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Balanced Budget, Yes. Amendment, No


Editorials

BALANCED BUDGET, YES. AMENDMENT, NO

Congress and the President are on the verge of accomplishing the unimaginable: agreement on a balanced federal budget by 2002. This newfound political will and governmental belt-tightening will stoke the economy, as interest rates decline and national saving and investment revive. Indeed, the Congressional Budget Office calculates that by 2030, real per capita gross domestic product could be 25% higher under a permanent balanced budget than if the budget were allowed to grow without restraint.

There's the rub: Keeping the budget in permanent balance will not be an easy task. Cuts in Medicare reimbursements to hospitals, doctors, and managed-care companies that the forthcoming agreement contains are fine as far as they go. But an aging population is pushing Medicare costs higher at a breathtaking pace, and growth in this entitlement will have to be checked permanently if the budget is to approach balance. Social Security, too, is due for some restructuring.

So what to do? Republicans think they have an answer--pass a balanced budget amendment to the Constitution and thereby ensure that fiscal discipline becomes the indispensable element of responsible government. The balanced budget amendment has enormous political appeal and at first blush seems reasonable. Most states and localities are required by law to operate in budgetary balance, the argument goes, so why not the federal government? What better way to force easy-spending legislators to shape up?

No question, budgetary balance is desirable. But seeking to achieve it through a constitutional amendment is foolish and irresponsible. The one being debated in the Senate would require the President to submit a balanced budget every year beginning in 2002 or two years after passage, whichever comes later. Congress could waive the requirement to enact a balanced budget only in the event of war or with a 3/5 vote in both houses. In the version being debated, not even recession is specifically cited as reason to waive the requirement--although the 3/5 rule could be used at such a time.

It's not appropriate to liken the federal government and its budget to the states. For one thing, Washington follows its own accounting rules. Yes, the Social Security trust fund is counted as part of the unified budget. On the other hand, Washington doesn't have a capital budget, as most states do. More important, though, the difficulty with likening the federal government to the states is that states don't fight wars, and statehouses don't finance and direct countercyclical economic policy. Of course, if Congress cuts deeply into block grants to the states to keep the budget in balance at all costs, that would effectively shift the recession-fighting burden to the states. That prospect will not be lost on governors and state legislators, who may well derail state ratification of a balanced budget amendment. It's easy to see the appeal of this legislation for members of Congress who shun the extremely tough job of cutting spending or raising taxes. But flexibility, not intractability, is what the budget-balancing process demands.


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