Debt Deal & the Balanced Budget Amendment

Because a Balanced Budget Amendment (BBA) is the only type of budget reform capable of binding future Congresses, it is disappointing that the pending debt ceiling bill does not contain the Boehner bill’s requirement that a BBA be approved by Congress and sent to the states.  However, there is some good news for BBA supporters in the bill (the Budget Control Act of 2011 or BCA).  It contains not just a requirement that both houses of Congress vote on a BBA – the sole focus of most press reports – but also an incentive for Congress to approve a BBA.


To understand the incentive, it is necessary to clarify some confusion about the relationship between 1) the bill’s BBA provisions – providing for a debt limit increase of $1.5 trillion this winter if the BBA is approved by Congress; 2) the spending cuts of up to $1.5 trillion to be recommended by a special Joint Committee – resulting in a debt limit increase of up to $1.5 trillion if the cuts are approved by Congress; and 3) the $1.2 trillion in across-the board spending cuts triggered automatically if #2 fails – resulting in a debt limit increase of $1.2 trillion this winter.  Reliable sources on the Hill have confirmed that, while Congressional approval of a BBA is a substitute for the Joint Committee cuts in the sense of enabling the $1.5 trillion debt limit increase, that substitution would not eliminate the automatically triggered cuts.

Some BBA supporters would have preferred that passage of a balanced budget amendment eliminate the triggered cuts, in order to give Democrats the maximum incentive for coming around to support the amendment.  Nonetheless, the BCA was specifically designed to incentivize Congress to choose action – approved cuts or passage of the BBA.  For example, either option provides the extra $300 billion in debt limit hikes necessary to see the Administration through the election if the economy and thus revenues continue to falter.


While the vast majority of Congressional Republicans need no incentive to vote for a BBA, most Democrats currently oppose the amendment.   The hope for BBA supporters is that moderate Democrats can be turned around through a combination of public pressure – numerous surveys show that a large majority of American support a BBA – and a preference for wishful thinking – specifically the hope that the BBA won’t get the required approval of 38 states – over immediate, hard choices about what cuts to make.

The requirement that constitutional amendments be approved by two-thirds of each house is a steep obstacle, but it’s hardly an insurmountable one.  In 1995, a balanced budget amendment got broad bipartisan support in Congress, breezing to passage in the House by a 300-132 margin and failing in the Senate by just one vote.

Interestingly, a united GOP could, intentionally or not, increase the probability of Democrats opting for a BBA by cutting off the other option for Congressional action – that is, by blocking approval of the $1.5 trillion in cuts in the Joint Committee or in the House.  Whether the increased odds of BBA passage are worth the loss of the Joint Committee cuts depends on what sort of BBA gets out of Congress.  The BCA does not address the details of a balanced budget amendment.  But I will: a good balanced budget amendment is one that would cap federal spending at about 18% of GDP, require super-majorities in Congress for tax increases, and mandate a balanced budget fairly quickly, say five years after ratification.


The BCA gives supporters of a balanced budget amendment at least two months – a BBA vote is mandated sometime between this October and December – to translate broad public support for a BBA into the sort of political momentum that would make it difficult for moderate Democrats to vote against the amendment.  Regrettably, the BBA did not take center stage in this summer’s debt ceiling debate until shortly before the House voted on it as part of the Cut, Cap & Balance bill.  As a result, the momentum-building process for the BBA got a late start.  The time between now and October gives BBA supporters plenty of time to erase the disadvantages of a late start.

In sum, while the BBA provisions in the Budget Control Act fall far short of our legislative ideal – a requirement for Congressional approval of a BBA with both spending caps and a super-majority requirement for tax increases – they are better than what’s been described in most press reports and offer some modest hope to BBA supporters.

Finally, I note that while constitutional budget reform is likely the most reliable approach, some permanent quasi-structural reform has already been achieved this summer with the establishment of a new normal for debt ceiling increases.  Until now, the debt ceiling increases that enabled and fueled today’s out-of-control budget deficits were essentially automatic – devoid of debate and largely unopposed.  I suspect that will never be the case again, thus ensuring a different budget playing field in the years to come.


Cross-posted at the Committee for Justice blog.


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