Not all balanced-budget amendments are created equal, as the American people are about to find out. The recent deal that raised the debt limit and created the so-called supercommittee mandates that both houses of Congress vote on a constitutional amendment requiring Congress to balance the federal budget.
Several versions have been proposed in recent months, and others will surface as the deadline to vote nears. The most important task for Congress is to determine which version will actually serve to restrain government spending and prevent the American economy from collapsing under the weight of its own debt.
Next came pay-go (“pay as you go”) rules, which required spending cuts or tax increases to offset any new spending. For the next decade, however, clever politicians used accounting gimmicks to avoid these rules and continue deficit spending. In recent years, congressional Democrats passed new pay-go rules but waived or simply ignored them on no fewer than 26 spending bills between 2007 and 2010.
With mounting deficits at record levels and a national debt now larger than our entire economy, Americans have a renewed interest in imposing a strict, structural and enforceable spending restraint on Congress. But not all balanced-budget amendments are alike.
Congress can pass and the states can ratify language that amends the Constitution to require the federal government to balance its budget. But if the amendment, like a Trojan horse, is filled with loopholes and avenues to circumvent the balanced-budget requirement, it will do little to rein in out-of-control spending.
At a minimum, a meaningful balanced-budget amendment must include four essential provisions. First, it must apply to all spending. Some have already suggested taking Social Security and other entitlement spending “off budget,” but doing so would allow Congress to ignore the greatest drivers of our nation’s deficit.
Second, the amendment must cap spending at the average historical level of federal revenue as a percentage of gross domestic product. Over the last 40 years, revenue has averaged just above 18 percent of GDP, while spending now approaches 25 percent — a trend that, if not reversed, will bankrupt the country with mathematical certainty.
Third, it must require a supermajority vote in both houses of Congress to raise taxes. Maintaining an easy path to extract new revenue from the productive sector of the economy diminishes Congress’s incentive to prioritize spending and use taxpayer dollars wisely.
Finally, the amendment must require a supermajority vote in Congress to raise the debt limit. Over the past two decades, both parties have eagerly borrowed trillions of dollars from foreign countries rather than reforming government spending habits. A strong, enforceable spending restraint will make borrowing a measure of last resort.
All 47 Republican senators have co-sponsored legislation, SJ Res 10, which contains all four of these protections. A similar measure has been introduced in the House. If Congress is serious about dealing with our fiscal crisis, it will oppose efforts to pass a phony, watered-down version of the balanced-budget amendment and will instead send a strong spending restraint to the states for ratification.
Lee is a member of the congressional Joint Economic Committee.