A Democratic Balanced Budget Amendment

[gulliver]

The budget of the United States of America shall be balanced. In the event that a budget cannot be agreed upon for a given year, then the previous year's budget shall be used. All existing programs will continue to be funded as legislated, complete with cost-of-living increases. All creditors shall be paid. Any shortfall necessary to assure the balanced budget shall be funded through a special tax on the income and property of those with incomes greater than X$ (scaled for inflation) or net worth greater than Y$ (scaled for inflation).

...something that could be sold as protecting Social Security, Medicare, and Defense for good. I just don't see why a BBA should be complicated, and I especially don't see why it has to inherently imply "across-the-board" spending cuts or (sabotage-able) tax legislation. Just automate it.

Ok, where's the flaw?

On edit: I should be clear about one thing. The budget would be balanced, not frozen. The budget would continue to rise and fall just as it does now. All emergency outlays would be made as needed--through new or existing legislation, just like now. The only difference with current practice is that a special tax on the wealthy would be used for any and all shortfalls. There would be no borrowing. The idea is to counter the idea of "across-the-board" spending cuts as the main way to achieve a balanced budget.

[shraby]

1. What happens if California has the big earthquake, Alaska

has another 7+, a Katrina sized hurricane hammers the gulf states all in the same year? How does a balanced budget tackle that without decimating all other spending?

[gulliver]

2. The key is legislation must be funded...

...and any automatic trigger for balancing the budget is entirely a tax increase on the wealthy. The budget changes to accommodate the legislation. Whatever programs pay for the earthquake now continue to pay for it. There is just an automatic tax increase on the wealthy unless the Congress successfully legislates another approach during that year. It could be a bigger budget, but it would be balanced.

It would just be interesting to see the Republicans against a balanced budget amendment that protects Social Security, Medicare, Defense, and California from earthquakes.

[HereSince1628]

7. I am not for a BBA for the US Constitution, but it doesn't cap borrowing

it just says there must be revenues to balance the service on the borrowing.

I don't want a BBA because I believe in Keynesian economics. I believe we need the possibility of deficit spending in order to have tools to stimulate the economy during downturns as well as large scale emergencies.

I realize that the economy cycles through bad times as well as good times. Every few years there is a downturn and in the economic downturns revenue declines. The r's will not abide a tax surplus to deal with rainy days or anticipated future spending--every pile of money always gets raided. Setting up government to constantly be slicing away at programs creates uncertainty. Investors and citizens don't need uncertainty in the federal government during economic emergencies.

[RB TexLa]

20. You either can afford to rebuild or you can't

As far as Katrina if Louisiana could tax oil and gas the same as the other 49 states we wouldn't need anything from the federal government to help with rebuilding

[Ruby the Liberal]

3. Military spending went up 55% after 9/11

What happens when the next auto/housing/whatever crisis hits and millions of jobs are at risk.

What happens when the next hurricane comes barreling into New Orleans or Florida?

You want to be beholden to a super duper majority in order to address it?

[gulliver]

4. Everything would be legislated exactly as now.

For example, unemployment insurance was extended several times, we bought GM stock, etc. All of that would be done with no change. The budget would still be allowed to increased. It just needs to be balanced, not frozen. So the wealthy would make up the difference in the cost automatically through a tax.

[mmonk]

5. The flaw is a balanced budget amendment.

[gulliver]

8. Please see the post. I edited it to clarify.

I am not talking about a frozen budget at all. I'm talking about a balanced one. The budget would still grow just as it does now. However, there would be no borrowing. It's a balanced budget. The wealthy would fund the shortfall in the event the Congress could not find alternative funding.

[Ruby the Liberal]

10. Economics 101

Monetary policy is a necessary tool for governments to use when in times of economic crisis.

Deficit spending is a good thing - if it is INVESTING in the future (think infrastructure). Not only is it an INVESTMENT, but it creates jobs in times of slowdowns.

Responsible deficit spending isn't racking up the credit card on a meal you can't afford, it is going into debt to go back to school and learn a new trade or upgrade the tools you need in order to do you job.

It really isn't rocket science.

[gulliver]

14. We would still INVEST in the future exactly as now (or moreso)

The only difference is that the United States would not be incurring debt and paying interest. They would simply take the money from the wealthy to do the investment that currently has to be done through borrowing and the payment of interest.

It really isn't rocket science. I think you are possibly confusing deficit spending with spending. With a Democratic BBA, we could keep the spending for investment. It just wouldn't be done via running a deficit. The money would come from the wealthy, as needed.

The idea here is to put the downside of an unbalanced budget directly on the wealthy rather than on "across-the-board" cuts to spending. It is the reverse of what Republicans would like to do.

In some ways, it is a tongue-in-cheek proposal, because it is literally a blank check for the citizens to legislate any program they think they need. But that's democracy (small d) if you think about it.

[Ruby the Liberal]

17. I am not confusing anything. I am making the case for the need for the ability to deficit spend

as Economic conditions warrant. Then again, my degrees are in Economics, so what do I know. :D

[gulliver]

24. An economist, no wonder.

:-) Actually, I really could use an explanation of why it is better to deficit spend than tax and spend. To the layman, it looks like when the country borrows money, it has to pay it back with interest. And it pays it back with taxes. So deficit spending seems to be like taxing and spending on steroids. It looks like deficit spending is taxation.

It seems like you are saying that the government going into debt is inherently beneficial, regardless of spending. I just don't get it. That would seem to mean that we should just borrow more money than we need sometimes and not spend it. If you could take a few sentences to clear this up, it would be helpful. Or at least point me to the book with the principles you appear to be citing.

[Ruby the Liberal]

25. Actually, that isn't all that complicated.

Deficit spending can be accomplished quickly when the country needs to adjust to changing economic situations (think the aftermath of 9/11 or Katrina - or an unexpected California earthquake).

Taxation doesn't come into play immediately - taxation is normally done with an effective date of 1-2 years out, so no immediate receipts

A balanced budget would force neutering the former while requiring the latter, which would hamper the country in being able to make decisions quickly to stop a economic situation from spiralling out of control.

Then, when it is time to address the deficit, raise taxes.

In times of surplus, lower taxes.

It is a cycle. Lather, Rinse, Repeat.

(On a side note - funding wars on the deficit is more akin to that meal I mentioned. That is definitely something that should NEVER be done on a deficit spending basis. Bush the lesser screwed up when he deficit spent on non-investment AND lowered taxes during a downturn. Double whammy. No President has EVER gone to war without raising taxes, much less lowering them as Dimson did).

Make sense?

[gulliver]

27. Yes, I think I get your objection.

Let's say an emergency hits tomorrow, and the government needs $200B right away. Under the BBA I am (again, jokingly-but-with-a-point) talking about, the government could immediately borrow $200B from the Chinese or by selling bonds. They could do anything they can legally do now. They could sell Indiana.

The only difference is that at the end of the year, if Congress did not find a way to repay the debt through some other means, the wealthy would automatically be taxed for the full $200B. You might think that the Congress would save the wealthy by immediately cutting some spending program through legislation. That is possible now, of course. But I actually think it would be harder for them to do that with the BBA I am talking about. They would have to enact a legislative change to do so, not merely obstruct one as they do with their minority now.

I take a back seat to no one when it comes to despising George W. Bush. Imagine him trying to start the Iraq War under the scenario I am describing. The wealthy would say to themselves, "Wow, I really don't want to pay for that." I don't think Junior would have made even a peep about starting that war.

Anyway, a full-up, automatically-soak-the-rich BBA is something of a pipe dream, but I do think it has some nice rhetorical elements.

[Ruby the Liberal]

28. First, If tax receipts do not precede the need to spend, you are deficit spending

Which is counter to a BBA.

Second, raising taxes and spending are always two different conversations. Try to tie them together and you are back to the gridlock of not being able to address economic emergencies in a timely manner.

Some of my favorite economists are Yves Smith, Ravi Batra and Paul Krugman. Not just for this topic, but econ in general. If this is a topic that interests you, I would point you to their works (Specifically Krugman who keeps it short and to the point in his NYT blog).

You may also like Dr Batra's Book: The New Golden Age: A Revolution against Political Corruption and Economic Chaos Brilliant and eye opening piece of work, written in lay language, not the typical economic wonk works that come from Professors.

:hi:

[shraby]

30. As far as I can see, the wealthy fund nothing but their lifestyle.

[MadHound]

6. Oh geez, we've got a Democrat now trying to sell us on a "good" BBA.

This place never ceases to amaze me on how low some folks are willing to go.

[Ruby the Liberal]

9. Or unwilling to learn how a government works

Ie - it can't be run like a business. It is a Sovereign Nation with a Social Contract, responsible for the safety of the citizenry.

[gulliver]

11. I'm not talking about a "frozen" budget.

To be clear, I edited the post. I'm talking about a balanced budget, not a frozen one. We used to a BBA being a bad thing and code for frozen budget and across-the-board spending cuts. But that is not what the literal term "balanced budget" means. A balanced budget can still grow to accommodate and protect as many social programs as we care to legislate. The difference with a "Democratic" BBA is that budget shortfalls would all be funded automatically by taxation on the wealthy.

It's a reversal of the Republican idea of a balanced budget as a tool to curb spending.

[MadHound]

12. First of all, that's not going to happen,

You will not get that through Congress. Second of all, BBA's don't work, no matter what form they come in. In fact it is because of BBA's that many states are in the bad shape that they're in.

[gulliver]

16. It's the Democratic polar opposite of "across-the-board" cuts.

It's somewhat tongue-in-cheek, and somewhat serious. I realize that it wouldn't fly in Congress or with the states. But if there were to be a BBA, then any automatic triggers need to take automatic revenue increases on the wealthy into account. It's interesting that we have programs that no one wants to cut like Social Security, Medicare, and (for some, not me) Defense. The idea of "automatic across-the-board cuts" that hit those programs is unthinkable. Yet the idea of "automatic across-the-wealthy tax increases" might be seen as silly.

[MadHound]

18. It simply won't work, it will kill our economy

Since our corporately controlled Congress will then insure that the budget will always balance, and never grow.

[Ruby the Liberal]

19. Thank you

I don't know why this concept is so challenging.

[gulliver]

22. Explain how it would be worse than now, please.

It is a given that the Congress is way too corporately controlled. But they are that way now.

Right now, if the Congress wants to cut spending and screw people, they argue that the United States can't afford more debt. Under the Democratic BBA I am (somewhat tongue-in-cheek) proposing, they would have to argue that the wealthy can't afford to pay more taxes. That's the only difference I can see. I don't think there is any other difference.

But someone explain it to me.

[MadHound]

23. I just did,

Namely, the government budgets won't grow. They will be balanced, but they simply won't grow.

[loyalsister]

13. Sets a precedent for modifying the constitution to suit an agenda

MO is notorious for it. The latest effort is for voter ID because the law was struck down as a violation of the MO constitution. It is a very very bad thing to make a habit of modifying the constitution.

[gulliver]

21. Well, of course I agree with you on the voter ID thing in MO

But budget is an absolutely central part of the government, so in a way, it belongs in the Constitution for that reason alone. It's arguable anyway. In any case, I for one don't think we need any more of these showdowns, and a Constitutional amendment is an argument settler. I just think the argument should be settled in favor of the Democratic approach.

We balanced the budget without a BBA. But if there is to be a BBA, let's make it decisively favor average people.

[loyalsister]

29. Except by definition it doesn't work that way

The reality of it is the budget is balanced no matter who gets hurt. We deal with it every year in MO.

[Igel]

32. That's the primary reason for modifying the Constitution.

To suit an agenda.

Women's rights? Emancipation? Prohibition? Abolishing prohibition. Income tax? Granting electoral representation to DC? Hell, even the Bill of Rights was left out of the main body and put in as amendments because somebody had an agenda: They didn't want the list to be seen as an exhaustive enumeration so it couldn't be included, and it couldn't be left out because it was doubted that the US government would acknowledge the rights unless they were enumerated.

It's a bad thing to make a habit out of modifying the Constitution, but it's often modified any way when it's considered a "living document" so that new interpretations can be rather at odds with historical interpretations. It's a toss-up whether that kind of amendment is best done by amending it or by simply repurposing and reimagining it.

[loyalsister]

33. The agenda I am referring to is more political

Every year we vote on how we're going to modify our constitution. The above Amendments you mentioned where mostly in the interest of voters.
A BBA amendment is in the interest of making the jobs of congress persons easier. And particularly making it easier for them to force agendas that suit political interests like, for example a no tax pledge. Very different goals.

[LaydeeBug]

15. THIS IS UNFUCKINGREAL. ewwwwwww nt

[jwirr]

26. IMO no government should close the door to flexability. I don't think

it worked out to well for California.

[Igel]

31. A federal property tax.

1. Would it be on real property or all property?

And in the event of a bubble, what's to prevent it from decapitating folks?

And once it's allowed, it's allowed. Congress would find a way of enacting it for general revenues on a consistent basis. Then that brownstone in NYC will be compared in price to that house in Veneta, Oregon. Due process is already a bitch when it comes to income taxes. Let's compound it.

2. Taxation authority is taken away from Congress, it would appear. Even there's a sudden deficit, taxes go up. Presumably an analyst deep in the entrails of Treasury would calculate what it needed to be. Paying it would be interesting: Assessing property? Issuing a demand to employers for more tax money from select individuals? Readjusting the tax rates *up* to the beginning of the year, thus negating a lot of the planning that goes into investing. If it's late in the year, perhaps going to confiscatory rates--with no control over it since it's Constitutionally mandated.

3. This could also easily be manipulated. Let's have a tax reduction for the middle class. Then it seems a tax hike for the rich is mandated. Class haters would enjoy that, even if it hurts them.

Even if not manipulated, it reduces responsibility. You pass a budget knowing that you don't have to worry about revenues. Or just deem it passed. Or, during a downturn, let the budget coast. No hard decisions, Congress can go home and let the budget/taxation process handle itself. A very nice way of shirking responsibility. I'm surprised it hasn't already been proposed.

[gulliver]

34. You're right that a property tax might be complicated.

You could confine it to easily monitored, traditional property like real estate, vehicles, equities, and other financial assets. Calculate a wealth index based on net worth and income and assess the tax. The budget would only be a "balanced budget" year to year. You could just assess the tax on April 15th of each year, even itemize it. I assume some system of overlapping U.S. bonds could be arranged to create an investment opportunity and a sort of credit card-like "rolling credit" to work with throughout the year. I'm no economist or banker, though.

For example, when Bush started the Iraq War, he would have immediately needed to begin paying for it on the "revolving" line of credit by selling bonds. Then, the next April after after he started the war, the wealthy would see their first big tax bite from it. The revolving credit "account" would be paid down to zero. I've argued above, that there might not have been an Iraq War at all if there were such a clear payment flow for it. By default, all new programs would be charged to the wealthy. Congress would have to specifically legislate a different revenue source or spending cut to change that fact.

The tax changes would not take place in real time. That would be way too complicated. Rates could be left completely alone for "simplicity." But, if you were one of the "wealthy," you could easily get an estimate of your, for example, Iraq War tax bump and begin a payment plan. That's why we have computers. The minimally wealthy, small business owners, farmers, etc., who are always protected in every revenue increase the Dems ever propose would need to be covered here too.

With such a BBA, do I think Americans would then vote themselves golden parachute retirement packages to take effect at 45? No, I don't. I think we would have free health care and longer vacations, more maternity/paternity leave, better and much less expensive higher education. We would fewer, if any, wars of choice. Like much of Western Europe, I think we would be fairly wise about the revenue/spending balance. The vast majority of Americans are not loafers and freeloaders by nature as the Republicans seem to think. I am a firm believer in the Tragedy of the Common, though, so I do think there would need to be some regulation.

It really is surprising to me that I don't see something like this proposed, not necessarily a full-up BBA with triggers that automatically tap the wealthy exclusively and leave spending alone of course. But I would expect some sort of serious consideration for at least partial automatic taxation of the wealthy. We Dems always talk about revenue when there are crises and things like wars or natural disasters. It's the right thing to do, IMO, and should never be off limits based on the tax fetish of the right as in the current moment. All I am talking about is making our revenue philosophy permanent.

If "automatic across-the-board spending cuts" are thinkable, then automatic "across-the-board tax bills for the wealthy" are thinkable. I think they are so thinkable, they should be the default. But, again, I'm no economist.