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Putting Balance In A Balanced Budget


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PUTTING BALANCE IN A BALANCED BUDGET

Stop me before I spend again!" Sadly, the proposed balanced-budget amendment is nothing more than a plea by our nation's political representatives to save them from themselves and their addiction to government spending. At worst, it is an exercise in hypocrisy by people who already know what to do to cut the federal deficit but lack the political courage to do it. At best, the balanced-budget amendment will provide political cover for Congress to do the right thing and cap entitlement spending. Mangling the Constitution, however, is a pretty high price to pay for financial sobriety.

Yet it may be inevitable. Polls show that the American public overwhelmingly favors a balanced-budget amendment. But while people want to cut the deficit and slash taxes, they don't want cutbacks in government programs that benefit them. This public schizophrenia has paralyzed Washington for decades. Hence the call for a binding mechanism in the Constitution that substitutes external discipline for internal will in order to kick the national spending habit. In a society where millions are "in recovery" for all kinds of addictions, the balanced-budget amendment is nothing less than a national 12-step program. Alas, we have come to this.

If America must have a balanced-budget amendment, three caveats are essential for it to have any chance of working. First, enabling legislation that contains exceptions for economic emergencies, such as severe recessions, must be written. What happens, for example, if there is a bad recession in 1996 and the deficit jumps temporarily to $300 billion? Must Congress then be forced to raise taxes, deflating an already weak economy and making the recession much worse? No.

Second, states that must balance their budgets are also permitted to borrow money for building roads and bridges. A federal balanced-budget amendment demands a new, separate capital budget that lets Washington borrow for long-term improvements in the nation's infrastructure--from highways to information superhighways.

Third, paying for a balanced budget must be done honestly and equitably. Democrats dissemble when they say that Medicare, Medicaid, and Social Security, the largest of the entitlement programs, are off the table. Republican hints that some entitlements may be included are not sufficient. There simply can be no balanced budget without cutting them. Fortunately, the pain need not be as severe as many fear. Simply moving people out of Medicare and Medicaid and into health maintenance organizations and preferred-provider organizations could save almost $400 billion over seven years, nearly 30% of all the savings needed to balance the budget.

The best that can be said for the balanced-budget amendment is that it creates an opportunity to rethink government. Companies that reengineer themselves generate more productivity and profits than those that blindly hack costs. Now is the time for Americans and their representatives to stop whining about taxes and benefits and make hard choices about the core functions of government. Pity they don't have the true grit to do it without debasing the Constitution.


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