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Balanced Budget Amendment

George Noga Budget (Federal)

Balanced Budget Amendment

BBAs are doomed to fail – far too little – far too late

GEORGE NOGA
NOV 5, 2023

In recent months, highlighted by the hi-jinks in Congress, there have been renewed calls for a balanced budget amendment, or BBA. Over 80% of Americans say they favor a BBA to the Constitution. Is a BBA good medicine that would help get us on the right fiscal path; or, is it smoke, mirrors and maskirovka that would beguile Americans into falsely believing government is making progress toward solving the spending crisis? This post resoundingly answers that question.

a pile of twenty dollar bills sitting on top of each other

The threshold issue about a BBA, is the definition of budget. Does it apply to total government spending, to the so-called primary budget (which excludes interest on the debt) or only to non-defense discretionary spending? Any BBA excluding interest is worthless. That is akin to a family with ginormous debt claiming its budget is balanced excluding interest on its mortgage, auto loans and credit cards. Interest on the debt soon will balloon to $1.5 trillion, as rapidly maturing low-rate debt is being replaced by significantly higher-rate debt. A BBA that addresses only the primary budget would result in a $1.5 trillion – and rapidly increasing – annual deficit.

Ten Biggest Flaws Of a BBA

There are many questions and flaws with a BBA; following are only the top ten.

  1. How is budget defined; what does balanced mean?
  2. Do we balance annually or over an entire economic cycle?
  3. Are wars and natural disasters excluded and how are they defined?
  4. How do we deal with off-budget entities like Fannie, Freddie and USPS?
  5. How about supplemental funding legislation?
  6. How are loan guarantees handled; do they constitute spending?
  7. Can regulations be used instead of taxes to shift spending to the private sector?
  8. Are there any restraints on imposing new user fees?
  9. What about using the tax code to fund expenditures and incentives?
  10. Are mandates (such as Obamacare) permitted?

It is clear from the above that there are myriad paths around, through, over and under a BBA to eviscerate it. There would be untold unintended consequences such as imposing tax increases instead of cutting spending to comply with a BBA. It is impossible to take the politics out of politics.

Hard Truths About Balancing the Budget

  1. Politicians could define a BBA to include only non-defense discretionary spending. They could allow for many years of transition and backend load the spending cuts – many of which will never happen. Even this very limited objective (it excludes, entitlements, interest and defense) is an impossibility as it would require spending cuts approaching 100% of the remaining budget.
  2. Politicians could seek to balance only the primary budget. However, even that is impossible. In FY 2022-23 the US had a deficit of $2 trillion which includes interest of $900 billion. Balancing the primary budget would entail cuts of $1.1 trillion – equal to 20% of all spending including Social Security, Medicare, pensions and other mandatory spending. If cuts to Social Security and Medicare are excluded, the remaining budget would have to be slashed by 60%.
  3. Balancing the total budget – except for defense and interest – would require an immediate and permanent cut in everything else, including Social Security, Medicare and pensions, of over 40%. This also is an impossibility.

The ultimate hard truth is America is past the time when even drastic spending cuts can prevent a crisis. A BBA would buy us only a few more months of spending madness.

The ineluctable truth is that nothing will work no matter how the budget is defined because we have dug the debt hole too deep and we still are furiously digging it even deeper. If a meaningless BBA were to pass, politicians would spare no hyperbole congratulating themselves and Americans would be beguiled into believing something positive had happened when, in reality, it was a giant nothingburger.

It Really Is Not a Spending Crisis

Calling it a spending crisis is a misnomer. At its heart it is a moral crisis that cannot be addressed until Americans understand its gravity and are prepared to make some incredibly difficult and painful choices. The ultimate hard truth however is that we are well beyond the time even for difficult spending choices to make a difference. We can delay the crisis, but cannot prevent it. A balanced budget amendment would be nothing but a mirage to buy America a few more months of spending madness.

© 2023 George Noga
More Liberty – Less Government, Post Office Box 916381
Longwood, FL 32791-6381, Email: mllg@cfl.rr.com