Back in June of 2010 Max Brantley posted on the Arkansas Times Blog:
Paul Krugman has a timely column as Republicans continue to block extension of unemployment benefits. He argues that stimulus, not austerity, is what’s needed now, both here and in Germany.
Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.
… In America, many self-described deficit hawks are hypocrites, pure and simple: They’re eager to slash benefits for those in need, but their concerns about red ink vanish when it comes to tax breaks for the wealthy. Thus, Senator Ben Nelson, who sanctimoniously declared that we can’t afford $77 billion in aid to the unemployed, was instrumental in passing the first Bush tax cut, which cost a cool $1.3 trillion.
Proponents of government spending are fond of citing 1937 as an example of when government implemented sharp austerity, and the economy derailed. This argument is dead wrong.
On Thursday, New York Times columnist Paul Krugman argued that fiscal austerity right now would make our economic crisis worse. “Even if we manage to avoid immediate catastrophe, the deals being struck on both sides of the Atlantic are almost guaranteed to make the broader economic slump worse,” writes Krugman. As his proof, he offers that “if the negotiations succeed, we will be set to replay the great mistake of 1937: the premature turn to fiscal contraction that derailed economic recovery …”
But both Professor Krugman and President Obama have their history entirely incorrect. Total government spending never decreased in the 30s, certainly not after 1937. Rather, total government spending went up:
Heritage economist Bill Beach adds that then-Secretary of Treasury Henry Morgenthau, in 1939, after seven years of New Deal spending, noted, “We have tried spending money. We have spent more than we have ever spent before and it does not work.”
Recent studies, however, have found the opposite: Countries that rely primarily on spending cuts tend to experience less economic pain in the short term. Moreover, in some cases, the cuts seem to spur faster growth.
The monetary fund study reported that a 1 percent fiscal consolidation achieved primarily through tax increases reduced economic activity by 1.3 percent over two years, while an identical consolidation driven primarily by spending cuts reduced activity by 0.3 percent.
Fortunately, the American public disagrees with Dr. Krugman and President Obama, but agrees with conservatives that spending cuts now wouldn’t hurt our economy, but would help it.
Mark Pryor has supported about every bill that President Obama has pushed. The stimulus was probably the biggest budget busting bill so far. Did that help get our economy going? Not according to Kathy Fettke:
President Obama is urging Congress to raise the $14.3T debt ceiling or else, he warns, the U.S. would be forced to default. Perhaps our representatives need a little lesson on good debt vs. bad debt.
Good debt gives the borrower the potential to create more money. Bad debt gives the borrower something he can’t afford but wants anyway.
In real estate, for example, good debt might be a loan used to purchase an investment property. The borrower acquires an asset that creates income. That income is used to pay off the debt. The borrower then owns an asset free & clear that continues to produce income, long after the original debt is gone.
Bad debt serves a need for instant gratification by borrowing income from the future.
An example of bad debt is getting a loan to purchase a new car. The car is worth less the moment it’s driven off the lot. From day 1, the borrower owes more than the car is worth, and the “asset” doesn’t create monthly income. It becomes a liability, unless it is used as a rental, trucking or any other profitable business use.
Is Obama asking for more good debt or more bad debt?
Politicians are expert wordsmiths who can spin facts into a slick campaigns designed for getting what they want. That’s why President Obama and the money magicians at the Federal Reserve are preaching that more debt would help the economy.
Has their plan worked so far? Let’s take a look:
During the past 5 years, the federal government has borrowed 4.5 trillion dollars to stimulate the economy. That’s a 40% increase in government debt!
Did the stimulus work?
Political spin doctors say it did, claiming that US GDP climbed 1.9% in Q1 of 2011. But how much did that increase cost us?
We spent $4.5 Trillion over 5 years to create $690 Billion in GDP growth. Doing the math, that means the US will receive 14 cents for every dollar of debt incurred to stimulate the economy.
With losses like this, the “stimulus” plan is really a bad debt deal – one in which borrowing results in more liabilities, not assets. And now our leaders are trying to talk us into more of it.
Just say “NO!” to raising the debt ceiling! It’s not just bad debt, it’s ugly debt.
The cure for bad debt is pretty simple and boring: cut spending and increase income. If you can’t do either, you default.
Borrowing just to keep up with interest payments and avoid default is reckless and only exacerbates the problem. It does not fix it.
Politicians must agree to cut spending. And they must avoid increasing income through taxation. As much as the general population would love to rob the rich, that method doesn’t work. Business owners who get punished for making money will stop producing and hiring.
Instead of taxing productive businesses to extended ugly government debt, offer businesses good debt so they can continue to grow.
Members of our society with solid business plans should be the ones borrowing – not the government.
Kathy Fettke is CEO of www.RealWealthNetwork.com, an educational resource for new and experienced real estate investors.
For Senator Mark Pryor it is time to get back to his liberal democratic roots. Blame the evil Republicans for wanting to end Medicare as we know it and push granny off the cliff. For heavens sake we better not cut a dime out of the government now, but maybe promise to cut 6 trillion out of it about 7 or 8 years from now and call that a 10 year plan.
Senator Mark Pryor on July 22 made the following statement on the Senate floor to encourage his colleagues to end the budget gimmicks and move forward with a comprehensive debt-reduction plan as part of a debt ceiling solution. A portion of his statement is below:
Mr. President, Abraham Lincoln once said, “I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts.”
We need to bring people the facts about our nation’s debt. People in my state see through the games being played in Washington. They want solutions, courage and leadership — the kind that puts us on a more secure fiscal path for the future.
… Chairman of the Joint Chiefs of Staff last summer said, “Our national debt is our biggest national security threat.”
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Mark Pryor is not going to lift a finger to cut down our national deficit. That is why he did not want to pass the “Cut, Cap and Balance” plan.
Pryor notes, “We need to bring people the facts about our nation’s debt.” However, he does not believe in a Balanced Budget Amendment. How does that make sense?
Then he complains, “People in my state see through the games being played in Washington.They want solutions, courage and leadership — the kind that puts us on a more secure fiscal path for the future.” Nevertheless, he will vote for a responsible plan like “Cut, Cap and Balance.”
Finally Pryor asserts, “… Chairman of the Joint Chiefs of Staff last summer said, “Our national debt is our biggest national security threat.” But Pryor’s inaction on cutting the deficit is speaking volumes. He just can’t break away from those old favorite tactics of the liberals. He travels across Arkansas screaming “The Republicans want to send granny over the cliff!!”
Abdication: Senate Votes to Do Nothing Unless It Can Hike Taxes for the President” by David S. Addington July 22, 2011 at 2:54 pm, seems to be perfectly describing Pryor’s own actions. Here is a portion of that article:
Earlier this week, the House of Representatives passed the Cut, Cap and Balance Act, to get federal spending under control and balance the budget. That legislation passed with 234 votes in the House. The House is a legislative body, and it has legislated. The House has done its job.
In contrast, the Senate is a legislative body that has failed to do its job. So far, the Senate has come up with lots of bad plans, but no votes. The Senate plans that have cropped up in the last week — the McConnell-Reid “Just Borrow More” Plan, the Coburn Plan with its tax hikes, and the Gang-of-Six Plan with its tax hikes — have among them exactly zero votes, because the Senate has not voted on any of them.
Today, the Senate voted 51 to 46 to not even consider the House-passed Cut, Cap and Balance bill, even though two-thirds of Americans, according to the CNN Poll dated July 21, support such legislation. The Obama Administration chimed in that, even if the Senate passed the bill, the President would veto it anyway. Therefore, if, ten days from now, America fails temporarily to meet its obligations because the Treasury lacks sufficient money to pay them when due, the responsibility for that failure falls squarely upon President Obama and the Senate liberals, who let it happen because they wanted to raise taxes. Conservatives have commendably pursued legislation to ensure that the government pays its most important obligations first when the Treasury has a shortage of money to pay all its bills, but even on that liberals have been no help.
President Obama and the Senate liberals may represent well that ever-shrinking tax-spend-and-borrow crowd of liberal special interests, but most of the American people want to cut government spending, cut the size and scope of government, and cut up and throw away the national credit card.
So far, only the House conservatives have acted responsibly.
A week is still plenty of time to pass legislation to get the spending-cut job done. The time to put America on the path to driving down federal spending and borrowing, while preserving our ability to protect America, and without raising taxes, is now.
Senator Conrad calls Balanced Budget Amendment is laughable, but I think it is laughable when you look at the lack of resolve of Congress to make the necessary cuts!!!
The White House is quietly encouraging the Reid-McConnell talks.
Meantime, there is talk of pandering to the tea party radicals in the unwieldy House by letting them pursue referral of a balanced-budget amendment to the Constitution.
Ratification would take years. If enacted, such an amendment would amount to the same abdication of political responsibility to make wise and responsible cuts in spending as has been evident in the debt-ceiling debate.
It is obvious to me that the Balanced Budget Amendment is needed because of the “abdication of political responsibility to make wise and responsible cuts in spending” that Brummett is talking about and we have all seen for decades.
Abstract:Republicans in the House and Senate have announced that they will force votes on balanced budget constitutional amendments. While the Senate and House versions of the current BBA are similar, there are some important differences that Members of Congress and the American people need to understand. For example, the Senate version makes it more difficult to enact revenue-neutral tax reform, while the House version would waive its tax limitation in times of military conflict. How Congress resolves these differences could determine whether future Congresses and Presidents balance the budget without increasing taxes.
Conclusion
These proposed balanced budget amendments differ on some fundamental issues that would dramatically affect the way Congress attempts to balance the budget. The House version, for example, is easier to waive. There is a lower threshold to declare military conflict in the House version that would allow for an easier waiver. Also, the tax limitation—forcing a two-thirds vote to increase taxes—would be waived in times of military conflict in the House version. The House version allows a lower supermajority threshold to pass an unbalanced budget than the Senate version does.
The Senate version makes it more difficult to enact revenue-neutral tax reform. The provision that forces a two-thirds vote to raise any tax would make it more difficult to modify the tax code in a revenue-neutral manner to implement a flat tax. For a flat tax to work, some Americans might have their tax rates increased as a means to make every American pay the same rate.
Also, neither version contains the complete ban on judicial enforcement that is necessary to prevent activist judges from setting budget priorities, which is a job reserved for the political branches of government.
The differences between the House and Senate BBAs may seem small to those who are not steeped in the budget process, but they will have a dramatic impact on the lives of all Americans. Ultimately, these differences would need to be reconciled in a manner that leads to a balanced budget without jeopardizing U.S. military interests or punishing taxpayers.
President Obama and Congress have agreed to cut $38 billion in federal spending, right? If you go by so-called “budget authority,” that may be true. But real spending cuts come when you actually cut real spending, not “budget authority.” Outlays in fiscal year 2011 will likely be considerably higher than last year’s outlays. That means the spending cuts advertised by President Obama and House Speaker John Boehner are laughably fraudulent.
The federal government is running massive budget deficits, spending too much, and heading toward a financial crisis. Without a change of direction in Washington, average working families will be faced with huge tax increases and a lower standard of living. In Downsizing the Federal Government, Cato Institute budget expert Chris Edwards provides policymakers with solutions to the growing federal budget mess. Edwards identifies more than 100 federal programs that should be terminated, transferred to the states, or privatized in order to balance the budget and save hundreds of billions of dollars. Edwards proposes a balanced reform package of cuts to entitlements, domestic programs, and excess defense spending. He argues that these cuts would not only eliminate the deficit, but also strengthen the economy, enlarge personal freedom, and leave a positive fiscal legacy for the next generation.
The White House is quietly encouraging the Reid-McConnell talks.
Meantime, there is talk of pandering to the tea party radicals in the unwieldy House by letting them pursue referral of a balanced-budget amendment to the Constitution.
Ratification would take years. If enacted, such an amendment would amount to the same abdication of political responsibility to make wise and responsible cuts in spending as has been evident in the debt-ceiling debate.
It is obvious to me that the Balanced Budget Amendment is needed because of the “abdication of political responsibility to make wise and responsible cuts in spending” that Brummett is talking about and we have all seen for decades.
Abstract:Republicans in the House and Senate have announced that they will force votes on balanced budget constitutional amendments. While the Senate and House versions of the current BBA are similar, there are some important differences that Members of Congress and the American people need to understand. For example, the Senate version makes it more difficult to enact revenue-neutral tax reform, while the House version would waive its tax limitation in times of military conflict. How Congress resolves these differences could determine whether future Congresses and Presidents balance the budget without increasing taxes.
The President’s Budget
The House and Senate BBAs require that the President submit a balanced budget to Congress. This provision is subject to waiver during time of military conflict or war, but during times of peace, the President would be bound by the Constitution to submit balanced budgets to Congress each fiscal year.
The House and Senate versions differ on the constitutional requirements for the content of the President’s budget. Section 3 of the Senate version provides that two conditions must be met by the President’s submission to Congress. First, “total outlays do not exceed total receipts.” This provision is identical to the condition in Section 4 of the House version. Second, the Senate version adds a condition not included in the House version that “outlays do not exceed 18 percent of the gross domestic product of the United States for the calendar year ending before the beginning of such fiscal year.” The Senate version references “gross domestic product,” but the House version is silent on GDP.
There is one other significant difference. Section 2 of the House version caps spending at “18 percent of the economic output of the United States,” whereas the Senate version states (also in Section 2) that spending is capped at “18 percent of the gross domestic product of the United States” for the prior calendar, not fiscal, year. This provision will allow for different calculations with regard to how the 18 percent number is reached in both approaches.
In truth, both the House and Senate versions may become problematic. The House version is vague in that it does not explain who calculates “18 percent of the economic output of the United States.” The Senate version may not be transparent. Limiting growth in gross domestic product to the prior calendar year may essentially limit spending to less than 18 percent of GDP.
On average, growth in GDP has historically been at about 3 percent to 4 percent, which means that spending is capped closer to 17 percent of GDP for the current fiscal year. While capping spending at 17 percent of GDP might be desirable, it must be understood that “18 percent” calculated by looking back at a prior year’s GDP would result in a figure that is actually lower than 18 percent.
Tax Increases
The House and Senate BBAs are designed to make it difficult for Congress to use tax increases as a means to balance the budget. Once amended, the Constitution would contain a provision that would force a supermajority in both chambers to raise taxes on the American people in order to balance the budget, with certain exemptions in one version.
The House and Senate versions differ significantly on what measures would be subject to the tax limitation provision in the amendments. Section 4 of the Senate version subjects any measure that “imposes a new tax or increases the statutory rate of any tax or the aggregate amount of revenue” to a two-thirds vote of both chambers. Section 5 of the House version, however, merely states that “a bill to increase revenue” would trigger a constitutionally mandated two-thirds vote. The Senate language would encompass far more legislation and subject that legislation to a supermajority vote.
For example, if a measure were to create a new tax yet cut taxes commensurately in another area of the tax code, the Senate version would subject that to a two-thirds vote; the House version would allow that measure to go forward under the regular order of the House and Senate. The same would happen if one tax rate was increased and another was to be decreased in a revenue-neutral manner.
The Senate version would make revenue-neutral tax reform much more difficult to pass with a two-thirds vote, but it would be a strong deterrent for Members to cut taxes on one sector of society while raising taxes on another.
Making it more difficult to conduct revenue-neutral tax reform is a big concern for many conservatives. Consequently, some conservatives may need to rethink the specifics of this provision. Conservative revenue-neutral tax reform would raise taxes on those taxpayers who lose exemption and deductions and impose one rate that would initially take in the same amount of revenue.
The Senate language may deter using the tax code as a means to forward the cause of class warfare, but conservatives would be effectively abandoning revenue-neutral tax reform if they allowed the language in the Senate BBA to be sent to the states. There are serious trade-offs in this debate and consequences for the specific working of the House versus the Senate provision imposing supermajorities to raise revenues or taxes.
Also, if the provisions relating to a declaration of war or military conflict are satisfied by the House version, then the Congress may increase taxes through the regular order. The Senate version specifically makes the tax increase provision subject to a two-thirds vote waiver during time of war or military conflict. The waiver of a BBA during time of war or “military conflict” under the Senate version does not affect the application of the supermajority requirement to raise taxes; there is no such exemption in the House version.
Sen. Marco Rubio (R-Fla.) spoke with Bob Schieffer on what he truly feels caused the country’s current debt crisis and the provisions he feels necessary to be included in a compromise for him to vote on raising the debt ceiling.
Senator Rubio is one of the upcoming stars of the Tea Party and he has some great insights on the issue of the debt ceiling.
Americans have built the single greatest nation in all of human history. But America’s exceptionalism was not preordained. Every generation has had to confront and solve serious challenges and, because they did, each has left the next better off. Until now.
Our generation’s greatest challenge is an economy that isn’t growing, alongside a national debt that is. If we fail to confront this, our children will be the first Americans ever to inherit a country worse off than the one their parents were given.
Current federal policies make it harder for job creators to start and grow businesses. Taxes on individuals are complicated and set to rise in less than two years. Corporate taxes will soon be the highest in the industrialized world. Federal agencies torment job creators with an endless string of rules and regulations.
On top of all this, we have an unsustainable national debt. Leaders of both parties have grown our government for decades by spending money we didn’t have. To pay for it, they borrowed $4 billion a day, leaving us with today’s $14 trillion debt. Half of that debt is held by foreign investors, mostly China. And there is no plan to stop. In fact, President Obama’s latest budget request spends more than $46 trillion over the next decade. Under this plan, public debt will equal 87% of our economy in less than 10 years. This will scare away job creators and lead to higher taxes, higher interest rates and greater inflation.
Betting on America used to be a sure thing, but job creators see the warning signs that our leaders ignore. Even the world’s largest bond fund, PIMCO, recently dumped its holdings of U.S. debt.
We’re therefore at a defining moment in American history. In a few weeks, we will once again reach our legal limit for borrowing, the so-called debt ceiling. The president and others want to raise this limit. They say it is the mature, responsible thing to do.
In fact, it’s nothing more than putting off the tough decisions until after the next election. We cannot afford to continue waiting. This may be our last chance to force Washington to tackle the central economic issue of our time.
“Raising America’s debt limit is a sign of leadership failure.” So said then-Sen. Obama in 2006, when he voted against raising the debt ceiling by less than $800 billion to a new limit of $8.965 trillion. As America’s debt now approaches its current $14.29 trillion limit, we are witnessing leadership failure of epic proportions.
I will vote to defeat an increase in the debt limit unless it is the last one we ever authorize and is accompanied by a plan for fundamental tax reform, an overhaul of our regulatory structure, a cut to discretionary spending, a balanced-budget amendment, and reforms to save Social Security, Medicare and Medicaid.View Full Image
Chad Crowe
There is still time to accomplish all this. Rep. Dave Camp has already introduced proposals to lower and simplify our tax rates, close loopholes, and make permanent low rates on capital gains and dividends. Even Mr. Obama has endorsed the idea of lowering our corporate tax rate. Sen. Rand Paul, meanwhile, has a bill that would require an up-or-down vote on “major” regulations, those that cost the economy $100 million or more. And the House has already passed a spending plan this year that lowered discretionary spending by $862 billion over 10 years.
Such reductions are important, but nondefense discretionary spending is a mere 19% of the budget. Focusing on this alone would lead to draconian cuts to essential and legitimate programs. To get our debt under control, we must reform and save our entitlement programs.
No changes should be made to Medicare and Social Security for people who are currently in the system, like my mother. But people decades away from retirement, like me, must accept that reforms are necessary if we want Social Security and Medicare to exist at all by the time we are eligible for them.
Finally, instead of simply raising the debt limit, we should reassure job creators by setting a firm statutory cap on our public debt-to-GDP ratio. A comprehensive plan would wind down our debt to sustainable levels of approximately 60% within a decade and no more than half of the economy shortly thereafter. If Congress fails to meet these debt targets, automatic across-the-board spending reductions should be triggered to close the gap. These public debt caps could go in tandem with a Constitutional balanced budget amendment.
Some say we will go into default if we don’t increase the debt limit. But if we simply raise it once again, without a real plan to bring spending under control and get our economy growing, America faces the very real danger of a catastrophic economic crisis.
I know that by writing this, I am inviting political attack. When I proposed reforms to Social Security during my campaign, my opponent spent millions on attack ads designed to frighten seniors. But demagoguery is the last refuge of the spineless politician willing to do anything to win the next election.
Whether they admit it or not, everyone in Washington knows how to solve these problems. What is missing is the political will to do it. I ran for the U.S. Senate because I want my children to inherit what I inherited: the greatest nation in human history. It’s not too late. The 21st century can also be the American Century. Our people are ready. Now it’s time for their leaders to join them.
Mr. Rubio, a Republican, is a U.S. senator from Florida.
Sen. Marco Rubio on the debt limit
The president is “more interested in delivering a tax increase to please the base of the party than he is about solving the problem.” Senator Marco Rubio appeared on Sean Hannity’s radio show this afternoon to talk about the debt limit debate and the out-of-control spending in Washington.
Congress’s dance with the debt limit can be confusing and, frankly, the details can be a real snooze fest for many Americans. Sometimes a little humor clarifies the absurdities of Washington antics better than flow charts and talk of trillions.
The 31-second video and accompanying infographic “The Debt Ceiling Explained” by Bankrupting America offers the facts, leavened with a dose of levity. The conclusion is serious, however: The country’s debt threatens economic growth, and spending cuts are the answer.
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It is obvious to me that if President Obama gets his hands on more money then he will continue to spend away our children’s future. He has already taken the national debt from 11 trillion to 16 trillion in just 4 years. Over, and over, and over, and over, and over and over I have written Speaker Boehner and written every Republican that represents Arkansans in Arkansas before (Griffin, Womack, Crawford, and only Senator Boozman got a chance to respond) concerning this. I am hoping they will stand up against this reckless spending that our federal government has done and will continue to do if given the chance.
What would happen if the debt ceiling was not increased? Yes President Obama would probably cancel White House tours and he would try to stop mail service or something else to get on our nerves but that is what the Republicans need to do.
The White House is quietly encouraging the Reid-McConnell talks.
Meantime, there is talk of pandering to the tea party radicals in the unwieldy House by letting them pursue referral of a balanced-budget amendment to the Constitution.
Ratification would take years. If enacted, such an amendment would amount to the same abdication of political responsibility to make wise and responsible cuts in spending as has been evident in the debt-ceiling debate.
It is obvious to me that the Balanced Budget Amendment is needed because of the “abdication of political responsibility to make wise and responsible cuts in spending” that Brummett is talking about and we have all seen for decades.
Abstract:Republicans in the House and Senate have announced that they will force votes on balanced budget constitutional amendments. While the Senate and House versions of the current BBA are similar, there are some important differences that Members of Congress and the American people need to understand. For example, the Senate version makes it more difficult to enact revenue-neutral tax reform, while the House version would waive its tax limitation in times of military conflict. How Congress resolves these differences could determine whether future Congresses and Presidents balance the budget without increasing taxes.
Differences Between S.J. Res. 23 and H.J. Res. 1
Waivers for War or Military Conflict
Both the Senate and House versions of the BBA provide for a waiver during a war or military conflict because an unyielding requirement to balance the budget during such times might unduly constrain the U.S. military, but these waiver provisions differ dramatically and warrant close scrutiny. Specifically, the House provision would suspend the entire BBA, while the Senate version would permit only a partial waiver when the U.S. is engaged in a congressionally authorized “military conflict.”
Both the Senate and House versions of the BBA provide for a waiver during time of declared war. The House version would waive all provisions of the BBA, and the Senate version would waive all provisions of the BBA with the exception of Section 4, which requires a two-thirds vote in each chamber to increase taxes.
The Senate version requires a higher threshold for waiver during “military conflict” than for official declarations of war. Section 6 of the Senate version allows for Congress to waive certain provisions of the BBA “for any fiscal year in which a declaration of war against a nation-state is in effect” by a majority vote of both chambers. Section 7 allows for Congress to waive certain provisions “in any fiscal year in which the United States is engaged in a military conflict that causes an imminent and serious military threat to national security and is so declared by three-fifths” of both the House and Senate.
The House version allows Congress to waive the whole BBA “for any year in which a declaration of war is in effect” or “any fiscal year in which the United States is engaged in military conflict which causes an imminent and serous military threat to national security and is so declared by a joint resolution.” The House waiver provision would go into effect with a simple majority vote of each chamber.
Neither the House nor the Senate version would require a declaration of war as a predicate to waive certain provisions of the constitutional amendment. The Senate version requires a supermajority to authorize a waiver, whereas the House version requires a mere simple majority to waive during time of authorized “military conflict.”
For example, if a majority, but less than three-fifths, of each chamber authorized a wavier of the BBA during military conflict, the House version would allow Congress to waive the entire amendment and deficit-spend in areas unrelated to the military conflict. The Senate version would not allow a waiver, because both chambers would have to approve a waiver by a three-fifths vote. For the House version, the declaration of “military conflict” allows a waiver by majority vote of both chambers, whereas the Senate version would allow a waiver only if three-fifths of both chambers voted affirmatively. This is a significant difference in the two approaches to securing a waiver during a “military conflict.”
Additionally, the Senate BBA requires that, even if the United States were in a state of declared war or a military conflict, the House and Senate would still have to pass a revenue or tax measure by a supermajority roll-call vote. The House version does not contain such a requirement.
A specific condition on the nature of funding a “military conflict” appears in Section 7 of the Senate version but is absent in the House version. This condition would require Congress to specify the amount necessary for the military conflict as part of the budgeting process. The Senate resolution states that “such suspension must identify and be limited to the specific excess of outlays for that fiscal year made necessary by the identified military conflict.” The deficit for a fiscal year envisioned in the Senate version is limited to the cost of the military conflict itself, and in no circumstances can it be used to justify deficit spending elsewhere in the government.
The House waiver provision, on the other hand, is exceptionally broad in that it would give Congress carte blanche authority to deficit-spend on non-military items such as education, entitlements, transportation, or any other area where the federal government spends taxpayer dollars.
The requirement for a simple majority vote, coupled with the provision allowing non-military spending to breach a balanced budget requirement during times of military conflict, weakens the practical effects of the House BBA. Since the United States has been in a continuous state of “military conflict” since 2001 and may continue in such a state for the foreseeable future, the House language could be used to justify budget deficits for many years to come.
Effective Date
The two versions of the BBA have different effective dates. Both dates, however, give Congress and the President time to prepare to meet the BBA’s balanced budget requirement.
Section 11 of the Senate version of the BBA states that the budget must be balanced “beginning with the fifth fiscal year beginning after [the amendment’s] ratification.” Section 9 of the House version makes the effective date “beginning with the later of the second fiscal year beginning after [the amendment’s] ratification or the first fiscal year beginning after December 31, 2016.”
The Senate version allows for Congress to take five years to balance the budget no matter what year the states ratify the constitutional amendment—a provision that gives Congress five years to develop a plan to chip way at overspending.
If it were to be ratified this year, the House version gives Congress until 2016 to balance the budget. But what if it takes five years for Congress to ratify the amendment? The House version would give Congress two years to put the budget in balance. For a Congress that has had a hard time coming even close to balancing the budget, this requirement might prove rather daunting.
Total Outlays v. Total Receipts
The House and Senate versions of a BBA include a procedure by which more than a majority is necessary for Congress to pass an unbalanced budget. This provision in both measures allows some flexibility in the operation of a BBA. There may be a time when a supermajority of House and Senate Members deems it necessary to spend more than is taken in for a specific fiscal year.
The House and the Senate versions differ on the percentage of votes required to pass an unbalanced budget for a given fiscal year. Section 1 of the Senate version provides for a “two-thirds” vote of each chamber to pass an unbalanced budget; Section 1 of the House version provides for a “three-fifths” vote of each chamber.
If the House version were to become part of the Constitution, the House would need 261 votes and the Senate would need 60 votes to pass an unbalanced budget. If the Senate version were to become an amendment to the Constitution, the House would need 290 votes and the Senate would need 67 votes to pass an unbalanced budget. The House version would create a lower threshold to run budget deficits.
Clearly, the Senate version makes it tougher for Congress to waive the BBA during a time when the U.S. is at peace with other nations.
Prohibition on Court-Ordered Tax Increases
Section 8 of the Senate BBA states that “no court of the United States or of any State shall order any increase in revenue to enforce this article.” This provision would prohibit activist federal judges from ordering tax increases as a means to balance the budget. This provision is absent in the House version.
While preventing the courts from raising revenue is certainly prudent, it is not enough. The courts can still meddle with a BBA—for example, by issuing declaratory judgments or choosing how to balance the budget. The only way to prevent activist judges from intruding on political questions such as spending choices is a complete ban on judicial enforcement of the amendment. Any BBA should contain such a complete and explicit ban on judicial enforcement.[9]
Sen. Mark Pryor said today he supports a $3.7 trillion deficit-reduction plan unveiled Tuesday by six Republican and Democrats as a “carefully crafted balanced” way to avert a looming financial crisis.
The Arkansas Democrat was one of about 46 senators who were briefed by the so-called “Gang of Six” on the proposal that has been negotiated on and off for nearly 10 months. Sen. John Boozman, R-Ark., also attended.
“Really, the Gang of Six is over and I am hoping that this will become a Gang of 60,” said Pryor, referring to the number of senators likely needed for the proposal to become law.
The plan would require Congress to make tough choices on spending priorities that would call on everyone to sacrifice, he said. About three-quarters of the reductions would come from spending, and the rest would be made up by closing “loopholes” and “giveaways” in the tax code, Pryor said.
Sara Lasure, a spokeswoman for Boozman, said the senator is still reviewing the plan. For now, he considers it a “good step” that could put Congress on the path to fiscal responsibility.
Pryor plans to sign a letter to congressional leaders urging them to adopt the “Gang of Six” proposal, he said.
I am not too happy about the gang of six getting so much power. It appears they will be determined to tax us to death. It is all smoke and mirrors. The taxes go up now and the budget cuts ARE ALL FICTION!!!! BIG SPENDERS LIKE MARK PRYOR NEVER LEARN!!!
Concerning the “cut, cap and balance plan” Senator Pryor noted, “We need to come together and work on this together and stop pushing things that sound good on bumper stickers but are basically never going to go anywhere.” SINCE THE REPUBLICANS WHO NOW ARE IN THE MAJORITY IN THE ARKANSAS DELEGATION VOTED FOR IT, THAT DOES NOT BODE WELL FOR PRYOR’S RE-ELECTION PROSPECTS!!!
Below is an article that exposes what this plan from the gang of six is really all about.
At this stage, all I’ve seen is this summary (A BIPARTISAN PLAN TO REDUCE OUR NATIONS DEFICITS v7), so I reserve the right to modify my analysis as more details emerge (and since I fully expect the plan to look worse when additional information is available, the following is an optimistic assessment.
The Good
Unlike President Obama, the Gang of Six is not consumed by class-warfare resentment. The plan envisions that the top personal income tax rate will fall to no higher than 29 percent.
The alternative minimum tax (which should be called the mandatory maximum tax) will be repealed.
The plan would repeal the CLASS Act, a provision of Obamacare for long-term-care insurance that will significantly expand the burden of federal spending once implemented.
The plan targets some inefficient and distorting tax preference such as the health care exclusion.
The Bad
The much-heralded spending caps do not apply to entitlement programs. This is like going to the doctor because you have cancer and getting treated for a sprained wrist.
A net tax increase of more than $1 trillion (I expect that number to be much higher when further details are divulged).
There is no Medicare reform, just tinkering and adjustments to the current system.
There in no Medicaid reform, just tinkering and adjustments to the current system.
The Ugly
The entire package is based on dishonest Washington budget math. Spending increases under the plan, but the politicians claim to be cutting spending because the budget didn’t grow even faster.
Speaking of spending, why is there no information, anywhere in the summary document, showing how big government will be five years from now? Ten years from now? The perhaps-all-too-convenient absence of this critical information should set off alarm bells.
There’s a back-door scheme to change the consumer price index in such a way as to reduce expenditures (i.e., smaller cost-of-living-adjustments) and increase tax revenue (i.e., smaller adjustments in tax brackets and personal exemptions). The current CPI may be flawed, but it would be far better to give the Bureau of Labor Statistics further authority, if necessary, to make changes. A politically imposed change seems like nothing more than a ruse to impose a hidden tax hike.
A requirement that the internal revenue code maintain the existing bias against investors, entrepreneurs, small business owners, and other upper-income taxpayers. This “progressivity” mandate implies very bad things for the double taxation of dividends and capital gains.
This quick analysis leaves many questions unanswered. I particularly look forward to getting information on the following:
How fast will discretionary spending rise or fall under the caps? Will this be like the caps following the 1990 tax-hike deal, which were akin to 60-mph speed limits in a school zone? Or will the caps actually reduce spending, erasing the massive increase in discretionary spending of the Bush-Obama years?
What does it mean to promise Social Security reform “if and only if the comprehensive deficit reduction bill has already received 60 votes.” Who defines reform? And why does the reform have to focus on “75-year” solvency, apparently to the exclusion of giving younger workers access to a better and more stable system?
Over the next few days, we’ll find out what’s really in this package, but my advice is to keep a tight hold on your wallet.
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The gang of six is engaged is providing real budget cuts? NO WAY!!! HOWEVER, PRYOR AND MANY OTHERS ARE OUT TRYING TO PULL THE WOOL OVER PEOPLE’S EYES CONCERNING THESE PHONEY CUTS.
So what’s in this great new plan from the Gang of Six? Only about $4 trillion in real deficit reduction achieved by deep defense cuts, commission-delegated reductions in spending for Medicare, Medicaid and Social Security, plugging of assorted tax code loopholes and — get this — an elimination of the alternative minimum tax and an over-all actual reduction in personal income taxes attainable, presumably, by the credibility and depth of the spending cuts.
Take a look at this video clip below and see if Brummett has it right or not.
The White House is quietly encouraging the Reid-McConnell talks.
Meantime, there is talk of pandering to the tea party radicals in the unwieldy House by letting them pursue referral of a balanced-budget amendment to the Constitution.
Ratification would take years. If enacted, such an amendment would amount to the same abdication of political responsibility to make wise and responsible cuts in spending as has been evident in the debt-ceiling debate.
It is obvious to me that the Balanced Budget Amendment is needed because of the “abdication of political responsibility to make wise and responsible cuts in spending” that Brummett is talking about and we have all seen for decades.
Abstract:Republicans in the House and Senate have announced that they will force votes on balanced budget constitutional amendments. While the Senate and House versions of the current BBA are similar, there are some important differences that Members of Congress and the American people need to understand. For example, the Senate version makes it more difficult to enact revenue-neutral tax reform, while the House version would waive its tax limitation in times of military conflict. How Congress resolves these differences could determine whether future Congresses and Presidents balance the budget without increasing taxes.
The House BBA
In the House of Representatives, conservatives are considering two competing versions of the BBA. On June 15, 2001, Representative Bob Goodlatte (R–VA) introduced House Joint Resolution 1 (H.J. Res. 1),[7] which the House Judiciary Committee subsequently approved. Representative Joe Walsh (R–IL) introduced House Joint Resolution 56 (H.J. Res. 56)[8] as a companion measure identical to the Hatch version (S.J. Res. 10) on April 6, 2011. The House is expected to move forward on H.J. Res. 1.
H.J. Res. 1, which the House Judiciary Committee approved by a 20–12 vote, reads as follows:
Section 1.Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless three-fifths of the whole number of each House of Congress shall provide by law for a specific excess of outlays over receipts by a rollcall vote.
Section 2.Total outlays for any fiscal year shall not exceed 18 percent of economic output of the United States, unless two-thirds of each House of Congress shall provide for a specific increase of outlays above this amount.
Section 3.The limit on the debt of the United States held by the public shall not be increased unless three-fifths of the whole number of each House shall provide by law for such an increase by a rollcall vote.
Section 4.Prior to each fiscal year, the President shall transmit to the Congress a proposed budget for the United States Government for that fiscal year in which total outlays do not exceed total receipts.
Section 5.A bill to increase revenue shall not become law unless two-thirds of the whole number of each House shall provide by law for such an increase by a rollcall vote.
Section 6.The Congress may waive the provisions of this article for any fiscal year in which a declaration of war is in effect. The provisions of this article may be waived for any fiscal year in which the United States is engaged in military conflict which causes an imminent and serious military threat to national security and is so declared by a joint resolution, adopted by a majority of the whole number of each House, which becomes law.
Section 7.The Congress shall enforce and implement this article by appropriate legislation, which may rely on estimates of outlays and receipts.
Section 8.Total receipts shall include all receipts of the United States Government except those derived from borrowing. Total outlays shall include all outlays of the United States Government except for those for repayment of debt principal.
Section 9. This article shall take effect beginning with the later of the second fiscal year beginning after its ratification or the first fiscal year beginning after December 31, 2016.
The House is expected to debate H.J. Res. 1 during the week of July 18, 2011.
—Brian Darling is Senior Fellow for Government Studies in the Department of Government Studies at The Heritage Foundation.
Now that Osama bin Laden has been successfully dispatched to the eternal damnation he so richly deserves, Washington is ready to return to the more mundane question of whether the Obama administration will be allowed to spend this country into oblivion.
The next big fiscal fight will be over when and how to increase the debt limit. The administration has been hard at work trying to shape the message and public opinion. Unsurprisingly, much of that message is less than 100 percent accurate. Here are some myths about the debt ceiling and the upcoming debate about raising it:
1. Failure to pass means defaulting on our debts. If there has been consistent message from the White House, it that the United States can’t afford to “default on our debts.” That is almost certainly true. However, refusing to raise the debt limit does not mean defaulting on our debts. The U.S. Treasury currently takes in more than enough revenue to pay both the interest and the principal on the debts we currently owe. And if the Obama administration is truly worried about whether it will do so, then it should urge Congress to pass the legislation proposed by Sen. Pat Toomey (R., Pa.) requiring the Treasury Department to pay those bills first. It is true that, once we had paid our debt-service bills, there wouldn’t be enough money left over to pay for everything else the Obama administration wants to spend money on. The government would have to prioritize its expenditures — sending out checks for the troops’ pay and Social Security first. Other spending would have to wait. Treasury Secretary Tim Geithner says that not spending money Congress has appropriated is “the same as default.” It is not. It is economizing, which is what you do when you are out of money.
There is nothing wrong with forcing government not to spend money that it had planned on spending.
2. Failure to pass the debt-ceiling increase on time would be unprecedented. Both the administration and the media sound as if we are at the edge of zero hour, the time at which economic Armageddon will erupt if we have not raised the debt ceiling. That’s not quite so. It is true that Congress has never refused to raise the debt ceiling. But it has, in fact, frequently taken its time doing so. In 1985, Congress waited nearly three months after the debt limit was reached before it authorized a permanent increase. In 1995, four and a half months passed between the time the government hit its statutory limit and the time Congress acted. And in 2002, Congress delayed raising the debt ceiling for three months. In none of those cases did the world end. It won’t this time, either.
3. It’s always a “clean bill.” The administration is also insisting that it would be shocking for Congress to add any conditions to the debt-ceiling increase. But such conditions are far from unprecedented. There have been numerous amendments and conditions attached to debt-ceiling bills throughout the years. Remember Gramm-Rudman-Hollings? The classic spending-control plan was added to the debt-ceiling vote in 1985.
4. This is not about future spending. The administration insists that raising the debt ceiling is just about paying for spending that’s already occurred. Not quite. Depending on how high it is raised, it may be about paying only for spending that is already authorized — or much more. Authorized and spent are not the same thing. There is nothing wrong with forcing government not to spend money that it had planned on spending. Moreover, Tim Geithner is reportedly calling for an increase in the debt ceiling big enough to last through the 2012 election, which would enable a lot of new spending.
5. Only Republicans oppose raising the debt ceiling. The media and the administration want to turn this into a partisan fight. The ongoing narrative is that radical Republicans in thrall to the Tea Party want to wreck our finances, while Democrats responsibly want to pay our bills. In truth, a number of prominent Democrats are on record opposing a debt-limit increase without substantial reductions in spending. They include Sen. Kent Conrad (D., N.D.), Mark Pryor (D., Ark.), and Joe Manchin (D., W. Va.). Even Sen. Amy Klobuchar (D., Minn.) normally a reliable liberal vote, has been expressing ambivalence. And the most prominent spending limit liable to be offered as a condition for raising the limit, the CAP Amendment proposed by Sen. Bob Corker (R. Tenn.) is cosponsored by Sen. Claire McCaskill (D., Mo.). The real story is that a small group of extreme liberals wants to keep spending more in the face of bipartisan opposition.
So far, Republicans have not been very good about presenting their message. If they want to win this fight, they are going to have to do a lot more to correct the record.
The Daily Hatch 