The balanced budget amendment; 'Simplistic'
The call for a constitutional amendment to balance the budget reminds me of those defeated people who, having utterly failed to control their calorie intake , have their jaws wired shut. This act of desperation is an open admission of their inability to control their impulses. For a handful of individuals to give up on moderating their eating may be pitiful, but for a nation to go so far toward despair of its public institutions is acutely disturbing.
Of various proposals for a balanced-budget amendment, the principal ones, including the one President Reagan supports, seek to require that Congress and the president each year ''adopt a statement of receipts and outlays'' that are in balance. In effect, policies that would unbalance the budget would be removed from public deliberation.
Such an amendment, quite popular with the conservatives, especially those of the right wing, is based on the simple belief that what ails the American economy is inflation -- not high interest rates, obsolescent equipment, a declining work ethic, or other ills -- and that the way to cure inflation is to balance the federal budget.
The proposal disregards whether balance is achieved at a high or low level of expenditure and taxation, although clearly a high budget, even though balanced, would leave relatively few resources for the private sector. It disregards the level of expenditure by state and local governments, although they spend from their own revenues only about 15 percent less than the federal government, and they employ four times as many people. And the proposed amendment forecloses the option of federal action to stimulate the economy -- at the price of deficits -- when it is in a deep recession.
The world is more complex, and the economy requires a more multifaceted and flexible approach than the miracle cure promised by proponents of a balanced-budget amendment. We need to concern ourselves not merely with inflation but also with unemployment, interest rates, and economic growth. Not only does the suggested constitutional amendment fail to provide any new way of dealing with these matters, it does not address them at all. At the same time, by locking away the budget in a rigid mold, it would exclude many ways of approaching these issues, even if it succeeded in curbing inflation.
It seems very unlikely to accomplish even that much. Its net result is widely expected in Washington to be what wits cynically call ''creative accounting.'' Because the amendment would cover only expenditures and revenues, it would encourage ''off budget'' items such as loan guarantees of some $200 billion a year to shipbuilders, students, low-income housing developers, and many others. These guarantees are either assumed to result in no cost or assigned some arbitrary cost without basis in reality. Adoption of an amendment requiring a balanced budget would most likely be followed by a drive to provide off-budget support for many items that could not be fitted into a balanced budget.
Theoretically, a constitutional amendment could encompass loan guarantees. But then attention would turn to other modes of creative accounting, such as underwriting bonds for favored purposes, or to another major tool of public policy, regulation that would require the private sector to pick up the tab for desired activities. The tighter the budget constraints, the greater will be the pressure to make the private sector pay for whatever the public and the politicians need and want but the locked budget will not provide.
The answer to our economic problems and to our politicians' timidity and ineptness lies not in the simplistic device of a constitutional amendment but in recognition that our economy is aging and ailing, that its capacity is limited, and that until it is revitalized its yield will remain relatively low. To shape a disciplined budget, we must as a nation agree what must be done now, what can be deferred. With such a consensus, no constitutional amendment is necessary. Without it, no amendment will work.