StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Balanced Budget Amendment is Nothing More Than Fiscal Prohibition

18 Oct 2011
Posted by Stan Collender

My "Fiscal Fitness" column from today's Roll Call explains why a balanced budget amendment to the U.S. Constitution will create fiscal speakeasies, budget bathtub gin, and bootleg spending. And we'll probably be doing the budget process Charleston too.

Under a BBA, the Bathtub Budget Gin Would Flow

By Stan Collender
Roll Call Contributing Writer
Oct. 18, 2011, Midnight

If you watched any one of the three episodes of “Prohibition,” Ken Burns’ excellent PBS series about the attempt in the early part of the 20th century to ban alcoholic consumption in the United States, it’s impossible not to see the strong parallels between that effort and the movement to add a balanced budget amendment to the U.S. Constitution.

The most obvious similarity is that Prohibition was and the BBA is an effort to enact a constitutional amendment. But there’s so much more that the comparison is almost eerie.

Although they both had their origins years earlier, both arose at the start of their respective centuries. The first was and the second is a movement that in large part pits the heartland vs. the cities. In addition, actual or pseudo-religious movements organized both and had or have supporters that are often seen as uncompromising zealots.

To be sure, the comparisons between Prohibition and a balanced budget amendment aren’t perfect. Instead of the Woman’s Christian Temperance Union, we now have the tea party. Instead of an effort to limit personal behavior with a law that bans drinking alcohol, we now have an effort to stop the government from having a budget with revenues that are less than spending.

But the biggest similarity between Prohibition and the BBA is far more obvious if you watch “Boardwalk Empire,” which has just started its second season on HBO.

“Boardwalk Empire” shows yet again the truly extraordinary lengths that Americans went to evade the 18th Amendment and the National Prohibition Act (the Volstead Act), the law that was enacted to enforce the amendment. In fact, the widespread evasion — everything from bootleg liquor to speakeasies and massive crime in spite of the often extraordinary efforts to prevent them — absolutely forced Prohibition to be repealed not that long after the amendment was ratified.

That same type of widespread avoidance and evasion that quickly doomed Prohibition is likely, if not very virtually guaranteed, to happen if a balanced budget amendment is adopted by Congress and ratified by the states.

BBA supporters disagree and say the amendment and a Volstead-like balanced budget-enabling act can be written in a way that will make the policy ironclad. The truth, however, is that no matter how it’s drafted, a BBA absolutely will be even easier to evade than was ever the case with Prohibition. After all, as many of the actual pictures that Burns used shows, bottles of booze could be and were smashed against the curbs in streets across America to make them impossible to drink. By contrast, nothing can be smashed or seized to balance the federal budget.

The first problem will be deciding which budget has to be balanced. The budgets the president submits and Congress is supposed to adopt each year all happen before the fiscal year starts. Presumably, therefore, those budgets will comply with the law if they show revenues equaling spending.

But that won’t actually mean anything because the final numbers for a fiscal year aren’t known until it’s over, and they are often very different from what was projected earlier. If the White House and Congress projected that their budgets would be balanced but there was a deficit because revenues were lower or spending was higher than expected, and if we didn’t know about it until after the year was over, getting that year’s budget back to balance would be technically impossible.

There could also be the tried-and-true bipartisan practice of taking a program “off-budget” so it doesn’t count against the budget totals. It’s not at all hard to imagine a situation where, because of the BBA, there is strong support for taking all Pentagon spending off budget so there’s no temptation to cut the military. Given the increasingly intense squawking about the defense cuts that will occur if the super committee doesn’t agree on a deficit reduction plan, evasion like that is likely to be inevitable if a BBA happens.

And that would be just the first drop of bathtub budget gin. Why not change the definition of the federal fiscal year so that it’s 12 months for spending and 18 months for revenues? How about if the government every year books the revenues from the sale of military bases, national parks and other buildings and then counts the smaller annual spending from leasing them back?

Congress and the White House could also do the equivalent of what was done during Prohibition, when sacramental wine was not included in the restrictions. The budget version would be to exempt “emergency” spending from being counted and then make everything an emergency (remember the 2000 census was funded as an emergency to get around other budget restrictions) or, as most states do, have separate capital and operating budgets and require only that the operating budget be balanced. You can’t possibly imagine what suddenly would qualify as capital spending if that were to happen.

One more gimmick leads to yet another remarkable Prohibition parallel. Federal spending could simply go underground, with Washington doing less itself and instead imposing more requirements on businesses and state and local governments.

You can almost imagine a scene such as the one in “Boardwalk Empire” where, with just a few hours to go before Prohibition goes into effect, Nucky Thompson toasts the Congress for having no clue what they were about to unleash. The difference in this case is that it would be Congress that would be doing the toasting.

Anti Deficiency

Has never been enforced.

That is money is often spent in ways not envisioned in the approrpiation and those miscreants are never investigated.

US government budget enforcement is like underwriting MBS tranches.

You haven’t addressed what is

You haven’t addressed what is really behind the BBA: stealing workers retirement funds. The CBO projected that the surpluses Clinton left for Bush were enough to pay off the entire US debt by the time that the Social Security/Medicare trust funds would have to be amortized for beneficiary payments, all without having to raise taxes to pay for the amortization of those trust funds. These “surpluses” were made up entirely of excess payroll taxes building up the trust funds. Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that taxes would have to be raised in order to amortize the trust funds. The failure to do so simply permits the Republicons to steal the money contributed by workers for their retirement. Everything about not raising taxes or limiting expenses, is about stealing our money.

Fun read. Now how about

Fun read. Now how about doing line item veto wars. Use the Star Wars theme.

But we have to stop the addiction!

Prohibition was in large part a serious effort to address a serious social problem.

So is the Balanced Budget Amendment.

Congress is out of control and addicted to deficit spending because they don't want to face the pain of taxation or budget cutting.

So in both cases there were too many people taking advantage of an intoxicating act to make themselves feel good, but at the vicious long-term expense of others in the society.

Congress needs to spent smarter, and balance priorities a lot more carefully. And yes, there should either be more in taxes or less in spending, because if we continue to run deficits at 10% of GDP, we'll be having a "European Debt Crisis" real soon. (Even if you believe in magic ponies and an economy returning to "normal" with a "structural" deficit of only 5%, we only have a few years of Federal debt-binging left...)

Also, unlike Prohibition, the BBA wouldn't ban actual Congressional spending. It would just force the addicts to pay for their intoxicants.

How about this amendment: A

How about this amendment: A vote for cloture in the house or senate shall passed by a simple majority.

If we had this amendment, voters could, if they so desired, vote for a majority government that promised to balance the budget, and expect that no legislative shenanigans would prevent such a promise being kept.

Why not just eliminate Congress?

With the Internet we ought to be able to run a direct democracy, at long last.

Immediately register everyone to vote who's qualified. Those who don't want to track all the issues can SELECT their OWN representative -- anyone they want to be their proxy. Could be a family member, good friend, someone they know shares their views... We don't need to be limited to 535 corrupt partisans.

Excellent questions

But...but...but... The BBA is such simple slogan.

Why are raining on the parade with a dose of reality?

Reality Bites....

like a dog biting his master in this case. A real BBA would limit spending to the amount of revenue actually taken in just like a household budget. But notice how nobody talks about a BBA in those terms - like they do when discussing deficits and the debt.

In the real world, I am constrained by what it is in my bank account. Nobody in government - especially those running for office - would ever admit to such constraints in actuality in government. Such Greece-style austerity would all but ensure rioting in the streets by Americans of all persuasions, parties and walks of life.

Thus, the BBA is just a slick marketing package to encourage Americans to feel confident in the government's financial footing.

Thanks at least for pointing

Thanks at least for pointing out that the Constitution has nothing to do with how government actually functions. Maybe we should end that pesky oath of office thingie too.

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