Balanced Budget Amendment and Spending Cap

1. Writing a BBA is tough; how do we define budget; what does balanced mean?
2. How do we deal with economic cycles; do we balance annually or over a cycle?
3. What about exceptions/waivers for wars or disasters; how are they defined?
4. Lawsuits will challenge the BBA and judges will wield enormous influence.
5. Do we distinguish annual expenses from capital; how?
6. How do we deal with off budget spending such as Fannie, Freddie and USPS?
7. Is interest on the debt exempt; what happens if interest rates skyrocket?
8. How about special taxing districts of which there are 50,000 nationwide?
9. Are entitlements like Social Security, Medicare and pensions included?
10. Are there restraints on user fees? If not, watch out for  outrageous new fees.
11. Loan guarantees can be used to fund programs off budget. Isn’t this spending?
12. Regulations can be used instead of taxes for de facto government spending.
13. California, Illinois and New Jersey have BBAs; what does that tell you?
14. Greece, Italy and France have anti-deficit laws but are in or near bankruptcy.
15. A BBA would be the only part of the Constitution subject to waiver/exception.
16. The tax code can be larded with tax expenditures, incentives and earmarks.
17. Don’t forget mandates; the Obamacare mandate survived judicial scrutiny.
18. A budget can be balanced via tax increases instead of spending cuts.
19. You can’t take the politics out of politics. Watch for unintended consequences.
20. There are myriad paths around, through, over and under a BBA to eviscerate it.
21. A BBA would beguile us into falsely believing the crisis is permanently solved.

The debt crisis is misunderstood. At its heart, it is a moral crisis, not an economic crisis. The debt crisis also is misnamed. It is a spending crisis not a deficit or debt crisis and in the future MLLG always will refer to it as the spending crisis. It can’t be solved by artifices like a BBA. It can’t be solved until the American people make some incredibly difficult and painful choices, which they are not yet prepared to make. Moreover, the USA has, in all likelihood, already passed the point of no return.

If a BBA can’t work, can anything else work? Since we really are in a spendingcrisis, a hard constitutional spending cap is a better alternative. Switzerland (Article 126) and Hong Kong (Article 107) have constitutional spending caps that work as did Colorado (TABOR) for many years until voters opted for a “time out” in 2005. A hard spending cap takes tax increases off the table and is much better than a BBA; however, spending caps are subject to most of the same 21 problems noted supra for BBAs.

The ineluctable and bitter truth is nothing will work because we have dug the hole too deep and are blissfully continuing to dig it deeper. Also, there isn’t enough time. Simply to freeze the debt ratio at its present level requires permanent spending cuts of $1.25 trillion a year, equal to over 25% of federal government spending, most of which must come from entitlements. This is impossible politically and absolutely nothing will happen until America is deeply enmeshed in the worst crisis of our time.