Sounds Great! But What Would It Do? : Why balanced-budget amendment is unbalanced

Who could be against a balanced budget? In theory, it makes sense to match spending to revenues. Households try to operate within a budget, so why not the government? But in practice, balancing the federal budget by the year 2002 would require spending cuts on the order of $1.5 trillion. What would be the economic and social impact? What programs would be slashed? How much? Who would be at risk?

Washington refuses to answer these hard questions. First it was the House that ducked them as it voted for a balanced-budget amendment. Now the debate continues in the Senate, and there, too, backers are dodging the questions. That debate is sure to heat up today as President Clinton submits his new budget.

Members of Congress who support the amendment are showing a false face of responsibility while ignoring the dire consequences the legislation would bring about. Their attitude is unconscionable, and not even as politically savvy as it might seem. Polls indicate high support among the public for the balanced-budget amendment, but that enthusiasm evaporates when people are presented with specific federal spending cuts that would affect their lives.

California’s senators are doing a bit of a dance. Both Dianne Feinstein and Barbara Boxer say they will support a balanced-budget amendment if Social Security is protected. Clever--because that’s the easy out. However, they are right in backing an amendment by Sen. Tom Daschle (D-S.D.) calling for specifying spending cuts. Based on the total cuts needed, states would lose billions in federal funding. The costs of Medicaid, welfare, education and highways would be dumped on them.

Take California. Federal funds covered $29.05 billion, or 33.6%, of the state’s total spending in fiscal 1993, the latest year for which the National Assn. of State Budget Officers has data. The balanced-budget amendment would reduce federal grants to the state’s government by $7.7 billion yearly, the Treasury Department estimates. And that figure rises to $10.5 billion when the amendment is combined with the massive tax cuts called for in the Republican “contract with America.” Neither of these figures includes cuts in Social Security or defense spending. If indeed there were reductions in these two areas, the state would be hit much harder.

Under either the amendment alone or the amendment in combination with the GOP “contract,” California would have to cut spending drastically. Gov. Pete Wilson says California should ratify the amendment. But even Wilson admits that a balanced-budget amendment would require additional heavy cutbacks of the sort we’ve seen in recent years. Or--guess what?--state taxes would have to be raised. What good is it to cut federal taxes only to hike state taxes? Your wallet doesn’t know whether a dollar goes to Sacramento or to Washington.

The ultimate fallacy of the amendment is that Congress would have an escape clause; it wouldn’t have to match spending with revenues in case of war or “imminent and serious military threat.” Through a three-fifths vote in both houses, Congress could run a deficit or increase the federal debt. In effect, any time it saw a “threat” it could operate just the way it’s operating now. Virtual reality goes to Capitol Hill. Americans, beware.

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California Impact

Federal money, in billions, state is expected to lose per year under:

Balanced Balance budget budget with tax cuts Medicaid $3.9 $5.4 Education* 2.4 3.2 Welfare 0.96 1.3 Highways 0.44 0.6 Total 7.7 10.5

*includes job training, environment, housing and others Source: U.S. Treasury Department