Politicians Rally Around Plan to Balance Budget

Hoping they have found a talisman to ward off voter backlash, politicians of every stripe are seizing upon a plan to amend the Constitution to mandate balancing the federal budget--an idea many of them once scorned as gimmicky, simplistic and downright dangerous.

The proposal, which would add language to the Constitution requiring a balanced budget beginning within two years, could come to a vote in Congress as early as next month.

And in an election year in which the federal deficit--projected to hit a record $400 billion--stands as Exhibit A in the case against congressional incumbents, few lawmakers dare to say they will vote against the amendment plan. The idea also has been endorsed by President Bush, who could make it a potent issue against the Democrats in the fall campaign if they fail to support it.

“What’s driving it right now is politics--the politics of fear,” said House Budget Committee Chairman Leon E. Panetta (D-Carmel Valley).

Opponents of a budget-balancing amendment--including a broad array of economists as well as many experts on federal spending--say it would probably fail to produce the desired effect. Also, they say ideas for amending the Constitution to deal with political hot potatoes have a history of winning quick initial support, only to die quiet deaths as the heat subsides and elected officials take another look at the practical consequences.

Critics cite a 1989 proposal to ban flag-burning as a case in point. When the proposed amendment first surfaced, it appeared unstoppable, but by the time it reached a vote in the Senate, the necessary support was not there.

That also could happen this time. Any precipitous throttling back of federal spending would have painful consequences for millions of Americans, including the middle class, as most members of Congress know all too well.

Balancing the budget would probably require reductions in Social Security and Medicare expenditures, or at least strict limits on future growth. It could jeopardize an array of other federal assistance programs too, such as state and local aid, welfare, farm price supports, military spending, defense contracting, road and transit construction and outlays for health, science, education and the arts.

“It’s conceivable that once people understand what it means, they may have second thoughts,” said one aide to the House Democratic leadership. “This is not a tidal wave.”

Still, if the amendment wins the required two-thirds margin of each house in Congress, it may be hard to stop at the state level. Some predict quick ratification by the necessary 38 states.

“I think the states will ratify it like a hot knife going through butter,” Panetta said.

During the 1980s, 37 states ratified a more controversial proposal calling for a constitutional convention to consider a balanced-budget amendment. Critics raised the possibility that such a convention could also rewrite other parts of the nation’s charter--including the Bill of Rights. Fear of a runaway convention helped kill that plan, but the present proposal would not involve such a convention.

Moreover, all but two state governments live under some sort of balanced-budget requirement of their own. “We balance our budget every year, so why can’t they?” asked Dwight Evans, chairman of the Appropriations Committee in the Pennsylvania General Assembly and a supporter of a federal balanced-budget amendment.

Paradoxically, among the lawmakers and other officials least enthusiastic about the idea are those, like Panetta, who were doggedly trying to curb the deficit during the years when most politicians were paying it little heed.

“My problem is I haven’t seen one (balanced-budget proposal) drafted that doesn’t create bigger problems than it solves,” Panetta said.

In recent testimony before the House Budget Committee, Congressional Budget Office Director Robert D. Reischauer warned that a balanced-budget amendment could prove to be “another empty promise . . . a cruel hoax” on the American public.

As critical as the need is to reduce the federal deficit, Reischauer said, “a balanced-budget amendment, in and of itself, will neither produce a plan nor allocate responsibility for producing one. Even if it is passed, therefore, the hard work will remain to be done.”

Virtually everyone agrees that the annual budget deficit and the growing national debt that it feeds are serious problems. The deficit accounts for 27% of this year’s $1.5-trillion federal budget, which means the government is borrowing one of every four dollars it spends.

Each year’s deficit, in turn, contributes to the national debt, which has reached a record $4 trillion. Interest payments on that debt are now the fastest-growing component of the federal budget, soaking up 19% of all taxes collected last year.

Years of living beyond its means have also severely limited the government’s ability to commit new funds to pressing needs, such as the urban problems that lay behind the Los Angeles rioting, and have diverted savings that could otherwise have been invested in economic productivity.

The measures now being considered would require the federal government to eliminate the deficit almost cold turkey. The President and Congress would have to approve a balanced budget within two years of the amendment’s ratification by the states unless three-fifths of both the House and Senate vote to permit deficit spending. During wartime, the balanced-budget requirement could be waived on a majority vote.

Yet there is no evidence of a consensus on how to reduce the deficit. That is because the hard reality is that, in an economy unlikely to experience huge surges of growth, there are only two ways to shrink the deficit: cutting spending and raising taxes.

“You would have no choice but to cut Social Security, Medicare and Medicaid--not just freeze the cost-of-living increases on them, but to actually cut benefits by as much as 20%,” warned Judy Schub, a lobbyist for the American Assn. of Retired Persons, which opposes a balanced-budget amendment. “It would devastate these programs, you would reduce access to health care and throw hundreds of thousands of people into poverty.”

“To eliminate the deficit in one or two years, Washington would have to cut the budget in a way roughly equivalent to wiping out the Pentagon,” added Barry Bosworth, a budget expert at the Brookings Institution. If anything, Bosworth understates the task: Defense spending is expected to total $313 billion this year, considerably less than the deficit.

In the past, such concerns have been enough to make balanced-budget proposals perennial losers in Washington because the electorate has frequently punished politicians who offered unpalatable solutions to rein in spending or raise new revenues.

After the Senate voted in 1985 to curb cost-of-living increases in Social Security--a relatively modest measure compared to what would need to be done to balance the budget--the proposal came back to haunt the incumbents who had supported it. It was blamed as one of the major reasons for the 1986 election results that cost the Republicans six Senate seats and gave the Democrats control of both houses of Congress.

Opponents also warn that a balanced-budget amendment can be a dangerous and inflexible tool.

At worst, they say, it could wreak havoc with the economy. It would deprive Congress and the President of their powers to soften the edges of economic cycles--limiting their ability to increase spending on unemployment benefits during a recession, for example. Some warn that it could actually bring on a deep downturn by forcing Congress and the President to impose drastic spending cuts and major tax increases on a fragile economy.

At best, critics contend, a balanced-budget amendment would invite evasion and gimmickry that are even worse than the sleight of hand already being employed in Washington’s annual budget ritual. Those include understating the size of the problem with overly optimistic economic forecasts, shifting pay dates and tax collections and declaring some types of spending to be off the budget.

Reischauer said the experience of states with balanced-budget amendments is hardly a model that Washington could or should follow.

States, he said, do not have responsibility for national defense, the stability of a national economy or disaster relief. Even without those larger responsibilities, most states can achieve balanced budgets only by excluding such important programs as capital spending and employee pension funds from their budget calculations.

And states also have learned to evade their fiscal constraints by shifting revenues and spending from one year to another, borrowing, and creating off-budget agencies, Reischauer said.

As recently as 1990, Congress defeated a proposed constitutional amendment to require a balanced budget. But congressional leaders say this year is different. Voters are in an ugly mood, incensed by the House bank scandal and frustrated by general policy gridlock that can be traced in large part to the government’s fiscal dilemma.

While many congressional leaders are opposed to a balanced-budget amendment, their control over rank-and-file members in the House and Senate has been weakened by voter outrage over scandals and perks. In the House, the proposal is being pushed by a group of six young back-bench members who say they latched onto the idea as a way to address Congress’ image problems.

Thus far, they have gathered more than 270 co-sponsors, or more than half of the House.

“We talked about the morass we are in, the sense of paralysis, and said why don’t we focus our energies on this kind of reform,” noted Rep. Chet Edwards (D-Tex.), a freshman lawmaker and co-sponsor of the amendment.

Speaker Thomas S. Foley (D-Wash.), his leadership shaken by the House bank scandal, predicts that the measure will be approved despite his opposition.

“We basically have an enfeebled Congress that wants to do something, anything, and so they are grabbing this,” Reischauer added.

Adding to the measure’s new momentum is the fact that Texas billionaire and potential independent presidential candidate Ross Perot has begun hammering away at the skyrocketing deficit as a metaphor for Washington’s failure to deal with the nation’s most serious economic problems.

Perot’s blunt message about the public debt has apparently contributed to his surge in the polls and seems certain to force Bush and Democratic candidate Bill Clinton to confront the issue more forcefully.

“The thing that causes me to be willing to do this is that we’re spending our children’s money,” Perot said in a recent television interview. “We’re going $400 billion into debt this year, and we have very little to show for it. It’s not as though our cities gleam, that everything in this country is world class. . . . You ever heard the incumbent President once mention the fact that during his tenure in Washington we’ve added $3 trillion to the debt?”

So far, Perot has failed to outline specific cuts he would make and instead has suggested he could make serious inroads in the deficit by eliminating “waste, fraud and abuse.” Budget experts, deriding such platitudes as “Rotary Club” solutions, say the crucial moment for Perot’s candidacy may come when he is forced to move beyond criticism of the status quo to proposing remedies such as slashing Medicare and Social Security.

At the same time, other Washington officials also are agreeing with Perot that the deficit has placed government in a fiscal straitjacket from which there is no apparent escape. That sense of frustration is contributing to this year’s record level of congressional retirements.

Sen. Warren B. Rudman (R-N.H.), for example, recently announced he is quitting because he is fed up with Washington’s inability to slow spending growth. Soon after, Sen. Kent Conrad (D-N.D.) announced that he also is going home, citing a campaign pledge to leave the Senate if the deficit did not shrink during his term.

For many of those who remain in Washington--or hope to--the balanced-budget amendment is suddenly looking good. An some of its new supporters openly admit that their conversion is born as much of desperation as anything else.

“Years ago, I would never have imagined that we would need, or that I would end up supporting, a balanced-budget constitutional amendment,” White House Budget Director Richard G. Darman admitted in congressional testimony this month. “But our political system has demonstrated a consistent--a systemic--bias toward short-term convenience at the expense of longer-term substantive responsibility. . . . In its own curious manner, the system may be in the process of self-correction.”