Weird Crusade for Balanced-Budget Law Flies in the Face of Reagan’s Fiscal Folly

President Reagan, in campaigning for a balanced-budget amendment that would outlaw deficit spending by the federal government, is running one of the weirdest crusades in the history of U.S. politics.

He has launched an assault on what he calls the “big spenders” on Capitol Hill, with the avowed aim of enlisting public pressure to force Congress to bring government income and outgo into balance. Toward that end, he is calling for a constitutional amendment requiring the federal budget to be in balance every year.

There are a lot of good arguments against such an inflexible proposal; spending requirements for defense and other national needs do not move up and down in lockstep with the business cycle and the collection of tax revenues.

In a well-ordered government, however, the peaks and valleys should average out within reasonable distance of a balanced budget. Considering the persistent inability of one Administration after another to make that happen, the attractiveness of the proposed balanced-budget amendment is at least understandable.

Reagan has been talking about a balanced-budget amendment since before he became President. Folks who have kept in touch with reality can only scratch their heads and wonder why he hasn’t at least tried to practice what he preaches.

During his 1980 campaign for the presidency, candidate Reagan blamed President Jimmy Carter for running up four straight deficits and accused the Georgian of making “the greatest single contribution to the national debt of any President” in history.

Now look at Reagan’s own performance.

When Reagan became President in January, 1981, the national debt--which is the cumulative net total of all budget deficits since the birth of the republic--stood at $935 billion. It more than doubled to $2.3 trillion during Reagan’s first six years, and is projected to reach $2.7 trillion by the time he leaves office a year and a half down the road.

So, when it comes to spending money that you don’t have, Reagan has made Carter and all previous Presidents look like pikers.

The fiscal 1981 budget, produced in Carter’s last full year in office, called for the government to spend $79 billion more than it took in. The deficit has never been less than $100 billion since. In Reagan’s first full year as President, it soared to $128 billion. In fiscal 1983, 1985 and 1986, spending exceeded income by more than $200 billion. This year the red ink is expected to total “only” $173 billion.

Governments, like people, must borrow to make ends meet when they spend more than they take in. Historically, economists could remind us that, after all, the national debt represented money that we owed to ourselves. In the private sector, too, foreigners borrowed more from U.S. creditors than American corporations and individuals borrowed from abroad. But all this is no longer true.

As recently as 1982 the United States was still the world’s largest creditor nation, but in 1985 we became a net debtor for the first time since 1914. Now we are by far the world’s largest debtor nation; we owe foreigners about $220 billion more than they owe us. Considering the present outlook for continued trade and budget deficits, the foreign debt could reach an astonishing $1 trillion by 1990.

The plunge into debt reflects the fact that as citizens we have been consuming more than we produce; in effect we have used our credit cards to buy those goodies from Japan, South Korea, West Germany and other places. The debt explosion also reflects the federal government’s turn to foreign creditors for the wherewithal to finance the big budget deficits of the Reagan era.

As economic consultant David Wyss told the Wall Street Journal the other day, “The United States has grown dependent on foreign funds to finance the large borrowing that the Treasury and the rest of us are doing. We clearly can’t continue to borrow more and more from overseas.”

Many economists warn that the American standard of living will decline as a direct result of the borrowing from abroad. By 1990 interest payments to foreign creditors are projected to run between $30 billion and $50 billion annually; that doesn’t include any payments for the reduction of the debt itself.

The U.S. trade balance is improving, but a $160-billion shortfall of exports versus imports is nonetheless anticipated this year. According to some calculations, the trade deficit can’t fall much under $100 billion until and unless the federal budget is brought much closer to balance.

There is no magic wand that we can wave to bring the budget deficit back within reason. It will take a painful process of adjustment, involving a greater willingness by ordinary citizens as well as by elected officials, to demand no more from government than we are willing to pay for.

To hear Reagan tell it, the spendthrifts in Congress are to blame for the huge national debt and the very real threat that it poses to our prosperity and that of our children. And Congress obviously does deserve a share of the responsibility.

The President, however, insults our intelligence when he takes himself off the hook.

Considering the kind of world that we live in, Reagan was right to launch an expensive military modernization program. It shows promise now of a payoff in the form of real reductions in nuclear arms. But if a strong military establishment is worth having, it is worth paying for. Reagan has never been willing to face this obvious fact, and for the past few years the American people haven’t, either.

Given the President’s simultaneous resistance to military spending cuts and to anything resembling the repeal of the tax cuts enacted early in his Administration, there was simply no way that Congress could have avoided the mushrooming of the budget deficit without cutting deeply into Social Security, Medicare and other programs that Reagan himself agrees are essential.

Yet Reagan keeps saying, as he did the other day, that “using taxes to cure deficits is like using leeches to cure anemia. We’re not going to counter one evil with another. We’re going to eliminate both.”

With mirrors, no doubt.

After listening to this “fiscal flabbery,” as one leading Republican aptly labeled it the other day, you begin to wonder if a balanced-budget amendment wouldn’t be the lesser of evils, after all.