Budget Amendment: What Comes Next?
THERE'S nothing wishy-washy about budget expert Stanley Collender's view of the balanced budget amendment to the United States Constitution. "This whole effort is nothing but a scam," he says of yesterday's scheduled vote on the issue in the House of Representatives.Skip to next paragraph
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The director of federal budget policy in Washington for Price Waterhouse, Mr. Collender predicted Wednesday that the House would pass the measure with more than the two-thirds majority needed. Some opposed representatives, he said, seeing that passage was likely, would climb on the bandwagon so they could tell their constituents they were fighting for a balanced budget.
"A bunch of members of Congress and the president are pandering rather than leading," Collender says. "Substance has nothing to do with this. It is politics."
Last week a group of 447 economists from across the nation, including seven Nobel laureates in economics, warned that the proposed amendment is a "misguided" initiative that would produce adverse economic consequences.
Collender says it probably wouldn't matter if every economist and political scientist in the country opposed the amendment. It would still pass because Congress is afraid of an electorate disenchanted with massive deficits.
The Senate will also pass the measure, Collender says. It could well be ratified by the necessary three-fourths of state legislatures "in two to five years."
What next? he asks. "What happens if Congress disobeys a constitutional amendment. Who would have a right to take them to court? Probably no one." Law enforcement agencies widely ignored the prohibition amendment.
Courts have taken over and administered school districts that have not obeyed civil rights laws. But would the Supreme Court really take over the duty of Congress and impose a new tax or cut some programs to balance the budget? Collender asks.
Would Congress itself be better able to make decisions on tax or spending measures than it is now just because of the existence of the amendment? It would face the same tough choices. Wouldn't Congress be more likely to raise taxes than cut spending? he asks. Taxpayers might generally prefer the latter.
"There is no answer to those questions," Collender says. "Ultimately the amendment could lead to more frustration rather than less, and more disaffection with the process than less."
Collender argues that cutting the budget deficit is not as simple as many believe. He guesses that 99 percent of federal spending cannot be classified as waste.
Moreover, he notes, $925 billion of the $1.5 trillion budget is accounted for by several items impossible or difficult to cut. One is about $250 billion in interest payments on the debt. Another is $280 billion in defense spending which Congress has been slow to slash because of its impact on the economy of individual districts of its members. A third is $270 billion of Social Security payments, protected by the powerful lobby of those retired. A fourth is rapidly rising Medicare and Medicaid payments ar ising from programs which Washington is having great difficulty reforming. Since only $575 billion is left after these outlays, eliminating a $400 billion deficit would come close to wiping out all other federal programs - or result in major tax hikes.
Actually, the deficit in fiscal 1992 ending Sept. 30 will come out between $360 billion and $380 billion, Collender estimates.
Gert von der Linde and Richard Hokenson, economists with the brokerage house of Donaldson, Lufkin & Jenrette, have projected the likely deficit for this fiscal year to be $382.5 billion. That's a bit less than the official prediction of $399.4 billion.
Federal receipts are up 1.5 percent in the first seven months of the current fiscal year from the same period in the previous fiscal year. Outlays are up 9.7 percent. The budget anticipated a spending increase of 11.5 percent for the full year. Congress, however, has limited the funds provided those federal agencies cleaning up the savings and loan catastrophe and more limited banking troubles. So these agencies are not spending at the budgeted rate.
"Nothing will reverse the federal budget mess except some form of crisis," the two brokerage house economists say.
Will Congress ever prove the skeptics wrong?