Senate Republicans have introduced a balanced budget amendment to the Constitution. The balanced budget part is great; it’s the rest that will sink the idea.
The Senate GOP proposal would do two things: First, require a balanced budget each year, and second, cap government expenditures at 18% of gross domestic product.
The usual rap against a BBA is that it would prevent the federal government from stabilizing the economy. But this objection can be overcome, say, by exempting automatic stabilizers like unemployment insurance or by requiring a balanced budget over the business cycle rather than annually.
The real problem with the GOP’s proposal is that it couples a popular and potentially passable provision—the balanced budget part—with a requirement that spending never exceed 18% of GDP, effectively an unconditional surrender by Democrats to Republicans in the debate over the size of government.
I’m all for small government and I’d go lower than 18% of GDP if I were in charge, but any Democrat would be out of his mind to accept that limitation. And since Senate Democrats have not lost their minds, the whole proposal—including the balanced budget part—will go nowhere.
And that may be by design: No one, in either political party, has any plans on how to balance the budget in the short-term. Even the House GOP’s pledge to balance the budget over 10 years would require some serious means testing of entitlements, something I don’t think is very good policy.
The merit of a balanced budget amendment is that it’s agnostic regarding the size of government. It merely says that, whatever amount of government you want, you have to pay for it. That’s an idea that’s worth an up-or-down vote.