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  • Balanced Budget Amendment Is the Price for a Debt Limit Increase

    A battle is raging within the conservative movement on Capitol Hill whether to shoot at the flag stick or lay up (in golf terms). The battle is between the Balanced Budget Amendment (BBA) versus a statutory spending cap bill. Both factions have good points.

    The bold, shoot-at-the-flag-stick faction of the movement wants to push for a BBA strategy or bust. This strategy includes taking the debt limit increase hostage for the demand of a BBA passing both the House and the Senate.

    Another other faction of the movement is pushing for a law that would set a statutory cap over the next 10 years, limiting the spending of the federal government to about 20.6 percent of the economic output of the United States’ economy. This strategy would settle for an amendment in the form of a spending cap to the debt limit increase as a price for passing an increased debt limit.

    Today, I wrote at Human Events that Senator Mike Lee (R–UT) is rounding up support for the idea that the price of increasing the debt limit is passage of the BBA by both the House and the Senate.

    Senate conservatives are working to pass a Balanced Budget Amendment (BBA) as part of the debate over a debt-limit increase. According to Politico, Sen. Mike Lee (R.-Utah) is circulating a letter to other senators asking them to join his pledge to “oppose any attempt to raise the debt ceiling” until a BBA is passed by both houses. Lee has been joined by Republican Senators Rand Paul (Ky.), Jim DeMint (S.C.), Jim Risch (Idaho), Marco Rubio (Fla.), Jim Inhofe (Okla.), and Richard Shelby (Ala.).

    Robert Costa over at NRO interviewed Senator Lee on the strategy, and Lee said the following:

    I would like to see a scenario in which Republicans in both houses draw a line in the sand. If Democrats do not give us the supermajorities we need in both houses to pass the balanced-budget amendment, we are not going to even come to the table. It is a condition precedent. We are always hearing the Left, from the political establishment, that it would be catastrophic if we do not raise the debt limit. I don’t mean to minimize the significance of that happening; it would create a lot of uncertainty and a lot of fear. But we have to remember that there are at least equal corresponding risks of raising it without putting anything else in place.

    The Commitment to American Prosperity Act, or CAP Act (S. 245), was introduced by Senators Bob Corker (R–TN) and Claire McCaskill (D–MO) as a means to cap spending as a percentage of America’s gross domestic product. I write in Human Events that the CAP Act is being viewed as a safe landing place for those who want to cap spending but fear that a BBA is a bridge to far, because it would take a two-thirds vote of the House and Senate to pass a change to the Constitution in the form of the BBA.

    Some conservatives worry that a bipartisan plan to cap spending … may undermine efforts to pass a BBA this year. The CAP Act would start in Fiscal Year 2013, capping spending at 25% of the gross domestic product, then ratchet down spending caps over the years 2014 through 2022. This isn’t enough for some conservative senators, who note that spending caps have proven ineffective. Furthermore, some complain that the CAP Act sets spending levels too high, and doesn’t even cap spending for the next fiscal year.

    Senator Corker describes the CAP Act as follows:

    The CAP Act reduces total federal spending—discretionary and mandatory spending combined—to a target of approximately 20.6 percent of gross domestic product (GDP), the historical average of federal spending. Beginning in 2013, the CAP Act will establish federal spending limits that will be gradually reduced over 10 years to 20.6 percent.

    Some conservatives demand fundamental constitutional reform, because statutory spending limits are too easy to waive and change. This debate will play out over the next few weeks approaching Secretary of the Treasury Tim Geithner’s declared deadline of August 2 for passage of a debt limit increase. It will be interesting to see if the House and Senate decide to throw in all their chips for a bold strategy or an incremental strategy to cut the size and scope of the federal government.

    Posted in Economics [slideshow_deploy]

    10 Responses to Balanced Budget Amendment Is the Price for a Debt Limit Increase

    1. Kevin H, college par says:

      The CAP Act is a horrible piece of legisaltion. It lives in some fairly land that thinks federal spending should be the way it was over 3 decades ago, when there was no war or terror or post 9/11 national security, were in 2 wars overseas (and all the costs associated with properly caring for our soldiers), the baby boomers were not close to retiring, health spending per beneficiary was half what it is now, and all the other aspects of a fluid society do not get taken into account.

      The same goes for these terrible balanced budget amendments. I'd be fine with a balanced budget amendment, if all pieces of the budget were on the table, but this, like all the recent conservative proposals focus only on spending. Conservatives continue to cut taxes. Cut, cut, cut. That is all they have been doing. In Reagan's first year in office, the top tax rate was 70% (for every dollar over $215,000). It currently stands at 35% (for every dollar over $435,000) and yet somehow the conservatives don't understand why the deficit is so bad, particulalry after they refused to pay for the 2003 Medicare law and two ongoing wars. All aspects need to be on the table, including taxes. Yes….taxes!

      And the CAP Act and BBA will make recessions far worse. Instead of our current counter cyclical economy, where in times of recession, spending goes up – it would make spending go down in times of recession – so it will turn its back on the American people when they need assistance the most.

      Both are extemely cowardly pieces of legislation. Instead of making the tough choices themselves, ones that they know will be incredibly difficult politically, they'd rather pass budget process bills that force Members down the road to make the decisions the current members are too afraid to make.

      Both are absolutely pathetic proposals with zero historical economic evidence to back up their claims.

      And like you said in your post, they plan to take the debt limit hostage. The very same members who voted to raise the debt limit 8.8 trillion dollars by voting for the Ryan plan. Yes, every single Republican who votes for the Ryan plan, voted to increase the debt limit 8.8 trillion dollars. yes, 8.8 trillion! They plan to hold it hostage, at the same time, threatening to damage America's economic standing in the markets and pushing the country and globe towards economic catastrophe. They are acting like economic terrorists.

    2. Bobbie says:

      it would be catastrophic if we do not raise the debt limit? How come there isn't a sound reason as to why, specifically? How come some call it "catastrophic" while others handle it professionally and structurally within the will of the people?

      The federal government is way over it's boundaries where correction is necessary to appropriate reduction of today's budget! I find absolutely no intelligence in only ONE answer and that being MORE MONEY! The only answer President Obaaama gives with his sheep following suit.

    3. Roger Baxter. Batavi says:

      I beg to differ with both approaches. A BBA puts the budget on autopilot, restrained by law that is still at to high of a level. The CAP act starts at too high a level. What is wrong here? We are arguing about ways to control the spending of money that does not belong to the Government. It belongs to us,

      We need to be talking about how to reduce the size and scope of Government to the minimum practicable level. Fundamentally, this means curtailing "Entitlements". Yes, I am one of those. A baby boomer that is eligible, but does not draw. Cut them back, deeply, and now. Get Government down to a size that the Founders could agree to.

    4. Pingback: Don’t Link Debt Deal to Budget Amendment | FrumForum

    5. Don Harper, Lubbock, says:

      The national debt is over $14 trillion now. How much bigger will it grow under each of these proposals? Which will allow the private sector to return to prosperity more quickly?

    6. Robert, North Richla says:

      This Balanced Budget Amendment limits federal spending as a percentage of GDP. However, it does nothing to address federal mandates to the states – funded or unfunded. The real lesson of the last 23 years is the unfunded federal mandate, which has crippled our states; crippled our economy; crippled our schools and robbed the states of their 10th Amendment rights to be different, creative and innovative – in the true American spirit. The worst part is these RINO Senators think we are stupid enough to fall for this.

    7. R Holland, Chandler, says:

      Can I get an "Amen" for a balanced budget amendment.

    8. Dan Stott, Hurley NY says:

      Per Article V of the US Constitution, 2/3 of both houses must propose an amendment, and then 3/4 of all states must ratify that amendment. There is little chance that the congressional criteria can be met, and even it if it were, it would be unlikely that 3/4 of the states would ratify any time soon. Years will go by and the debt will increase by trillions before the amendment could take effect if it were ever ratified. How in the world, then, would a balanced budget amendment be a good criteria for deciding whether or not to raise the debt limit?

      If we continue to raise the debt limit, what is the point of having a debt limit? And if we already owe more interest than we can pay from our revenue stream, why will future creditors think we're a good risk for more borrowing?

      Where in the world is "common" sense in Washington, DC? Why do we keep re-electing the same people year after year?

    9. Ross writes from Flo says:

      When I lost my job two years ago, my family and I had to cut back. I refused to go further into debt to finance "stuff" we didn't need nor necessary and did not contribute to the "building of wealth" for the family. Therefore, everything deems "non-essential was eliminated including the second car. It was starting over…again. I now have a part-time job that is very part-time with no benefits other than being a job that pays. I'm eligible for social security. However looking over what I have paid in over the years, if I received it in a lump-sum, I could survive for five years. It is the same with all the government retirement programs and benefits, only a road to poverty for the majority. I don't plan to have the American taxpayer pay for my survival in retirement. I believe that ALL Federal social programs are morally wrong and unconstitutional. They have create slaves just as surely as the Arab and African slave trader of yesteryear and today.

      To go into debt to pay for social programs is unconsciousible. I had much rather be sick and starving under a tree or in a cave than be an economic slave to federal bureaucrats.

      * I would like to see both the BBA and the CAP act made law.

      * I'm also for repealing the Admentment concerning the election of the Senate by general elections. Let the states determine how they want to select a Senator to serve in the US Senate. The Senate was the State government only representation in the Legislative Branch under the constitution.

      * I would like to see a law enacted that states that the President cannot conduct military action for more than 30 days without congressional approval and after 90 days all military action will be withdrawn completely if the President does not submitted and the Congress has not formally declared war on the biligerent nation(s) or non-state para-military organization(s) so engaged.

      Finally, years ago, I read a humorous GOLDEN RULE: HE WHO HAS THE GOLD, RULES. In our federalist system, we are the soveign, we pay taxes, so we own the gold. Elected officials are the hired help, not our rulers, we pay them (in a perverted way). That is how I look at ALL elected officials, the hired help. It is past time to fire the hired help who have not, do not, and will not support the United States Constitution. Like bad employees, they can and will destroy the business called the United States of America. .

    10. Mike, Wichita Falls says:

      We've seen the GOP draw a line in the sand before…and then move the line as in this last CR. They told us they were "saving their powder" for the debt ceiling. O.K. Here's the fight.

      A good point was raised about unfunded mandates to the states. If some provision limiting or eliminating mandates could be inserted into this BBA, I think it would serve the country well. I think the chances of 37 states ratifying it are greater that 67 senators and 290 reps voting for it though. The states are chomping at the bit; Congress will be the challenge.

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