How do you kill the economy? Pass a balanced budget amendment.

Guest post by Publius

The House recently passed “Cut, Cap and Balance” (see John McCain’s fantastic take on it here). Republicans are convinced of the need for a balanced budget amendment, and one of the most cited arguments for they give for a balanced budget amendment is that 49 states have one so the federal government should too.

The concept of a balanced budget amendment sounds intuitive enough. “Ordinary Americans and 49 states have to balance their budgets,” the argument goes, “so Congress should too.” Well, not exactly.

First, there is a huge difference between the balanced budget “amendments” (several states have laws instead of constitutional amendments) at the state level and the proposed amendment at the federal level. The state amendments, for example, do not even attempt to balance the entire state budget. Instead, they almost exclusively only apply to a state’s “general fund.” The general fund oftentimes constitutes less than half of a state’s budget. It is the fund out of which general expenditures flow and into which general revenues enter. “Special” expenditures and revenues, such as gasoline taxes, education expenses, etc., have nothing to do with the general fund and are exempt from the balancing requirement.

If Congresspeople would stop and think about their argument for a moment, they would quickly realize that the balanced budget requirements at the state level either can’t apply to the entire budget or are laxly enforced. Most every single state is currently running a deficit, and has been for several years! Further analysis by these Congresspeople would also show the issue isn’t lax enforcement- at least exclusively.

In 1987, the Advisory Commission on Intergovernmental Relations published an oft-cited study (PDF) of state balanced budget requirements. The study examined each state’s budget balancing requirements and the mechanisms each used to enforce the requirements. It then ranked each state on a scale of 0-10, with 0 being no enforcement mechanism and 10 being the strongest possible enforcement mechanism. 26 of the states ranked a “10,” and in 2004, California recently became the 27th state to join that category by adopting an amendment to its constitution. Here’s how those states have done with their deficits since FY 2009:

States in categories 3-5 (fairly lax enforcement) had the largest deficits by far over the measured periods, but states in category 10 (most stringent) were the next worst deficit spenders. Ironically, states with little to no enforcement mechanism had almost no deficit (though only 2 states fit in this category, so not much of a sample size). This suggests that stringent enforcement of a balanced budget amendment is insufficient to produce a balanced budget for the states.

The scatterplot table below (amounts in thousands) shows the deficits by year, state and category. California’s enormous deficits and NY’s 2010 deficit were removed from the scatterplot because they shrunk the scale of the chart so much the rest was not legible:

The scatterplot is a bit messy, but it shows the size of the deficit for each state within the 0-10 enforcement categories described above. There’s no getting around it. No matter how strict a state balanced budget requirement is, states continue running deficits during this economic downturn. This doesn’t mean the balanced budget requirements have no impact- only that they don’t accomplish what Republicans in Congress think they accomplish.

One might ask, “Why isn’t the federal proposal (which demands that the entire budget be balanced) more workable than the state proposals?” Well, first consider that the federal “general fund” only accounts for about about 35% of the entire federal budget. That number includes defense spending, however (which is considered “discretionary” even though it has a history of only going up). Non-defense discretionary spending only accounts for about 15% of the budget.

A true “balanced budget amendment” like what Republicans have proposed could require that money which is allocated to defense spending or other mandatory spending (social security, Medicare, Medicaid, interest on the debt, etc.) be cut in order to balance the budget. In FY 2010, for example, the deficit was about $1.3 trillion. Total non-defense discretionary spending in FY 2010 was only $714 billion. Even if all non-defense discretionary spending was eliminated in FY 2010 (no spending on education, justice, health, roads or other infrastructure, etc.), we would have still had a $586 billion deficit. Total defense spending in FY 2010 was only $663.7 billion, meaning to avoid any cuts to mandatory spending (which, as its name implies, is money we must spend), the Department of Defense budget would have been reduced by 88% (to a total of $77 billion). The last time defense spending was that low was 1973.

As should be obvious, when a severe recession hits, it’s quite difficult to balance a budget. In fact, it’s also precisely the wrong thing to do in a recession (when spending should go up as a stabilizer). The federal government has a macroeconomic role through fiscal policy which it cannot play if it is hamstrung by a balanced budget amendment. But even assuming that wasn’t the case, there’s just not enough discretionary spending to cut to balance a budget in a severe recession. Recessions reduce tax revenue dramatically because people lose jobs and stop paying FICA and income taxes. There just aren’t enough discretionary dollars to eliminate to keep pace. That means defense spending and/or mandatory spending has to be cut. So who should cut it?

This is the next problem with the balanced budget amendment. The enforcement mechanism. If the Constitution requires Congress to balance a budget and it doesn’t- what happens? In some states, the governor can eliminate spending without legislative approval (like a line-item veto). In 2010, however, there is no chance any politician would have voluntarily eliminated 100% of discretionary spending plus a large amount of defense/mandatory spending. The courts, then, would be required to mandate the cuts or, alternatively, raise taxes (also a bad idea during a recession). One can only imagine the Republican cries of “activist judiciary” in such an instance- and ironically they would have been the ones demanding that the judiciary take such an activist role. I should mention that tax increases could be adopted in lieu of spending cuts, but I haven’t spent much time on that option because: a) Republicans would never agree to tax increases; and b) to ensure no tax increases are passed, Republicans have proposed in Cut, Cap and Balance that all tax increases require a 2/3 vote, effectively making them illegal.

So, what happens if the courts also don’t act to force the budget to balance? The Constitution is violated and, as we are seeing with the debt ceiling debate, the nation’s credit rating would beat risk as a consequence (thereby threatening global economic instability).

Of course, the federal amendment could be fashioned to look more like the state balanced budget requirements and only apply to discretionary spending. Needless to say, such an amendment would not eliminate federal deficits (which is the stated purpose of enacting such an amendment). The amendment would be circumvented entirely in recessions (appropriately so from an economic perspective) which would only serve to undermine the Constitution and the rule of law. The accounting tricks employed by states to “balance their budgets” would only be magnified at the federal level thereby creating far more frustration with the system (California technically has a balanced budget this year, despite its projected $17.9 billion deficit).

The balanced budget amendment as included in Cut, Cap and Balance is quite possibly the worst economic idea any major party has actively promoted in modern history. It can’t work- except to wreak havoc. Few other proposals stand to do as much harm to the US and global economies, particularly during recessions.

(Cross-posted at The Fourth Branch.)

Billion-dollar coins and exploding options -- oh my!

By Capt. Fogg

Maybe the president can't simply cite the 14th Amendment and raise the debt ceiling, maybe he can -- but does the Constitution provide a paddle? Must he allow the Tea Party to shut down the government as the more mainstream Republicans attempted to do in 1995 during the Clinton administration? 

You remember President Clinton, don't you, the guy that the snickering snarkmongers told us would only serve one term, who would destroy capitalism, plunge us into debt and start fake wars simply to allow him to become a dictator. I'm sure the parallels are coincidental (wink-wink, nudge-nudge).

But Obama, even if if no Clinton ( for better or worse), may still have options, says Jack M. Balkin, Knight Professor of Constitutional Law at Yale Law School. The Constitution has as many loopholes as the Tea Party has loonies, although some of them are as arcane as something out of The Da Vinci Code. There's the Platinum Coin Gambit and the Exploding Option Strategy, for instance.

Even so, all may not be lost for 14th Amendment solution protagonists, like Bill Clinton and a few others, says Balkin:

If the president reasonably believes that the public debt will be put in question for either reason, Section 4 comes into play once again. His predicament is caused by the combination of statutes that authorize and limit what he can do: He must pay appropriated monies, but he may not print new currency and he may not float new debt. If this combination of contradictory commands would cause him to violate Section 4, then he has a constitutional duty to treat at least one of the laws as unconstitutional as applied to the current circumstances.

Balkin likens this dispute to recent attempts to topple the president over his ability to use the military to protect the national interest or in emergencies: 

If the courts won't intervene in the Libya affair, they probably won't intervene here.

But regardless of your opinion on the best way to beat back the barbarians, whichever side you think they're on, Balkin's CNN exclusive interview is great reading and gives a glimmer of hope that the Constitution will do what it was designed to do: protect us.

(Cross-posted from Human Voices.)

Taking the 14th

By Capt. Fogg

"The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

14th Amendment, U.S. Constitution
____________

Now, I'm no lawyer, which means that I generally take such statements at face value and have no knowledge of what pretzels they've been twisted into by various courts in various cases, but it seems to me that if congress can't question the validity of our public debt, then congress can't refuse to pay it or more importantly say it's only valid under a certain amount authorized by Congress after they've already deemed it legal. What do you think?

I hate to bring up the Constitution at a time when the Tea Bag Patriots are pretending to worship it while claiming that those who would like to actually conform to it are "shredding it," but the situation is getting serious.

Of course, this whole controversy is about "taking down" the president we elected by a good margin and replacing him with a Tea Party Republican of their choice hell bent not on reducing the debt, but killing Social Security, Medicare, all forms of welfare, and any protection for the public against the health insurance cartel -- and all to make sure people like me can put an extra tank of fuel into the yacht every now and then thus creating jobs in the Bahamas and Taiwan.

After all, they raised the debt ceiling every year a Republican was in office since the beginning of the Reagan administration and authorized Bush's massive debt explosion like a well-disciplined private army. Remember when "debt doesn't matter" was the slogan? No? Well I do.

Obama would be impeached if he blocked debt payments,

says Rep. Steve King (R-IA) and he'd also be impeached if he invalidated the debt ceiling based on the 14th Amendment, says Rep. Tim Scott (R-S.C.) Talk about a poker player with a "tell." Might as well lay the cards on the table.

It's all about impeachment and all about finding some flimsy excuse for forcing the president into a position where they will impeach him if he does and impeach him if he doesn't. No more revolting, I guess, than impeaching one for asking his secretary not to tell his wife he was having an affair. Talk about insurrection and rebellion! No sooner did we lose the Cold War gravy train then we embarked on the Cold Secession.

President Clinton told us recently he wouldn't hesitate to use the 14th to raise the debt ceiling and "force the courts to stop me." You'll remember the attempts to impeach him on any pretext and how the talk of the "failure of the Clinton presidency" preceded the Clinton presidency and how he would certainly be a one-term president and how his tax policies would bankrupt the economy. They hope you won't remember, of course, because we're hearing the same damned bullshit again.

I think the Constitution is clear and I think this idea that the Congress gets to vote twice on whether to pay for [expenditures] it has appropriated is crazy,

said Bill Clinton to The National Memo last week. No wonder slimy things like the Newt are challenging the Constitutional basis for even having a Supreme Court.

Meanwhile that extra 3% tax cut I get on anything I earn over $250,000 is going to prompt me to create jobs for those struggling people now paying for the longest, most expensive wars in American history while losing their houses, jobs, and medical insurance, waiting for the voodoo to kick in and save us all -- and all will be fine just in time for a Tea Party president. I can feel it in my bones.

(Cross-posted from Human Voices.)

Pants on fire

By Capt. Fogg

The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish.

Article III of the U.S. Constitution

There is no Supreme Court in the American Constitution.

Newt Gingrich

Really, Newt? Are you really a history professor? Do you really think we're that stupid?

It's getting hard to tolerate the stench coming out of the pre-primary Republican cesspool; from presidential candidates getting government funds -- our tax dollars -- to teaching people how to pray away the gay and advocating the use of federal might to stamp out all forms of pornography frowned on by their frowning religion and to legislate and limit and punish our personal relationships -- while griping about too much government interference and too much spending and too much social engineering. It's getting damned hard to tolerate morally, mentally, and ethically bankrupt creeps like Newt Gingrich, who is quite happy to feed the malignant idiocy now consuming the remnants of our Republic by telling us that our constitution does not "mention" much less provide for a Supreme Court, Article III of the Constitution notwithstanding. 

We now have this entire national elite that wants us to believe that any five lawyers are a Constitutional convention. That is profoundly un-American and profoundly wrong,

lies the moral multimillionaire elitist with the million dollar line of credit at the jewelry store and a string of illicit mistresses and abused ex-wives. That's profoundly un-American and profoundly wrong and profoundly Republican. But of course anyone who thinks the highest court is an extra-legal ad hoc assembly of five self-appointed members foisted on the public by "elitists" and with no constitutional authority can hardly be considered an elitist of any kind unless there's a ranking of candidates according to their ignorance and mendacity and greed. Perhaps Newt just forgot that the Supreme Court justices are approved by Congress or perhaps he's just a lying tub of septic scum who thinks he's entitled by birth and party affiliation to feast on the corpse of America.

You can fool some of the people all of the time: you can fool a lot of them in fact. They're called Republicans. They're called perverts, they're called liars, thieves, embezzlers and saboteurs.


(Cross-posted from Human Voices.)

Debt ceiling madness: Standing on the brink of economic apocalypse

By Michael J.W. Stickings

There may soon be a deal, and maybe even a "grand" one (or maybe this more realistic one), that will see America's debt ceiling raised. It has to be, if economic apocalypse is to be avoided, but the default deniers in the GOP are resisting to the end and seem to have no problem, probably because they have no idea what's really going on here and what the consequences would be, accepting, as Sen. Jim DeMint ignorantly put it, "serious disruptions" to the economy.

Of course, there wouldn't just be "disruptions." Defaulting would wreak havoc on the economy and on millions and millions of Americans:

If Congress fails to raise the national debt limit by early August, the Obama Treasury Department will have to choose between defaulting on obligations to the country's creditors -- triggering higher interest rates and perhaps damaging the country's credit rating for months and years to come -- or freezing outlays to contractors, entitlement beneficiaries and others who are also expecting prompt payment as well. In either case, the macroeconomic impact will be staggering.

This according to Mark Zandi, Moody's chief economist and former McCain advisor.

Now, if there's no deal, there's another option, a constitutional one:

Last month, Treasury Secretary Tim Geithner suggested that the debt ceiling is unconstitutional because of Section 4 of the 14th Amendment, which states that "the validity of the public debt of the United States... shall not be questioned." If the Obama administration were to embrace this view, the country could avoid default in the event that the debt ceiling is not raised by the Aug. 2 deadline.

This may not be the preferred option, and it may just be the option of last resort, but what else is there to do when the other party has succumbed to sheer madness?

And mad it is. House Republicans are actually considering filing articles of impeachment against Obama should he end up having to go the constitutional route. That's how wildly disconnected from reality they and their priorities are, how blindly partisan they are, how closed to compromise in the name of any sort of common good they are, how unable or unwilling they are to dealing in any meaningful way with the country's long-term fiscal problems, not to mention the debt ceiling crisis they themselves have created.

Look, there are good reasons to criticize the president. To say the least, he has handled the debt ceiling issue poorly. He seemed (and still seems) to have all the leverage, with Republicans torn between the party's corporate establishment (which understands that the debt ceiling needs to be raised) and the Tea Party (which fervently opposes any compromise on the debt ceiling and will launch a primary challenge against any Republican who violates its extremist demands). Boehner is the one in the difficult position, not Obama. And yet it is Obama who is the one giving in, and who is prepared to give the other side almost everything it wants just to get a deal done. No, not what the extremists want, but certainly what Republicans should be prepared to accept and what would, for them, constitute victory.

Obama has even put Social Security and Medicare cuts on the table. This has justifiably incurred the ire of many liberals, including this one. It appears that Obama is desperate to do a deal -- or, if not desperate, willing to go to great lengths, willing to give up a great deal, to avoid risking a debt ceiling crisis, even if it would be the Republicans to blame for it. (The White House is pushing back against the story, saying that it "overshoots the runway" and that the president wants to strengthen Social Security. But that's awfully vague and keeps everything on the table.)

But, seriously, impeachment? Republican craziness is piling up, higher and higher, at a time when what is needed is maturity and sobriety, a willingness to work for the American people, including for future generations of Americans, by putting aside ideological extremism and working towards a deal that makes sense to both sides.

Yes, Obama deserves to be criticized -- though we'll have to see exactly how much he gives up if and when a deal gets done -- but we mustn't forget that this is all happening because Republicans simply refuse to work constructively with the president and the Democrats, that is, refuse to help govern the country in any productive way. They're such extremists, and so ignorant of what they are doing, that they're taking the country to the brink of economic apocalypse and are willing, it seems, to pull it into the abyss.

Ultimately, Obama and the Democrats, along with the few Republicans who actually want to help, must do whatever it takes to save America.

If they're for it, we're against it.

By Capt. Fogg

The natural state of men, before they were joined in society, was a war, and not simply, but a war of all against all.

-Libertas, Thomas Hobbes -


Scanning the Facebook page of my congresscritter, Tom Rooney (R-FL) I find the real interest not to be the simplistic banalities and the strained attempts to generate outrage against Barack Obama. It's not the continuing effort by Rooney to portray the assistance being given NATO's actions in Syria as a constitutional violation; it's more about the truly demented calls for impeachment by the people who post there; calls that remain in view without comment by Mr. Rooney, who claims that he maintains the page to be more "in touch" with the sentiments of his constituents rather than as a tool to promote irrational rage for political purposes.

If he has some constituents other than me who disagree with the "Oh I just hate, hate him" and "Oh he just makes me sick" and the "he uses the constitution to line his bird cage" swamp dwellers, they must indeed like me, be very reluctant to post comments there under their real names. He's created a milieu quite hostile to reason and reasonable people offering constructive criticism.

Yes, of course there are many questions about the legality of George W. Bush's legacy, some of which -- too much of which -- remains in place, but the War on Obama is not really based on his alleged and often misrepresented constitutional infractions, and we know it because they weren't presented as such during the previous administration and indeed were eagerly supported by the reactionary beasts who hang out on the Rooney page to congratulate themselves and outdo each other on the size of their hate. Indeed, that place is a microcosm of our war against ourselves, a war of all against all.

It's not that I like Senator Rand Paul or his familiar pose of principled outrage, but I am indeed on his side when it comes to addressing the real constitutional outrage of the Patriot Act. I have to smile at what may be the end of his naivete because it isn't the Democrats at war with the Leahy-Paul Amendment, designed to allow greater oversight of ever increasing Government warrantless surveillance powers under that cynically named act. It's the Republicans supporting precisely the kind of power they pretend to oppose while posturing as libertarians to the frothy-mouthed and furious rabble.

“Unfortunately, what we’re finding now is that the Democrats have agreed to allow me to have amendments but my own party is refusing to allow me to debate or present my amendments.”

Said Paul. Imagine that.

But as the man said, the joining of people into a society serves to prevent the chaos of nature, and I have to ask myself whether the effort to portray anything social or designed for the common good as the unqualified evil of Socialism, did not have the promotion of that very bellum omnium contra omnes; everyone at war with everyone and every man for himself as a purpose. Perhaps when everyone is against everyone, such things as consistent viewpoints are illusory as is anything resembling principle. If you're for it, I'm against it may be as close as we can get.

(Cross posted from Human Voices)

Just wrong

By Carl 

It makes little sense to spread democracy around the globe if we are not going to practise democratic ideals:

The Daily Telegraph, along with other newspapers including The Washington Post, today exposes America's own analysis of almost ten years of controversial interrogations on the world’s most dangerous terrorists. This newspaper has been shown thousands of pages of top-secret files obtained by the WikiLeaks website. 

[...]The files detail the background to the capture of each of the 780 people who have passed through the Guantanamo facility in Cuba, their medical condition and the information they have provided during interrogations.

Only about 220 of the people detained are assessed by the Americans to be dangerous international terrorists. A further 380 people are lower-level foot-soldiers, either members of the Taliban or extremists who travelled to Afghanistan whose presence at the military facility is questionable.

At least a further 150 people are innocent Afghans or Pakistanis, including farmers, chefs and drivers who were rounded up or even sold to US forces and transferred across the world. In the top-secret documents, senior US commanders conclude that in dozens of cases there is "no reason recorded for transfer".

However, the documents do not detail the controversial techniques used to obtain information from detainees, such as water-boarding, stress positions and sleep deprivation, which are now widely regarded as tantamount to torture. 

Now, let's see what the Framers had in mind with respect to "democracy":

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

Words you and I, if you're American, had to learn by heart. This doesn't mean that some men who are not American do not have the same rights and privileges as Americans. It says that the Creator made all men equal, that all men are entitled to life and that all men are entitled to their personal freedom. It also says that even a Teabagger ought to recognize these rights, that it doesn't require deep thought or evidentiary hearings. All men are entitled to these rights. Period.

The Framers were smart enough to elucidate these points and outline these rights in a supporting document to this Declaration, our Constitution.

Right up top in the first Ten Amendments, the Bill of Rights, the Framers delineated what is liberty. Liberty is the protection of the individual from the tyranny of the majority, that beautiful phrase of John Stuart Mill. That majority can take the form of mob or governance by mob rule.

It means that any man in the entire world should be free from the depredations of our exertion of American will and might over him. One can make the case that in war, these rules should be suspended, and perhaps there is a point to be made there but it seems to me that if you can't have a higher batting percentage than roughly .500 in the application of that suspension versus harming innocents, you have no business being in the business of war in the first place.

The willful negligence... and that's being overly polite... of the Bush and Obama administrations in the pursuit of the aims of their aggressions in Afghanistan, Iraq and now in Libya will come back to haunt American citizens. How can it not? How can Americans expect to live a life of freedom in a world where freedom is a slogan and not a philosophy? How can we expect to continue to presume that what we own and what we enjoy cannot be taken from us at a moment's notice, not just by those who would do us harm, but also by those who wave the flag of "freedom" in our faces?

How can we in good conscience say we are bringing freedom to the world, but only to the part of the world that agrees with us? For if one man is not free, they I am not free. And if I am not free, then my fellow Americans are not free. 

(Cross-posted to Simply Left Behind.)