Budgeting

With the bargaining chips at the table for debt reduction talks, we expect to see the partisan dreams of each party spilling over into the public discourse. Raising taxes, reforming entitlements, cutting wasteful government agencies... Rarely can a deal be mentioned without the deal-breaker (as evidenced by the current debt ceiling standstill). One idea floated by many Republicans and even some conservative Democrats is an amendment to the U.S. Constitution demanding a balanced budget from Congress, similar to most state budget arrangements. The government would not be able to pass a spending plan that exceeds its income. While it is generally championed by anti-tax fiscal conservatives, this plan will ultimately lead to new taxes and greater budget peril. And with an unstable population leading into the future, a balanced budget amendment is little more than another unfunded mandate.

State and local elected officials hate unfunded mandates. These decrees from higher government force them to act in a certain way (usually very costly) without any funding to back them up. Conservatives like to take on these mandates as another example of government interference and expansion. Yet in the heat of the budget crisis, an amendment forcing the hand of budget writers is ironically a call for another strict government mandate. It forces more decisions like we face now: do we make up the difference through budget cuts or by raising taxes? There is definitely no guarantee that Republicans will have the leverage they currently have to shape the budget, and the future might see an administration with more power to raise taxes. Even worse, when we run out of budget cuts, painful taxes are the only other option.

We cannot confuse a balanced budget amendment with an easily balanced budget. It will not be simple to balance a budget every fiscal cycle, especially with the ups and downs we experience in the economy. When we entered the recession, had we had this amendment we would have no other option than to make painful cuts in programs like social security and Medicare. However, once the economy recovers, we suddenly have more money to float to these programs. This leads to a lot of problems. Do we consistently increase and decrease social security checks to seniors? Do we allow people to gamble their retirement on whether the government will return the money they paid in? On entitlement programs, we are better having a meaningful reform (which will help balance our current budget) with the elasticity to adjust to future economic changes.

A second budget crisis we would set ourselves up for is a wartime power struggle. Congress would then be forced to either lift the amendment or enact further cuts to other government programs that people rely on. Wars are certainly not cheap (as we know all too well), and I can't imagine cutting education so we can involve ourselves in another conflict. However, these are the choices we would have to make. The ultimate lesson is: our budget is too unpredictable to demand a balanced budget every year. We have seen the painful cycling of an economy, but the stock market will become no more stable with an all out partisan war every economic cycle. Think partisanship is bad now? Just wait. A balanced budget amendment might be politically popular right now, but when partisan gridlock slows or stops the services people depend on, the appeal will soon turn to frustration.

The evidence does not stop there. Demographic trends show an increasingly aged population. Social security and Medicare are funded through young and working individuals. Entitlement programs like these are considered "mandatory spending" in our budget, meaning we must pay out our obligations to those who are eligible. This places an increasing burden on our young taxpayers. Though it is clear we will need some reform, we cannot increase the strain wrought by a balanced budget amendment. These programs would consume our budget and our political willpower, and set us on a more unsustainable path than we are on right now.

Aside from the support by members of Congress and the consideration of even our top political leadership, the public generally supports a balanced budget amendment in theory. People want to see a budget that works for us. However, when the question is broken down even further, the public does not want taxes to be raised or social security to be drastically cut to meet an exact number. The solution is this. We need a balanced budget whether we like it or not. We cannot go on spending our way out of economic viability. We need significant reform and true fiscal responsibility. But we also need the option to work with our budget in the longer term, not every single cycle.

To extend the metaphor used by balanced budget proponents: a family needs to balance their budget. They cannot take on a debt load as crushing as we already have. However, a family does have the option to take out small loans to invest in solutions that are right and good for themselves and others. Most homeowners have a long-term home mortgage. When purchasing the vehicle that drives them to work, many people take out a small car loan. Even for paying the bills that keeps their family fed and housed, people use credit in manageable amounts for the good of their family. We need flexibility to honestly address our budget. We must be responsible.

It sounds hypocritical to demand a balanced budget without a balanced budget amendment. In my judgment, we cannot afford to limit our options when it comes to budget fixes. I am a consistent supporter of debt reduction and budget solutions that are substantial, but our future depends on our innovative solutions, not unfunded mandates from the past. We can balance our budget without being told to, and the American people can check their politicians through the mandate of free and open elections. We can keep our country free by not limiting our possibilities and potential.