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Five Faults of Balanced Budget Amendment Outlined by Center on Budget and Policy Priorities and Citizens for Tax Justice

Floor Speech

Location: Washington, DC

* Mr. JACKSON of Illinois. Mr. Speaker, the First Fault: a Balanced Budget Amendment would damage the economy and make recessions deeper and more frequent.

* Under a Balanced Budget Amendment, Congress would be forced to adopt a rigid fiscal policy, requiring the budget to be balanced or in surplus every year, regardless of the current economic situation, or threat to the nation's security.

* A sluggish economy with less revenue and more outgoing expenditures creates a deficit. As we've seen from recent events, a deficit necessitates economic stimulation to reverse negative growth.

* That is why in the last session of Congress, the American Recovery and Reinvestment Act invested in roads, bridges, mass transit, and other infrastructure, provided 95% of working Americans with an immediate tax cut and extended unemployment insurance and COBRA for Americans hurt by the economic downturn through no fault of their own.

* If Congress were forced to function under a Balanced Budget Amendment, deficit reduction would be mandated, even more so during periods of slow or stalled economic growth, which is the opposite of what is needed in such a situation.

* This consistently proposed constitutional amendment risks making recessions more common and more catastrophic for middle class families, seniors, veterans and the poor. Under such an amendment, Congress is stripped of any power to adequately respond.

* The Second Fault: A BBA would risk default and jeopardize the full faith and credit of the U.S. government while simultaneously challenging the Separation of Powers.

* A BBA would bar the government from borrowing funds unless a three-fifths vote in both houses of Congress permitted a raise in the debt limit. Under such a scenario, a budget crisis in which a default becomes a threat is more likely, and because of the limits placed on the fluidity of the debt ceiling, that default becomes more likely to occur.

* After a default of only a few days, long term impacts would quickly appear. Confidence in ability of the U.S. to meet binding financial obligations would erode almost immediately. The government pays relatively low interest rates on its loans because it pays its debts back in full and on time. A default would mimic an earthquake, shaking confidence in the U.S. on a global scale, resulting in exploding interest rates and aftershocks felt in our national economy.

* The international economy would also succumb to the rumbling of this potential disaster, and our deep connection to it would cause even further chaos here at home.

* Other BBA proponents argue that since states have to balance their budgets, so should the federal government. Indeed, many states are required to balance their operating budgets, but not their total budgets. No such distinction is made by a BBA.

* ``Rainy-day'' or reserve funds, which states can draw on to balance their budgets, are prohibited by a BBA. Many states operating under a BBA require the governor to submit a balanced budget, but do not require actual achievement of it. Some states allow governors to act unilaterally to cut spending in the middle of a fiscal year. This condition of the BBA would violate the federal Constitution's separation of powers.

* The Founding Fathers were deliberate in their construction of government, and the separation of powers serves as a cornerstone in our democracy. Each branch has certain powers and limitations. Congress, the Courts, and the President work together, but in distinct ways, to move America forward. The threat of judicial involvement in matters of the budget, is real and present under the BBA.

* The BBA would threaten the balance of power. It diminishes the authority of Congress, as the elected Representatives of the people, to have the final say on taxes and spending. Mr. Speaker, what purpose does this body serve if this amendment passes? Should we broaden the scope of Judicial Review granted to our federal courts?

* By subverting the balance of power between the branches, this body steps on to a slippery slope of reassigning authority and moving away from the values inherent in our constitution.

* The Third Fault: A BBA would lead to reductions in needed investments for the future.

* Since the 1930's our nation has consistently made public investments that improve long-term productivity growth: in education, infrastructure, research and development. These efforts encourage increased private sector investment, leading to budget surplus, and a thriving economy. A Balanced Budget Amendment, which requires a balanced budget each and every year, would limit the government's ability to make public investments thereby hindering future growth.

* For years, conservatives have abused the debt and the deficit as a springboard from which to argue for smaller government and cuts to programs that serve as social safety nets to American families. Although we must consider the debt and deficit, the larger and more significant issue is the nature of the debt--what created it.

* If you invest fifty thousand dollars in a business, a house, or an education, you can expect future returns on your investment. If you ``invest'' the same fifty thousand dollars in a gun collection and ammunition, what are the future investment returns? Both investments result in a fifty-thousand-dollar debt, but only one results in returns that can transform that debt into a long term gain.

* Social investments provide the potential for greater returns in the long run, in the same fashion as personal investments. Even small expenditures on social programs lay a foundation for great wealth in the long term.

* If the nation chose to invest over a five-year period, $1.5 trillion in the building of roads, bridges, airports, railroads, mass transit, schools, housing, and health care, we would create a debt.

* But the increased ability of companies to interact and ship their goods over well paved and planned roads, the new businesses that would sprout around a freshly built or newly expanded airport, the higher wages of a student who was well educated and a le to attend college resulting in more tax revenue, the improved productivity of employees at their healthiest, would eventually result in greater returns for our country.

* The extension of Bush era tax cuts for corporations and the rich, brought about some short-term stimulus of consumer spending. But, similar to Reagan's tax cuts which resulted in record government deficits and debt, the long term damage outweighs the immediate effects.

* Reagan's tax cuts for the rich came at the expense of investing in our nation's need for long-term balanced economic growth. The Reagan administration neglected and cut back on our nation's investment in infrastructure, education, health care, housing, job training, transportation, energy conservation, and much more.

* The inclination of most conservatives in both parties, is to cut the debt by cutting programs for the most vulnerable among us--our poor, our children, our elderly, and minorities. This approach, however, has been proven false too many times. A Balanced Budget Amendment would take us back to this archaic and ineffective system, permanently.

* The Fourth Fault: A Balanced Budget Amendment favors wealthy Americans over middle- and low-income Americans by making it harder to raise revenues and easier to cut programs.

* Again, a BBA ultimately favors wealthy Americans over middle- and lower-income Americans. Under current law, legislation can pass by a majority of those present and voting by a recorded vote. The BBA however requires that legislation raising taxes be approved on a roll call vote by a majority of the full membership of both houses.

* Thus, the BBA would make it harder to cut the deficit by curbing the special interest tax breaks of the oil and gas industries and make it easier to reduce programs such as Medicare, Medicaid, Social Security, veterans benefits, education, environmental programs, and assistance for poor children.

* Wealthy individuals and corporations receive most of their government benefits in the form of tax entitlements while low income, and middle income Americans receive most of their government benefits through programs.

* As evidenced by the cuts that both parties agreed upon recently, its far easier to cut social welfare programs than to cut spending on our military, or to increase taxes. As long as spending is a political issue, cuts to those programs that assist those with the smallest voice in government, will always happen first.

* Raising taxes, the only option to address a budget deficit aside from cutting programs, is already a burdensome political issue. The additional requirements of a BBA further complicate the process of raising taxes. This means that the richest Americans will likely keep the benefits they receive from our government via tax cuts.

* Meanwhile, the poor lose the programs that provide them with housing, food, job training, health care, and the means to survive. This will further reinforce the growing gap between the rich, and the rest of our society: middle class, working poor, and destitute alike.

* Aside from this already distressing point, when the baby boom generation retires, the ratio of workers to retirees will fall to low levels. This poses difficulties for Social Security, since Social Security has been a pure ``pay-as-you-go'' system, with the payroll taxes of current workers paying for the benefits of current retirees.

* This was acceptable as long as today's workers could pay for today's retirees. But, in the future, when there are fewer workers to pay for more retirees, the system will be out of balance. So in 1977 and 1983, the Social Security Administration took important and prudent steps toward addressing this issue. It allowed the accumulation of reserves to be used later when needed. These changes were akin to what families do by saving for retirement during their working years, and then drawing down on their savings after they reach retirement.

* The BBA insists that the total government expenditures in any year, including those for Social Security benefits, not exceed total revenues collected in that same year, including revenues from Social Security payroll taxes. Thus, the benefits of the baby boomers would have to be financed in full by the taxes of those working and paying into the system then. This undercuts the central reforms of 1983.

* Drawing down on any part of accumulated reserves, required under present law, under a BBA would mean the trust funds were spending more in benefits in those years than they were receiving in taxes. Under a BBA, that would be impermissible deficit spending.

* The Fifth Fault: A BBA weakens the principle of majority rule and makes balancing the budget more difficult.

* Most Balanced Budget Amendments require that unless three-fifths of the members of Congress agree to raise the debt ceiling, the budget must be balanced at all times. They also require that legislation raising taxes must be approved on a roll call vote by a majority of the full membership of both houses, not just those present and voting.

* Clearly this provision weakens the current principle of majority rule. A three-fifths requirement empowers a minority (40 percent, plus one). It creates a small group, willing to threaten economic turmoil and disruption unless they get their way, with the ability to extort concessions or exercise unprecedented leverage over our national economic and fiscal policy.

* Mr. Speaker, haven't the last few weeks demonstrated how difficult it already is to reach consensus on a budget? This provision will make it simply impossible.

* Ezra Klein Argument: There is a final fault, which is not on my list, but is significant enough to mention: Ezra Klein, of the Washington Post, cleverly points out in a recent article titled, ``The Worst Idea in Washington'' that under a BBA, not a single budget of the Bush or Reagan Administrations would qualify as Constitutional. In fact, the only recent Administration which would not violate the requirements of the Balanced Budget Amendment would be President Clinton for only two of his budgets.

* Mr. Speaker, if President Reagan's budget wouldn't qualify, is this really something we should even be considering?

* Conclusion: I've listed a few, and certainly not an exhaustive list, of arguments against the Balanced Budget Amendment. The truth is the federal budget is quite unlike the fiscal practices of businesses, families, and states. Contrary to popular myth, except in times of war and recessions, the country has a conservative record of keeping deficits in line.

* Our government needs the flexibility to respond in times of economic downturn or war, in a way that businesses, families and states never have to consider.

* I've been in the House long enough to know, that when my colleagues on the other side of the aisle came into the majority with large deficits and debt, I knew their first response would be to cut social spending, weaken government regulation, and underfund protection of workers' rights, civil rights, environmental protections, you name it.

* I wish I could say I didn't see this coming. But, conservative politicians want to get the government ``off the backs'' of business, finance and industry. They are willing and ready to use the current economic situation to do it and they intend to place the burden on the backs of middle class families, seniors, children, veterans and the poor.

* The Republican budget we voted on today does just that. The Balanced Budget Amendment aims to make it a permanent fixture.

* Mr. Speaker, I know we can do better. We cannot balance the budget on the backs of middle class Americans. We need to achieve the America of everyone's dreams. The burden of that dream must rest squarely on the shoulders of every American that can carry it.

* I find it offensive that some of the most profitable corporations in this country pay no taxes and some even get a refund. I find it offensive that the richest 400 people in the country who have more wealth than half of all Americans combined have an effective tax rate of only 16.6%.

* In the words of William Jennings Bryan, ``When I find a man who is not willing to bear his share of the burdens of the government which protects him, I find a man who is unworthy to enjoy the blessings of a government like ours.'' With those wise words, I yield back the balance of my time.

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