[Congressional Record Volume 140, Number 17 (Thursday, February 24, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: February 24, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
        BALANCED BUDGET AMENDMENT: RISK OF PROMOTING INSTABILITY

  Mr. SARBANES. Madam President, I believe that adding a balanced 
budget amendment to the Constitution of the United States would be 
economically impractical, indeed under some circumstances dangerous and 
constitutionally irresponsible.
  The amendment would have the very substantial risk of promoting 
instability, retarding economic growth, and shifting the basis of our 
democracy from majority to minority rule.
  The amendment raises unanswerable questions concerning 
implementation. It would invite either fiscal paralysis or court 
intervention in the conduct of economic policy.
  Madam President, the Constitution is the guiding charter of our 
Government defining the basic structure of our democracy and the 
political and civil liberties of our citizens. It does not establish 
specific policies out of a belief that those policies should be shaped 
by the people and their elected representatives in the times in which 
they live. Because the Constitution distinguishes between universal 
principles and the specific policies of the day, the Constitution has 
endured for over two centuries, despite dramatic changes in American 
society.
  The Federal budget, on the other hand, is rewritten on a yearly basis 
to address evolving national goals. During the eighties, both the 
budget and the process by which we made economic decisions fell short 
of what was required. Large deficits, which should not have been 
experienced, increased. That is a problem that needs to be addressed.
  The question is not whether you want to get deficits down. The 
question is how do you go about doing it. It is a little bit like the 
question, if you have a headache, do you shoot yourself in the head in 
order to get rid of your headache? I submit the balanced budget 
amendment to the Constitution has that aspect to it.
  There is nothing in the existing political arrangements that prevents 
the President and the Congress from addressing the Federal budget 
deficit. In fact, we did just that last August with a major deficit-
reduction program which is working. It has changed the trend line of 
the Federal budget deficit and put it on a downward path for the first 
time in over a decade, which is transforming the economic situation in 
this country.
  The deficit-reduction package which was passed last August and which 
has paid such dividends regarding deficit reduction and economic growth 
would not have been passed if this amendment was law.
  My colleague who just spoke said that this provision has a 
requirement in it that any taxes would have to be passed by a 
constitutional majority of the Members of the House.
  No bill to increase revenue shall become law unless approved by a 
majority of the whole number of each House by rollcall vote. However, 
we did not have a constitutional majority for the President's economic 
plan because the votes were split 50-50. The deciding vote was made by 
the Vice President.

  It is not the Constitution that needs changing. What needs to be done 
is for the President and the Congress, working together, as they have 
just done successfully, to enact a program which will bring the budget 
deficit under control.
  Let me just address what I consider to be the main defects in this 
proposal. First, a balanced budget requirement in the Constitution 
which had to be followed at all times could have a devastating impact 
on the economy during an economic recession. In fact, the application 
of this measure during an economic recession might well drive the 
economy into a depression.
  When we go into an economic slowdown, people lose their jobs, no 
longer pay taxes into the Treasury, and draw support payments from the 
Treasury. The disparity between receipts and outlays widens in a 
recessionary period. The outlays go up and the receipts go down by the 
very nature of the economic turndown.
  If at that point you further seek to cut back, you will only succeed 
in driving the economy further down, and you will transform a recession 
into a depression.
  In fact, the lower economic growth would create higher deficits. Each 
1 percent added to the unemployment rate is about $50 billion added to 
the deficit. So, the whole exercise might be counterproductive; you 
would be engaging in an effort of trying to balance the budget, the 
consequence of which would be to drive the economy further down from 
recession into depression. The consequences of recession and depression 
is an increase in the deficit, not a decrease.
  This amendment would severely limit the ability of the Government to 
address economic downturns and it might well doom our country to a 
series of depressions--not just recessions but depressions.
  Second, this proposal to alter the Constitution does not recognize 
the important economic distinction between consumption and investment 
spending. Running deficits to pay for today's consumption, while 
leaving the bill for future generations, is not responsible conduct. 
But borrowing now to pay for capital investments that increase future 
economic growth may make sense.
  Under this balanced budget amendment, you would have to pay for all 
investment entirely in one fiscal year. If households followed such a 
budget strategy, only a tiny minority of American families would own 
houses, cars, or major appliances.
  Most businesses borrow prudently to enhance their business, expand 
their sales, and strengthen their economic enterprise. If they fail to 
do so, their competitors will do so and gain a market advantage over 
them.
  People say that the ordinary family has to balance its budget every 
year, so should the Federal Government. The ordinary family does not 
balance its budget every year. The year it buys a house, it takes out a 
mortgage, it is in tremendous imbalance. Yet, if the income flow 
projected for the future and the cost of the mortgage and the home is 
all within reasonable means, everyone regards that as a wise and 
prudent step because you go ahead and acquire the home and then you pay 
it off over the next 20 to 30 years. That is how most Americans 
operate, and it works very well indeed.
  Now, one of the superficial appeals of this amendment is that it 
appears to be doing something about balancing the budget without any 
pain. There are no specific spending cuts or tax increases in this 
proposal. You are just going to put a provision into the Constitution 
without providing any indication of how the deficit reduction should be 
achieved.
  There are a number of ways to make it work. One way to make it work 
is for the Congress to enact legislation to carry out what the 
amendment says. Of course, the Congress can enact that legislation 
without the amendment, just as we did last summer.
  In addition, this amendment will have a serious impact on Social 
Security. It is no wonder people on Social Security are apprehensive 
regarding this amendment. They ought to be apprehensive because, I 
submit to you, one of the prime targets, once you put this balanced 
budget amendment in the Constitution, will be the Social Security 
System. The amendment specifically includes Social Security in its 
calculations of receipts and outlays. In my view, the Social Security 
surplus ought to be kept for Social Security recipients. That is to 
whom it is committed and it ought not to be used in some effort to 
achieve this balanced budget amendment.
  Now, the amendment does have a so-called escape clause which allows 
it to be waived by a three-fifths vote in both Houses. Two-fifths plus 
one in one House can thwart any action. I have never heard of a 
constitutional principle that is waivable. The Constitution is a 
statement of fundamental principle, not matters to be waived away. 
Other constitutional principles of free speech, individual rights, 
equal protection cannot be waived by a three-fifths vote of both 
Houses. In fact, this is an admission that this is not an enduring 
principle but a matter of current judgment.
  In effect, what this amendment would do is shift the balance of power 
from majorities to minorities in our society, violating the democratic 
principles upon which our Government is based. It would effectively 
give control of fiscal policy to a minority in one House or the other.
  None of the proposals contain any detail concerning how such 
provisions would be implemented or enforced. Fiscal policy is a complex 
task which would likely be disrupted or paralyzed by struggles over 
implementing a vague constitutional balanced budget requirement. If, in 
fact, outlays exceeded revenues, if revenues fell short, would we have 
to bring the whole Government to a halt toward the end of the fiscal 
year, stop paying benefits to Social Security, abrogate contracts under 
the Agriculture Stabilization Program? There are no answers in this 
amendment.
  It is almost certain that this lack of clarity would lead to court 
involvement in both defining and implementing economic policy. You now 
have a constitutional requirement, and the courts have been 
consistently prepared to fashion remedies in order to implement 
constitutional requirements so that they are not rendered meaningless. 
So this amendment offers a real opportunity for the courts to get into 
the job of managing fiscal policy.
  Let me just turn very quickly to the analogy that is made with the 
States. People say, the States balance their budgets; the Federal 
Government ought to balance its budget.
  If the States kept their budgets on the same basis the Federal 
Government keeps its budget, they, in fact, would not be in balance. 
Most States have an operating budget and a capital budget, and the 
capital budget is funded by borrowing, by selling bonds in the 
marketplace. We do not do that at the Federal level. We do not separate 
out a capital budget, which represents long-term investment in the 
future where we borrow the money because we are going to have the use 
of the asset for 20, 30, 40 years and pay it back over that period of 
time.
  In conclusion, let me just say that the Constitution is a relatively 
brief general statement defining the political structure of our Nation 
and the civil liberties of our citizens. It has endured for two 
centuries because it focuses on universal principles, and in thinking 
about amending the Constitution we should proceed with great caution.
  The desire to put this amendment in the Constitution is frequently 
justified in the name of political expediency. It is put forward as a 
response to the deficit. But it is not a response to the deficit. We 
would still have to enact the tough measures on spending and revenues 
that are necessary to bring down the deficit, just as we did in August.
  This amendment is yet another promise to do something about the 
deficit in the future masquerading as a tough choice today. We do not 
need any more masquerades. We need to take the issue head on.
  Instead of a constitutional amendment, the President and the Congress 
should continue to work together for deficit reduction. We have seen we 
can make a significant impact on the deficit by working together.
  Let me close with this observation. Much of today's alienation of 
voters with their Government comes from the practice of passing so-
called ``hollow laws,'' laws which purport to change things but which 
through loopholes and waivers result in nothing really happening, 
unlike the tough deficit reduction measure we passed last August.
  If hollowing out the law creates political cynicism and alienation, 
imagine what hollowing out the Constitution would do.
  I urge the defeat of this resolution.
  Mr. MITCHELL. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Campbell). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. MITCHELL. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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