Economics

Selected Skirmishes: Deficit Attention Disorder

Its opponents make the case for the Balanced Budget Amendment.

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So rich is the nonsense oozing from America's public forum on the Balanced Budget Amendment that you're gonna need some beta blockers if you've been paying any attention whatsoever. All the hucksterism lining up against the measure powerfully recommends it, of course. While it's difficult to see how the BBA could constrain these resourceful spenders and taxers, the public flogging of the proposal has restored my faith.

The BBA is not perfectly crafted, nor will it miraculously "fix" the federal government's compulsive gorging, nor will the court battles over what constitutes "balance" be less than hideous. Yet the champions of government, both liberal and conservative, are howling. I like that in a constitutional law.

Start with this: The system is hemorrhaging red. In fiscal 1996 the federal government spent $344 billion on interest servicing the national debt, 24 percent of total federal taxes paid! Federal budgets have been in deficit for 29 straight years. If the BBA erects but a speed bump on the federal government's joyride to fiscal damnation, then let the constitutional games begin.

The liberals crow that we need deficits to stimulate the economy in times of recession. Nice try with the mouth-to-mouth on Keynesian demand management. But since the "stagflation" of the 1970s (when fiscal policy and monetary expansionism cleverly combined to deliver negative growth effects), John Maynard Keynes has been as dead as Elvis.

On the other hand, conservative critics such as Robert Bork and Charles Fried detest the Supremes so much (perhaps because they ain't one?) that any court-enforced constraint on the duly elected branch of government is branded a tyrannical usurpation of the people's power. That's what a constitution is all about: checking democracy. The central question is, Can legislators act responsibly without a balanced budget requirement? One need not even serve up the appalling Sen. Bob Torricelli (D- N.J.), a hustler whose multi-million-dollar campaign–fully endorsed by his predecessor Bill Bradley, the Mother Teresa of American politics–had scarcely dimmed its TV spots touting his unwavering support for the BBA before he rose to cast the deciding ballot defeating it. The answers supplied by Our President are the ones dancing on the cutting edge.

The administration's argument is that we don't need a BBA: Let's just roll up our sleeves and get it done. "Balancing the budget only requires Congress's vote and my signature," Clinton hammers. "It does not require [us] to rewrite our Constitution."

Tough talk, Mr. President. Brrrrrrrr. Funny how you have never once rolled up your sleeves and actually submitted a balanced budget to Congress. Nor will you. Even assuming that the Clinton budget really does balance in the year 2002 (a projection the Congressional Budget Office expects to be $80 billion wrong), there is a scandalous element to this claim: The fiscal year 2002 budget is the first budget to be enacted after his term expires. Mr. Clinton may talk like Clint Eastwood now, but he plans to tiptoe out of town like Marcel Marceau.

Moreover, the Clinton budget is stuffed with more gimmicks than a Bourbon Street transvestite revue. In general, the deficit is projected to be higher in 1999 than in 1996, and the CBO estimates that 98 percent of spending cuts will occur only in the five-year plan's final two years.

In particular, take the license auctions conducted by the Federal Communications Commission. The administration's budget claims that we will sell 1,500 FCC licenses in 2002. One tiny problem is that the "buyers" won't get to use them until several years later, when TV stations stop broadcasting on them. You see, it's an advance auction sale: 2005 is the earliest 2002 buyers will take over assigned airspace, even if everything goes according to the administration's plan for transition to High Definition TV.

So far, nothing in the 10-year history of this regulatory Vietnam has gone according to plan, and no one in the industry seriously believes that TV licenses will be coughed up in 2005. But the $14.8 billion penciled in for the 2002 auction accounts for over one-fourth of that year's $53 billion in deficit reduction. Sold!

That brings us to the bizarre opposition launched by Nixon's chief economist Herb Stein. Writing in The Wall Street Journal, Stein notes that the BBA would hem in the policy makers, taking away flexibility. (Yes, that is the idea.) Stein actually complains that balancing the books by 2002 is a tawdry goal because right now the budget should be in surplus, paying off the $5.4 trillion national debt.

So Stein puts it straight to the president: Please show BBA advocates that a surplus can be achieved right away, without all the fuss and muss associated with printing new, updated copies of the U.S. Constitution. Such an example would allow BBA opponents to "feel more confident in arguing that government, without constitutional constraints, is capable of making the hard choices that adherence to a policy will require."

The Clinton budget, instead, complete with phantom revenues from nonexistent asset sales, plans to "balance" the very first year Clinton is out of office. I think, Dr. Stein, that Mr. Clinton has shown us all the "hard choices" he's willing to make. The choice before the rest of us is how hard we're willing to make it on politicians who tell us that fiscal responsibility is easy–leave it to the next guy.

Contributing Editor Thomas W. Hazlett (hazlett@primal.ucdavis.edu) teaches public policy and economics at the University of California at Davis.

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