Constitutional budgets bad news for economyIf we could change the Constitution and lock in changes that would throw millions of people out of work, double the unemployment rate, and shrink the economy, would we?
By: By Ken Taylor, Superior Telegram
If we could change the Constitution and lock in changes that would throw millions of people out of work, double the unemployment rate, and shrink the economy, would we?
Of course not.
But the balanced budget amendment the U.S. Senate voted on last week would have done just that. The amendment would have made it virtually impossible for the federal government to take steps necessary to mitigate recessions. The likely result would be longer, deeper and more frequent recessions.
When the economy slows down, more families and workers rely on food stamps, Medicaid, and unemployment benefits to get by. That increases federal spending during recessions even though tax revenue is depressed. But it also plays the critically important role of injecting additional money into the economy to help reverse the downward economic spiral.
A balanced budget amendment would prohibit the federal government from spending more money in a year than it took in. As a result, we would have to roll back public investments in health care, education, and safety during recessions — at exactly the time our communities need these investments the most.
The economic effects of a balanced budget amendment would be “catastrophic,” according to a Macroeconomic Advisors, one of the nation’s major economic forecasting firms. Macroeconomic Advisors predicted that if a balanced budget amendment were in effect in 2012, the drastic spending cuts required would mean an additional 15 million people would lose their jobs, the unemployment rate would skyrocket to 18 percent, and the economy would shrink by 17 percent.
Some people argue that since families have to balance their budget in good times and bad, the government should have to as well. But in fact this amendment would block the federal government from using methods that families use to manage their finances. For example, the federal government would not be able to save money during good economic times for use during recessions, as families do. And under this amendment, it would be extremely difficult for the federal government to make worthwhile investments toward long-term goals that pay off down the road, like a family does when it sends a child to college.
A balanced budget amendment might sound appealing, but would put the economy in a straightjacket. Instead of enshrining inflexible fiscal policy in our nation’s Constitution, let’s ensure that lawmakers make decisions that help the economy grow. We can work to reduce the federal deficit while still providing the federal government with the tools it needs to help mitigate recessions.
The House of Representatives had already rejected a balanced budget amendment in a mid-November vote. The Senate was wise to vote against this extreme measure as well.
Ken Taylor is the executive director of Wisconsin Council on Children and Families.