Sunday, July 24, 2011

The GOP & the national debt: A history of symbolism and hypocrisy

Clinton's surpluses, Bush's deficits & the value of balanced budget amendments • Debts don't matter, perception does • GOP fights responsibility to govern • Symbolism over solutions • GOP laws protect GOP lawmakers from their own irresponsibility

Constitutional amendments aren't a laughing matter, but they quickly become the butt of the joke and the source of mocking ridicule when they are pursued as a blatant sabotage tactic meant to undermine the economic recovery and score political points in the lead up to the 2012 election.

As if in revolt against their responsibility as leaders, Republicans have sidestepped the real debt negotiations in Washington, D.C., and have instead proposed balanced budget amendments in the House and Senate that ignore both the economic repercussions and the partisan political climate required for passage of such measures.

Similar to their retreat from debt ceiling negotiations and their hollow, half-hearted attempts to repeal President Obama's health care law, Republicans are demonstrating to the American people that they would rather rile the conservative base with symbolic gestures and partisan votes than offer legitimate solutions and workable compromises that help solve the real problems facing the United States.

Here's why a balanced budget amendment won't happen, why it shouldn't happen, and why Republicans don't care one way or the other if it does happen.

A Brief History
Congress hasn't voted on a balanced budget amendment since 1997.

Similar to GOP leaders today, Republicans in the 1990s so feared the effects of growing debts that they sought a balanced budget amendment to the Constitution, as they believed only a legal requirement would be a strong enough motivation for the government to balance its books.

Their efforts failed, but President Clinton kept his vow to eliminate annual deficits without a balanced budget amendment. By the end of his second term, Clinton had amassed a budget surplus of nearly $560 billion, prompting both the Office of Management and Budget and the nonpartisan Congressional Budget Office in 2001 to predict budget surpluses reaching $5.6 trillion and the complete elimination of the national debt by FY 2011. 

Obviously that didn't happen, as a swift change in fiscal priorities by Clinton's successor erased the surpluses within a year. During his eight years in the White House, President Bush would never sign a single balanced budget bill.

The American Presidency Project

What's noteworthy here is that Republicans sought permanent measures to balance the budget under an administration that didn't need a constitutional amendment to reach such ends, then abandoned the strategy for the next 14 years while a Republican president added $4.97 trillion to the national debt over his two terms.

Within a year of another Democratic president's election, Republicans were once again talking about a balanced budget amendment. On Tuesday, July 19, the Republican-controlled House of Representatives brought a bill to a vote with that end in mind.

As a general observation, the fact that Clinton created budget surpluses without a balanced budget amendment says something about the necessity of such measures. The fact that Congress will forever retain the power to say no to a president’s spending initiatives only further undermines the value of a balanced budget amendment.

The Potential for Fiscal Sanity
In response to President Obama's weekly radio address on July 16, Sen. Orrin Hatch (R-Utah) reminisced about the good old days – or day – when he nearly saw his proposed balanced budget amendment enacted. It failed by one vote.

"Think of how different our fiscal picture would be if we'd passed one in 1997," he said. "Fourteen years later, our nation faces a debt crisis of epic proportions. Our national debt has gone from roughly $5 trillion in 1997 to over $14 trillion today. That's more than $45,000 for every man, woman, and child in America."

Indeed, things would be different.

Had Congress found that last vote, and had three-quarters of the states voted for ratification, as is required to amend the constitution, the 1997 bill, which was slated for implementation in 2002, would have severely hampered President Bush's agenda.

Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless three-fifths of the whole number of each House of Congress shall provide by law for a specific excess of outlays over receipts by a rollcall vote.

With a deficit of $377 billion in FY 2003, the second round of Bush's tax cuts would never have become law, as a BBA would have required 67 Senate votes to allow spending to exceed revenues. The 2003 tax cuts squeaked by with a mere 51 votes – and that only after Vice President Dick Cheney, the Senate president, ended a 50-50 deadlock with his tie-breaking vote.


Arguably, the 2001 tax cuts wouldn't have passed, either. Many Democrats were on the fence about the estimated $1.7 trillion cost, and many economists already were predicting budget deficits within two years as reports warned of exaggerated estimates for GDP growth and significantly lower surpluses. If a BBA had been in place in 2001, the 58 votes in the Senate wouldn't have been enough to make them law, either.

Other than the wars, which undoubtedly would have been cut short due to spending restraints, Bush's other cash cow, the Medicare Part D prescription drug program, also would have failed in the Senate for lack of a supermajority.

If Republicans had been as worried about deficit spending during Bush's spend-thrift years as they were during Clinton's surplus years, we'd be better off for it, financially. The pock mark on our national conscience that is the Iraq war would have ended at "Mission Accomplished." The government's books would be in the black. The debt likely would have been paid off.

That said, Congress didn't need a balanced budget amendment in order to keep President Bush in check. The simpler solution to excessive spending is to vote down any unnecessary spending initiatives that add to the deficit.

The Assurance of Fiscal Doom
There are two sides to every coin, and on the other side of the balanced budget debate there is the damning economic impact of such strict financial obligations in times of recession.

In what now ought to be regarded as prophet-like foresight, President Clinton and the majority of Democrats opposed the GOP's balanced budget amendments in 1990s on the grounds that it would spell economic doom in the event of a future downturn.

When faced with a strong Republican majority in Congress that was intent on passing a balanced budget amendment, Clinton softened to the idea, but with conditions: "I don’t believe we need it," he said, a statement he was already in the process of backing up, "but if we have it, it ought to be able to be implemented in a way that actually works and gives the country what it needs to manage a recession because... someday down the road we’ll have another bad patch in the economy."

When the Great Recession hit, federal revenues plummeted nearly $400 billion in two years, falling in 2009 to a near-60-year low of 14.8 percent of GDP. Under a balanced budget amendment, that $400 billion deficit would have to be offset with a) spending cuts and/or tax increases, or with b) deficit spending legislation to allow the government to spend more than it collected, both of which would have required supermajorities in Congress.

Government Receipts vs. Outlays, 1962-2009

Given the partisan political climate in D.C. today, it's safe to say that a BBA would be economically disastrous. With supermajorities required for deficit spending, America would have lost an additional 3.3 million jobs during the Great Recession, as Congress would not have had the votes needed to pump $800 billion into the economy via the 2009 stimulus bill (which passed in both houses of Congress with only simple majorities). When the CBO made its 3.3 million estimate, unemployment was 9.7 percent, with 15 million people out of work. Without the stimulus bill, unemployment in would have reached 12 percent.

And that doesn't include however many more workers would have been added to the unemployment statistics if the government let the auto industry go bankrupt, if Congress had let the banks crash, and if Obama had ignored the housing crisis.

As Clinton warned Congress in the 1990s:

The balanced budget amendment is, in the first place, bad economics. As you know, the Federal deficit depends not just on Congressional decisions, but also on the state of the economy. In particular, the deficit increases automatically whenever the economy weakens. If we try to break this automatic linkage by a Constitutional amendment, we will have to raise taxes and cut expenditures whenever the economy is weak. That not only risks turning minor downturns into serious recessions, but would make recovery from recession far more difficult. Let's be clear: This is not a matter of abstract economic theory. Contractionary fiscal policy in the 1930s helped turn an economic slowdown into a Great Depression. A balanced budget amendment could threaten the livelihoods of millions of Americans. I cannot put them in such peril.

He didn't put them in such peril. And neither will President Obama.

Political Playmaking 
Passing a constitutional amendment with majority control of only one branch of Congress isn't an easy task.

Republicans know this. Fortunately, they don't care. As backward as it may sound, their BBA proposal isn't about taking action. It's about symbolism.

Like every major legislative initiative Republicans have fought for this year, the party's proposal to amend the Constitution has nothing to do with achieving pragmatic and effective legislative solutions to real national problems. It has to do with perceptions.

The Republican-controlled House of Representatives voted on Tuesday, July 19 on a bill that would cut spending and balance the federal budget.

The "Cut, Cap, and Balance" bill passed along party lines in the House. It is doomed in the Senate, and the president has already threatened a veto if a miracle happens and it somehow receives a majority in the upper chamber.

As evidence to just how serious Republicans are about lowering the debt and balancing the budget, the "balanced budget amendment" portion of the bill was not an actual amendment. It was a call for an amendment, which explains why it passed the House without a two-thirds majority. 

Republicans essentially drafted a bill that said, "We think the government should cut spending, cap total outlays based on average GDP growth, and send a balanced budget amendment to the states for ratification, but we're not actually going to write a bill that accomplishes those ends."

Sen. Hatch's latest balanced budget amendment faces the same hurdle the House bill does: odds. Though it has the support of every Republican in the Senate, "every Republican" is only 47 votes, far short of the 67 needed to send the bill to the states for ratification.

But that doesn't matter.

It doesn't matter what Republicans accomplish, or even that they've failed to uphold virtually every promise on which they based their 2010 midterm election campaigns. It doesn't matter that "Obamacare" is still in place or that the deal they negotiated in April to cut spending by a full $100 billion actually increased spending by more than $3 billion.

What matters is that they appear to their constituents as fiscal hawks who fought to the death against Obama's "socialist" regime. Effective governing, in the eyes of the GOP constituency, means refusing to negotiate even if the country's financial solvency is on the line. This strategy works out quite well for Republicans considering that every budget proposal they've offered would tank the economy and add to the already high unemployment level. (Not implementing any of their proposals actually saves them the embarrassment of having to defend the results of those proposals.)

Politics for Republicans is about symbolic legislative maneuvers and ideological posturing. Because they won't even attempt to lobby Democrats for their support, a balanced budget amendment will meet the same fate as their health care repeal attempts.

As the past six months have shown us, real solutions to real problems don't matter.

The Party of Symbols is waging a shadow war.


Related Links:
David Broder, in 1994, wrote that the largest flaw in the BBA proposal "is that it would give a minority of the Congress permanent veto power over fiscal policy by requiring a three-fifths vote for a deficit budget."

In The New York Times, Nov. 6, 1993, Clinton says of the GOP's BBA proposal: "[I]t would promote political gridlock and would endanger our economic recovery."

From the Los Angeles Times, Nov. 6, 1993: "Government and private economists generally agree that a quick move to actually bring the government's books into balance – either by cutting spending or by raising taxes – would knock the economy back into deep recession."

Jon Perr on the GOP's BBA farce.

The New York Times: Bush signs 2003 tax cuts.

The cost of war: a running tally.

Paul Krugman on the Bush Tax Cuts.

(Cross-posted at Muddy Politics.)

Labels: , , ,

Bookmark and Share


Post a Comment

<< Home