[Congressional Record Volume 143, Number 21 (Tuesday, February 25, 1997)]
[Extensions of Remarks]
[Pages E302-E303]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          BALANCED BUDGET AMENDMENT: CONSTITUTIONAL BOONDOGGLE

                                 ______
                                 

                         HON. JOHN CONYERS, JR.

                              of michigan

                    in the house of representatives

                       Tuesday, February 25, 1997

  Mr. CONYERS. Mr. Speaker, I am attaching a copy of an important 
editorial appearing in last week's Wall Street Journal entitled 
``Constitutional Boondoggle'' strongly opposing the

[[Page E303]]

balanced budget amendment. When a bastion of conservatism such as the 
Wall Street Journal refers to the balanced budget amendment as a 
``flake-out'' and ``silly,'' I think it is time for all Members to look 
up and take notice.

              [From the Wall Street Journal, Feb. 4, 1997]

                       Constitutional Boondoggle

       With President Clinton about to deliver his State of the 
     Union Address and new budget, this is an apt moment to say 
     that the President is right and the Republicans are wrong on 
     item one of the GOP Congressional agenda. The balanced budget 
     amendment is a flake-out.
       The notion of amending the Constitution to outlaw budget 
     deficits is silly on any number of counts. Politically it's 
     empty symbolism. Legally it clutters the Constitution with 
     dubious prose. Today's lesson, though, concerns economics and 
     accounting. You can't measure economic rectitude by any one 
     number, let alone the ``deficit,'' however defined, let alone 
     the deficit projections the proposals will inevitably involve 
     in practice. The attempt to enshrine such a number in the 
     Constitution is bound to prove a snare and a delusion.
       The proposal passed by the Senate Judiciary Committee says 
     that outlays (``except for those for repayment of debt 
     principal'') shall not exceed receipts (``except those 
     derived from borrowing''). While this concept sounds simple, 
     in fact it reflects neither accounting principles nor 
     economic reality.
       If you can balance your family budget, the thinking goes, 
     the government can balance the federal budget. But applying 
     the budget amendment's principles to households would outlaw 
     home mortgages, which have proved a boon to countless 
     families and the general  economy. What a family balances is 
     its operating budget, a concept foreign to the federal 
     accounts. In corporate accounting, similarly, the health 
     of an enterprise is measured by careful distinctions such 
     as accruals or depreciation. Even the balanced budget 
     restraints of state and local governments exclude spending 
     on capital improvements financed by bond issues approved 
     by voters.
       The reality is that borrowing money is not a sin; it 
     depends on how much money, and in particular on the uses of 
     the borrowed funds. Even the amendment itself recognizes this 
     by allowing Congress to waive the amendment by majority vote 
     when war is declared or when a joint resolution declares ``a 
     military conflict which causes an imminent and serious 
     military threat to national security.'' Other emergencies 
     would presumably be dealt through the provision that Congress 
     could approve borrowing by a two-thirds vote.
       Republicans back the amendment because it scores well with 
     focus group participants, who don't understand the 
     difficulties, and with Ross Perot, who doesn't care. They 
     also hope that limiting the government's power to borrow will 
     force it to limit spending. Democrats seems pretty much to 
     agree, and want to voice support for the amendment to appease 
     focus groups while also killing it to avoid a spending 
     straitjacket. We're not so sure.
       For one thing, we've observed how European politicians, 
     even supposedly conservative ones, have been behaving toward 
     the budget-deficit requirements they imposed on themselves in 
     the Maastricht agreement. To get within the numerical 
     criteria, the Italians are taking their railroads off and on 
     budget; the French government, in return for an infusion of 
     funds this year, assumed pension obligations running into the 
     far future. Governmental accounting, you see, simply counts 
     formal government debt; it ignores unfunded governmental 
     promises.
       This is a loophole enormous enough that Rep. Fernand St 
     Germain could drive half of the S&L crisis through it in one 
     night in 1980, when he doubled deposit-insurance limits. 
     Another enormous loophole is the government's ability to 
     offload, or ``mandate,'' costs on corporations, individuals 
     and state and local governments without running any receipts 
     or outlays through the Washington books. And when the bill 
     for Rep. St Germain's coup suddenly came due in 1989, would 
     it really have been better to avoid borrowing and put the 
     rest of the government through a temporary wringer?
       These imperfections might not matter if the amendment did 
     no harm, but it's easy enough to imagine scenarios in which 
     it would keep us from doing the economically right thing. 
     Take the proposals by the most conservative bloc in the 
     recent Social Security Commission. They would allow current 
     taxpayers to personally invest part of what they owe in 
     payroll tax, giving them a better return. But meeting 
     obligations to those retiring before their benefits were 
     funded would require a big issue of government debt. The new 
     debt would merely formally recognize current obligations, and 
     the privatization would dramatically reduce future 
     obligations. Though this transaction would plainly improve 
     the federal fisc, the balanced budget amendment would outlaw 
     it.
       Or for that matter, take the Reagan defense build-up, which 
     led to victory in the Cold War. The balanced budget amendment 
     would have allowed a majority to vote for borrowing if 
     fighting broke out, but not for expenditures to deter it. Is 
     that what we want?
       And take the Reagan tax cuts, which in combination with 
     Paul Volcker's tight money, led the country out of 1970s 
     malaise, conquering inflation without an extended recession. 
     Clearly deficit projections would have prevented the tax 
     changes.
       Yes, this policy mix gave us deficit, but the 1980s 
     deficits are themselves a large part of the reason we have a 
     new concern with budget discipline today. Indeed, it seems to 
     us that history argues that discipline comes from forcing 
     governments to borrow, and pay interest--instead of raising 
     taxes or making unfunded promises or issuing unfunded 
     mandates. Yet in the form passed by the Finance Committee, 
     the amendment says you need a majority to raise taxes, a 
     majority to declare a military emergency, but two-thirds to 
     borrow.
       What President Reagan understood is that if you limit 
     taxes, spending will sooner or later have to follow. For 
     permanent budget discipline, the best idea now on the table 
     is Rep. Joe Barton's proposal, up for a vote in the House 
     April 15, simply to require a two-thirds vote to raises 
     taxes. If that should pass, nature will take its course.
       We do need to get the national debt declining as a per cent 
     of economic output. We do need to restrain federal spending. 
     We do need to solve the Medicare crisis, as Senator Phil 
     Gramm notes alongside. We do need to look beyond the year 
     2002. But these battles have to be fought one by one, and 
     can't be solved by amending the Constitution. The concept 
     embodied in the proposed amendment measures nothing useful; 
     it is at best a distraction, and at worst spreads confusion 
     that will make the right things harder to do, not easier.

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