Governor Perry's preferred method to deal with federal overspending.
But what is popular is not necessarily a good idea. Let's look at the history of the U.S. budget and show how a balanced budget amendment would work and see if it seems like a great idea for the federal government.
A look at Federal Debt
One important fact to keep in mind when considering a balanced federal budget is that the United States government has always been in debt. Budget surpluses have occasionally allowed for a large portion of that debt to be paid back, but it has never been paid off. Even when it has been mostly paid off, a war usually ensued that rapidly escalated the debt back to a high level. For a recent picture of the debt, here's an image showing it since 1940, with a sharp increase right at the start due to WWII.
Since the United States is still involved with two wars and also invests a significant amount of money into combating worldwide terrorism, it doesn't seem out of place for there to be significant government debt right now. Perhaps once President Obama's withdrawal plan for Afghanistan is completed it will be possible for the debt to be reduced significantly. Wars are expensive, so it shouldn't be a surprise to anyone that the debt has kept increasing.
Military supplies brought to you courtesy of the national debt.
The addition of revenue loss due to the large tax cuts passed during the last decade basically guaranteed that the national debt was going to be quite large. With the description of the current situation out of the way, let's look at the inner workings of a balanced budget plan for the government.
How a Balanced Budget Amendment Works
Fortunately, it's easy to see how a balanced budget amendment works since most states have one in place. They force the state's legislature to make up for any budget shortfalls each year by reducing spending or increasing taxes to ensure that the state does not fall into debt. There isn't much tolerance for increases in taxes lately in the U.S. so states have had to rely on spending cuts in order to meet their balanced budgets. This has resulted in layoffs of state employees and deep cuts in spending due to falling tax revenues stemming from economic turmoil from the recession. Although this has been painful for vulnerable segments of society that are reliant on state programs for support, state spending cuts typically are not that noticeable for citizens who can support themselves financially. Unfortunately, that would probably not be the case for federal spending cuts.
State vs. Federal Balanced Budget Amendments
The biggest reason that state spending cuts are not all that noticeable for most of the population is that a lot of the most important spending, such as Defense, Medicare, and Social Security, takes place at a federal level. The federal government also gives a lot of money to states to fund education and other state programs. So, even if Maryland decided to not spend any money for a year, they would not be vulnerable to foreign invasion since they're still protected by the national military and some services, particularly those directed toward the elderly, would still be provided courtesy of federal spending. Additionally, while it would be painful for residents of Maryland, the rest of the country would likely not even notice.
In comparison, if the federal government needed to cut back on spending suddenly, the entire country would feel the impact. The federal government spends trillions of dollars each year, including billions of dollars that go to each state in the union. The problem with a balanced budget amendment is that the federal government responds to major challenges for the country.
Such as this, for example.
So, if something like Pearl Harbor were to occur today, the states are not responsible for the response to it. It's the federal government that has to rebuild the Pacific fleet and create a military capable of fighting in Asia and Europe. This is why it's acceptable for states to have balanced budget amendments, they are not the level of government that responds to large-scale disasters. Even with major floods and hurricanes, it's the federal government that provides the bulk of the money for rebuilding efforts.
One important point to bring up is that proponents of balanced budget amendments do typically allow for an exception to be made in times of war and national emergency. Congress would be able to vote for a time of national emergency to be declared so that the need for a balanced budget could be ignored for a few years while the war or whatever is resolved. However, the current political environment in Washington shows that it may not be possible for Congress to agree on whether the country is in a major emergency or not. Earlier this year, Republicans and Democrats could not even come to agreement on raising the federal debt limit, even with months of warning, resulting in the United State's credit rating being reduced for the first time. Compromise just seems to be impossible in the government right now, so I wouldn't count on the political parties putting aside their differences to allow a little matter like a major war to determine that the balanced budget needs to be ignored for a year or two.
Particularly when some members of government point to federal spending as being a worse enemy than the Nazis.
The Potential Consequences of a Balanced Budget Amendment
So, let's say the worst case scenario of a major war or other unanticipated and extremely expensive disaster occurs and Congress doesn't agree to lift the balanced budget requirement to deal with the problem. Let's use the example of the wars in Iraq/Afghanistan as a new budget issue. They have cost around $3.7 trillion so far. That number is as large as the entire yearly U.S. budget! Now, that cost has to be spread over 10 years of budgets, but that's still a hell of a large unanticipated expense. Well, here's the budget:
What do you want to cut out?
Basically, no matter what part of the budget you want to cut, it will be a hell of a painful cost for the country. Perhaps that's part of the point of a balanced budget amendment, it makes for some really hard decisions that maybe the United States should have to make. But still, do you really want those decisions to have to be made while we're in the middle of a national disaster? In this instance, I think Rick Perry and other supporters are a little off the mark in what needs to be done to fix the U.S. budget. Yes, it needs to be reduced, but it should not be forced in this manner.
Without a serious discussion on the budget, we may end up not aiming at the right parts to cut.
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