending such as expanded unemployment benefits and helping state and local governments retain their teachers and firefighters.  We did not get the maximum benefit that we could have gotten out of an optimal stimulus package.  A balanced budget amendment would prevent the federal government from using the tools it needs to utilize during the timethat it most needs to use them.

An annual cycle balanced budget amendment is also dangerous because it would not allow us to respond appropriately to unforeseen crises as 9/11.  No president or Congress can allow a balanced budget amendment to constrain them in a time of great national threat or calamity.   The defense of the country will always take priority over a requirement for an annual balanced budget.Most proposals for a balanced budget amendment allow an exception for national defense emergencies.   If you look at the pattern of conflicts over the last 50 years, however, such an exception would render a balanced amendment inoperative for very long periods of time.   We have been involved in sustained hostilities for 13 years.  The necessary and repeated circumventing of a balanced budget amendment would increase both political distrust AND political polarization.

We do need a disciplined fiscal approach over the next two decades as our population grows older and the retirement and medical costs of the baby boom generation begin to tax Social Security and Medicare.   In the current situation, however, we have a huge problem with unemployment that should take precedence over our longer term issues with fiscal discipline.  The annual budget deficit has been shrinking significantly in the last several years as the economy picks up.  Ironically, the annual budget deficit would have declined more quickly if we would have adopted a more optimal stimulus package back in 2009-2010.

Candidates that support a balanced budget amendment need a hard reality check.  A candidate may cynically endorse the idea because it provides a politically expedient way to avoid being characterized as a big spender.   In this case, it is time to challenge the candidate’s candor.  If a candidate endorses a balanced amendment because s/he thinks it is a good idea, then it is time to challenge the candidate’s knowledge.  We live in times where difficult choices need to be made.   We should not entertain proposals based on gimmickry and wishful thinking.

Visit Greg Leichty’s website, and you can find him on Facebook.

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About The Author

Eleanor is a sociologist and political activist, concentrating on social and economic disparity. You can contact her at Eleanor.Mae.Collins@gmail.com.