By Laurence M. Vance*
It wasn’t that long ago (1987) that the entire budget of the federal government was “only” a trillion dollars. It reached the $2 trillion mark in 2002, and didn’t exceed $3 trillion until 2009. Even after a long series of budget deficits, the national debt didn’t exceed $1 trillion dollars until 1982 and $5 trillion until 1996.
The first budget that Donald Trump proposed soon after taking office was $4.094 trillion, even though federal government receipts were projected to be only $3.654 trillion. Now the federal budget is well over $4 trillion a year, the budget deficit is approaching $1 trillion a year, and the national debt is more than $21 trillion. Even worse, the Congressional Budget Office (CBO) projects federal spending to grow by $329 billion from fiscal year 2018 (which began on Oct. 1, 2017) to fiscal 2019 (which begins on Oct. 1, 2018). The CBO also projects federal spending to grow by approximately $3 trillion over the next 10 years, for an average annual spending increase of about $300 billion. Total federal debt is projected to top $30 trillion by 2028.
The Budget Process
Although the Constitution doesn’t mention a federal budget, according to the Budget and Accounting Act of 1921, the president must annually submit a proposed federal budget to Congress for the next fiscal year by the first Monday in February. According to the Congressional Budget and Impoundment Control Act of 1974, within six weeks of the president’s submitting his budget, twelve congressional subcommittees are required to submit their “views and estimates” of federal spending and revenues to the House and Senate budget committees. The budget committees hold hearings on the president’s budget and then draft and report a concurrent resolution on the budget. Action on the concurrent resolution is supposed to be completed by April 15. It is only then that twelve regular appropriation bills are enacted and sent to the president for his signature. Although the Budget Act requires Congress to consider budget plans covering at least five years, the current practice is that budget plans cover 10 years. If Congress fails to pass an annual budget, a series of appropriations bills or an omnibus bill is passed to fund the federal government for a certain period of time. That is what usually happens, for as Sen. Rand Paul explains, “Congress has funded the government on time and under the process enacted through the Congressional Budget Act just four times: fiscal years 1977 (the first year the process was used), 1989, 1995, and 1997.”
On February 12, Trump released his proposed budget for fiscal year 2019. The White House’s Budget & Spending website still proclaims, “With our national debt well above $20 trillion, now is the time to reverse the trend of climbing government spending. The President’s federal budget commits to restraint while prioritizing funding to rebuild our national defense and strengthen America’s borders.” “Restraint” is an unusual word to describe a budget proposing that the federal government spend $4.4 trillion in fiscal year 2019. According to The Hill, although the president’s budget includes proposals to reduce deficits by $3.6 trillion over ten years, deficits are still estimated to total more than $7 trillion over the same period. Office of Management and Budget Director Mick Mulvaney acknowledged at a briefing that Trump “has — for now — given up on balancing the budget over the next decade.”
The president’s budget ended up being just a formality. Just a few days before its release, Trump signed into law the Bipartisan Budget Act of 2018 or BBA (H.R.1892). It raised the caps on appropriated spending by $300 billion over two years and included a continuing resolution to fund the government through March 23, 2018. When that expired, Trump signed into law the Consolidated Appropriations Act, 2018 (H.R.1625), a 2,232-page, $1.3 trillion omnibus spending bill that passed both the House (256-167) and Senate (65-32) within two days of the bill’s being introduced. The bill funds the federal government through the end of the current fiscal year. Two weeks later the Congressional Budget Office released a report estimating the fiscal 2018 budget deficit to be $242 billion larger than it projected in June 2017.
Even so, Republicans have come up with several plans this year to balance the budget.
The RSC Budget
The Republican Study Committee (RSC), currently with 150 members, is the largest caucus of conservatives in the U.S. House of Representatives. The RSC “is dedicated to preserving the values that America was founded upon: a constitutionally limited role for the federal government, a strong national defense, protection of individual and property rights, economic opportunity, and preservation of traditional family values.” The RSC claims to believe
- that a centralized and pervasive federal government slows America down while contradicting the principles on which our nation was founded.
- that the appropriate role of a limited government is to protect liberty, opportunity, and security, and that it is the responsibility of each generation to preserve them for the next.
- that increasing the power of government is the problem, not the solution, for the toughest issues facing our nation.
- that there is no limit to the ingenuity, innovation, and prosperity Americans can create when allowed to live their lives freely, according to their beliefs, and in pursuit of the fruits of their labor.
The RSC introduces budgets every year as more-conservative alternatives to the budget resolutions released by the House Budget Committee. The RSC’s Unified Conservative Budget for Fiscal Year 2019 was released on April 25. The group calls its 169-page blueprint “A Framework for Unified Conservatism.” The RSC budget “is intended to chart a course toward solvency” by “incorporating cutting-edge solutions that may not have widespread support initially,” but that “need to be included in the policy discussion as they gain acceptance over time.”
The RSC budget proposes to cut government spending by more than $12.4 trillion over the next ten years and balance the federal budget within the ten-year budget window. According to an analysis by the Heritage Foundation, among other things, the RSC budget aims to do this by
- Cutting or eliminating programs that fall outside Congress’s constitutional authority and those that are “duplicative, unnecessary, wasteful, or ineffective,” and limiting funding for “unauthorized programs.”
- Banning budget earmarks for lawmakers’ pet projects, ending permanent authorizations, and increasing transparency in the budget process.
- Reforming and ensuring solvency for Social Security, including more accurately calculating cost-of-living adjustments and phasing in a higher eligibility age of 70 to avoid tapping out the trust fund by 2035.
- Improving Medicare through more choices, lower costs, and a simpler model.
- Converting some mandatory government programs to discretionary programs so that Congress can set funding levels each year.
- Reforming the regulatory process and expanding congressional oversight of government programs.
- Requiring work, job searches, or training, or volunteering for able-bodied adults who want to qualify for welfare programs.
Although the plan puts forward “over 300 specific policy reforms and spending cuts,” it is doomed to fail because it ignores and actually enlarges the elephant in the living room: “defense” spending. The RSC wants to increase defense spending “from $716 billion in fiscal 2019 to $800 billion in fiscal 2028, with an emphasis on military readiness, a ‘robust naval fleet,’ and responsiveness to threats in multiple theaters.”
The Penny Plan
Rep. Mark Sanford (R-S.C.) and Sen. Rand Paul (R-Ken.) have each introduced in their respective houses of Congress a “penny plan” to balance the budget. This is something that was first introduced in 2011 by two other members of the House and Senate.
Representative Sanford introduced the “One Percent Spending Reduction Act of 2018” (H.R.5572) on April 19. It would “balance the budget by cutting one percent of government spending each year over the next five years.” According to a Sanford press release,
The idea is simple: for the next five years, cut a single penny from every dollar that the federal government spends, excluding interest payments on the debt. By 2024, the budget would be balanced and would remain balanced by mandating that spending not exceed revenue. The plan’s only mandate is a one-percent cut in spending every year for five years. Limiting spending would be forced as an issue to be dealt with because if the political body didn’t find consensus on where best to limit government, then the one-penny cut would be automatic.
The bill “escapes the politics that prevent a balanced budget.” It “puts the power of compound interest on the side of limited government rather than where it usually rests in growing government.” However, once a balanced budget is reached in 2023, the federal government can still grow as long as “total outlays” don’t “exceed 18% of the gross domestic product (GDP) for that year as estimated by the Office of Management and Budget (OMB).” It should also be noted that the provisions of the bill can be waived or suspended in the House or Senate by “the affirmative vote of two-thirds of the Members.”
Senator Paul introduced his “penny plan” on April 18. His plan balances the budget in just five years “without touching Social Security” by requiring Congress “to make a one percent cut to on-budget spending for five years.” According to a Paul press release, his plan “reduces spending by $404.8B in FY19 and by $13.35T over 10 years relative to baseline” by requiring that “for every on-budget dollar the federal government spent in FY18, excluding the BBA, it spend one penny less for the next five years (at which point balance is reached), with spending then growing at one percent thereafter.” This plan would likewise allow the federal government to grow, since “total spending still increases by 14.6 percent over the ten-year window.”
A Balanced-Budget Amendment
On January 3, 2017 — the first day of the 115th Congress — Rep. Bob Goodlatte (R-Va.) introduced in the House (H.J.Res. 2) a balanced-budget constitutional amendment proposal. Said Goodlatte, “A constitutional amendment requiring a balanced budget would finally bring discipline to federal spending and would benefit generations to come. I have demonstrated my commitment to fiscal responsibility by introducing constitutional amendments to mandate a balanced budget every Congress since 2007.” Goodlatte’s joint resolution simply states, “Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless three-fifths of the whole number of each House of Congress shall provide by law for a specific excess of outlays over receipts by a rollcall vote.”
It likewise mandates that “the limit on the debt of the United States held by the public shall not be increased, unless three-fifths of the whole number of each House shall provide by law for such an increase by a rollcall vote.” Congress may also override the resolution’s provisions “for any fiscal year in which a declaration of war is in effect.” The proposed amendment also requires that the budget that the president submits to Congress each year must be balanced. If ratified by the states, the new amendment would “take effect beginning with the fifth fiscal year beginning after its ratification.”
After languishing in the House Judiciary Subcommittee on Constitution and Civil Justice for more than a year, the House finally voted on the proposed balanced-budget amendment on April 12 — just weeks after enacting a $1.3 trillion spending package projected to add billions to the deficit. Representative Goodlatte challenged his “colleagues in the House and Senate to do what is morally right and responsible by passing this amendment and sending it on to the states for ratification.”
Nevertheless, the proposed amendment failed just like the last time it was voted on in 2011. Although the measure had a majority (233-184), it failed because a constitutional amendment resolution needs to pass both Houses of Congress by a two-thirds margin. Six Republicans voted against the measure, but seven Democrats voted in favor of it, all of whom are the most conservative House Democrats, who tend to believe that some restraint must be put on government spending. And of course, once a proposed constitutional amendment is passed by both Houses of Congress, it must still be ratified by three-fourths of the states.
There are now twenty-seven states that have passed resolutions calling for a constitutional convention that would propose a balanced-budget amendment. Thirty-four states (two-thirds of the states) are needed to meet the Constitution’s Article V requirements for a convention.
The House Liberty Caucus urged opposition to the proposed balanced-budget amendment because of its “serious flaws that undermine its effectiveness as a fiscal restraint and render it unfit as an amendment to the Constitution.” The measure “doesn’t provide any mechanism, such as multi-year averaging, to dampen annual revenue fluctuations.” Its “efficacy as a budget constraint is undermined almost to the point of uselessness by allowing the spending rule to be waived, for any reason whatsoever, with the support of a mere three-fifths of each chamber — a standard lower than the House itself requires to consider supposedly ‘uncontroversial’ legislation under suspension of the rules.” It also “permits deficit spending related to military conflicts with the support of just a simple majority.”
The Real Issue
There are a number of problems with a balanced-budget amendment, statute, or goal in theory and in practice.
A balanced-budget amendment or statute is unnecessary. If the president wanted to, he could submit to Congress a budget that was balanced. If Congress wanted to, it could produce a budget that was balanced. If Congress wanted to, it could simply not spend beyond what the federal government takes in. The problem is that members of Congress are profligate spenders of other people’s money.
A balanced-budget amendment would not stop Congress from having an unbalanced budget or spending beyond its means. Congress doesn’t follow the Constitution now. What makes anyone think that Congress would follow any new amendments to the Constitution? The federal government currently violates its own Constitution in thousands of ways. Why would anyone think that the federal government would follow the Constitution in any other respect? Is federal spending on education authorized by the Constitution? Of course not. But that hasn’t stopped the federal government from handing out Pell Grants and having a Department of Education. Is federal spending on the drug war authorized by the Constitution? Of course not. But that hasn’t stopped the federal government from enforcing drug prohibition and having a drug czar and a Drug Enforcement Agency. Every state but Vermont has some form of a balanced-budget amendment, but that hasn’t prevented states such as California, Illinois, and New Jersey from increasing spending beyond revenues and accumulating more debt.
A balanced budget is a gimmick to make Americans think that members of Congress are fiscally responsible people instead of spendthrifts — just like all of the other proposals that have been put forth to rein in government spending. Things such as baseline budgeting, sequestration, automatic across-the-board spending cuts, sunset provisions, reclassifying spending from mandatory to discretionary, spending increases limited to the rate of inflation, spending caps based on GDP, deficit-reduction targets, elimination of earmarks, deficit commissions, temporary freezes on certain categories of spending, spending rollbacks to some previous level, non-binding public voting on spending cuts, and, of course, empty promises to cut waste, fraud, abuse, and unnecessary spending.
A balanced budget is based on projections. And as explained by Sen. Howard Metzenbaum (D-Ohio) in a Senate Judiciary Committee report on a proposed balanced-budget amendment in the 99th Congress, “There is a high degree of inherent uncertainty in spending and revenue projections. It is impossible to guarantee congressional budget decisions at the beginning of a fiscal year will lead to a balanced budget at the end of the year.”
A balanced-budget amendment or statute can lead to a tax increase. In a 1993 letter to congressional leaders, Bill Clinton characterized a proposed constitutional amendment as a “budget gimmick,” the result of whose vagueness would be that budget decisions would be made by “appointed judges with life tenure” instead of their being made by elected officials. In his 1997 State of the Union Address, Clinton stated that he believed it to be “unnecessary and unwise to adopt a balanced-budget amendment that could cripple our country in time of crisis later on and force unwanted results such as judges halting Social Security checks or increasing taxes.”
In the Supreme Court case of Missouri v. Jenkins (1990), justices ruled that federal judges can order local elected officials to raise taxes, even if state law imposes a limit on such taxes. The case stemmed from an attempt by the Kansas City, Missouri, School District to combat segregation in public schools by complying with court directives, even though its ability to raise taxes was limited by state law. The Court ruled that court orders directing local governments to levy taxes were “plainly” judicial acts within the powers of federal courts.
A balanced budget doesn’t in and of itself rein in federal spending. It is not designed to do so. And it certainly doesn’t limit the size and scope of government. In the future, when the U.S. budget reaches $10 trillion, will that be okay as long as it is balanced?
The real issue is out-of-control federal spending.
The solution to the problem is a simple one, but one with the result that libertarians, fiscal conservatives, and constitutionalists who propose it are viewed as stark raving lunatics: Limit federal spending to only what is authorized by the Constitution. That would mean, at least on the federal level, that there would be no farm subsidies, student loans, foreign aid, refundable tax credits, job training, art and culture grants, funding for scientific and medical research, funding for space exploration, housing subsidies, or Pell Grants; no programs such as Social Security, SSI, NSLP, Head Start, LIHEAP, Medicare, Medicaid, AmeriCorps, CHIP, food stamps, WIC, or TANF; no agencies such as the EPA, TSA, FCC, FHA, SBA, TVA, ATF, SEC, CFTC, CPB, USAID, EEOC, CPSC, FTC, FDA, DEA, NASA, or FEMA; and, of course, no departments such as Health and Human Services, Education, Transportation, Commerce, Interior, Energy, Agriculture, Labor, or Housing and Urban Development. And no more military-industrial complex, CIA, NSA, foreign military bases, foreign aid, or foreign interventions.
The only way to rein in federal spending is by the wholesale elimination of federal departments, agencies, commissions, administrations, corporations, councils, boards, and bureaus with all of their programs and personnel. Balanced-budget baloney is not going to do it.
This article was originally published in the August 2018 edition of Future of Freedom .
About the author:
*Laurence M. Vance is an Associated Scholar of the Mises Institute, columnist and policy adviser for the Future of Freedom Foundation, and a columnist, blogger, and book reviewer at LewRockwell.com. He is also the author of Gun Control and the Second Amendment, The War on Drugs Is a War on Freedom, and War, Empire and the Military: Essays on the Follies of War and U.S. Foreign Policy. His newest books are Free Trade or Protectionism? and The Free Society. Visit his website: www.vancepublications.com.
This article was published by the MISES Institute