CHN: Senate Rejects Balanced Budget Amendments

On December 14 the Senate failed to garner the two-thirds majority (67 votes) needed to pass two separate constitutional amendments to balance the federal budget (balanced budget amendments or BBAs).
S.J. Res 10, the Republican BBA, failed by a vote of 47-53, strictly along party lines. This BBA is one of the most restrictive versions ever to come before Congress.  It would cap federal spending at 18 percent of the nation’s economic activity (gross domestic product or GDP).  Currently spending is at 24 percent of GDP.  It would require a three-fifths majority to raise the debt ceiling and a two-thirds majority in both houses to raise taxes. With spending capped far below current levels and a super-majority needed to raise taxes, this amendment is designed to achieve balance by a drastic curtailment of federal services. A two-thirds majority would be required to waive the balanced budget requirement.

S.J. Res 24, a Democratic measure, was rejected 21-79 with 20 Democrats and 1 Republican voting for the amendment.  Many of the Democrats who voted for the amendment are up for re-election in 2012.  (See the votes here.)  Under S.J. Res 24’s provisions Social Security would be exempt from cuts to bring the budget into balance and no tax cuts for individuals with incomes over $1 million could be passed unless there was a budget surplus.  A three-fifths majority would be required to waive the balanced budget requirement.

Both S.J. Res 24 and S.J. Res 10 would require the President to submit a balanced budget annually and would allow the requirement to balance the budget to be waived if a declaration of war is in effect.

The two versions of the BBA have distinct differences, S.J. Res 10 being more severe, but both would have harmful consequences on the economy.  They would cripple the federal capacity to provide countercyclical spending in times of recession.  According to a recent analysis by Macroeconomic Advisors, a preeminent economic forecasting firm, if a BBA was in place for FY 2012 the impact would be catastrophic.  One-year cuts of about $1.5 trillion would have been required.  Such deep cuts would result in a loss of 15 million jobs and doubling the unemployment rate from 9 to 18 percent.

While the White House does not have veto power over a constitutional BBA it did issue a Statement of Administration Policy strongly opposing H.J. Res 10.  The reasons cited for its opposition include its severe and unrealistic spending cap, the risk a BBA imposes of accelerating economic downturns by requiring the government to cut spending and raise taxes when the economy is contracting, and the potential that the Federal courts would end up making decisions that should be left to Congress.

The Budget Control Act (PL 112-25) passed in August required both chambers to vote on a BBA this year but does not impose a penalty for failing to pass it.  The House failed to pass a BBA in November. In 1997 after the House last passed a BBA (300-132) the Senate fell one vote short of passage.

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