Major Flaws Mar Plan For Balanced Budget
THERE are several real jewels of reform laid out in the ''Contract With America.'' But the more one looks at the proposed balanced-budget amendment, the less it glitters. Its main attraction is the claim that, if it appeared likely to be ratified by three-fourths of the states by 2002, it would create a strong incentive for Congress to work the deficit down in the intervening years. There are, however, irremediable flaws with enshrining the concept into the United States Constitution, which deals with t he broadest concepts of government and individual rights. Moreover, wrangling over the amendment in one state after another for the next several years could actually detract from the many positive things this Congress is poised to do.
What are the proposed amendment's flaws? Let's look at them:
1. A zero deficit is not necessarily the goal of fiscal policy. No matter how much or little one might be a Keynesian, it is axiomatic that revenues fall during recessions and government spending rises (at least as long as some degree of income protection exists). It is even likely that government will want to continue intentionally increasing spending during periods of downturn.
2. The definition of what constitutes the budget is not set in concrete. (I remember being financial editor of this newspaper when for the first time Social Security was incorporated into the budget.) Over the years, Congress has shown great facility for taking items ''off budget.'' With an amendment in force, the attraction of such accounting gimmicks would only increase.
3. The US government has no capital budget. A comparison is sometimes made with states, most of whose constitutions require a balanced budget. But states and localities float bond issues for capital projects, which are paid for over 20 or 30 years. Only the current paydown of debt counts as an expenditure.
Without the federal government resorting to a capital budget, one can see that some deficit spending is in the nature of capital projects, which benefit the same future taxpayers inheriting the debt. The problem in recent years, particularly during the Reagan-Bush period of an executive and legislative mismatch, was that too much of the deficit only served to bolster consumer spending and did not provide for an increase in either physical capital or human capital in the form of better education.
4. The Constitution remains a simple document. Its brevity served to set up the three branches of government and to define the federal relationship to the states. Most of the amendments, beginning with the Bill of Rights, have to do with federal guarantees of individual rights or with modifying elements dealt with in 1787 (such as the presidential succession or the direct election of senators). As important as fiscal responsibility is, the introduction of any language that would be a sufficient guide to
the federal courts in issues that would arise out of a balanced-budget amendment has no abiding place in the Constitution.
If Congress is serious about fiscal responsibility, well and good. Difficult choices must be made in the next few years to get the budget in reasonable balance. But that is what we think we have elected our Congress to do. Given the present mood of the country to get on with meaningful reform, we need to face the difficult choices that will have to be made. Hiding behind the easily pierced papier-mache of a balanced-budget amendment won't do the job for us.