A part of the debt ceiling bill that the House is insisting on is a balanced budget amendment. I am not certain if the bill says that a balanced budget amendment must be voted on in both houses or if it says that it must be passed by both houses. If it is the latter, then the ceiling crisis will continue because it is doubtful if the senate will pass the amendment. Nevertheless, I am opposed to a balanced budget amendment. To balance the budget, you must either decrease spending or increase taxes. Which is the more likely outcome? It is raising taxes. Consider the following: let us say that the congress must incorporate revenue projections from the congressional budget office into the appropriations process. Forecasters usually give three choices - most likely, a low side estimate and a high side estimate. Which one will the congress choose? Given the choice, spending will be dictated. It is guaranteed that whatever choice is made, it will not occur. How many times have economic forecasters been correct? Don't you hear that when economic statistics are released, the commentators always say that the numbers were "not anticipated" by the forecasters. Therefore, regardless of what estimate is chosen, it is highly likely that the actual revenues will not match with the appropriations thereby calling for an adjustment in revenues (taxes). So what can be done? Language would have to be incorporated into the amendment limiting the ability of the congress to balance the budget through taxation. This would mean that any balanced budget amendment would be complicated which would lessen its passage otherwise the spirit of the amendment would be circumvented virtually every year. What is ironic is that the discipline for limiting government is already on the books. It is the debt ceiling itself. If the congress just says no to raising the ceiling, the federal government would be forced to submit appropriations roughly equal to projected expenditures and no more. Congress could no longer write deficit budgets. So in essence we already have a law mandating a balanced budget on the books already. What is happening now is one of those rare instances in which the congress is not ignoring the law or constantly modifying it. What all this means is that we must elect more people to congress (senate and house) who pledge not to raise the debt ceiling.
Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com