I've drafted a letter (below) opposing the balanced-budget amendment to the
Constitution now under consideration in Washington. My effort has support
from Robert Eisner. I would like signatories and assistance distributing
the letter to economists and political scientists (including constitutional
scholars). [Subscribers to AFEEMAIL and other networks may want to post
this message where it has not yet appeared.] Please e-mail your support to
me: [EMAIL PROTECTED] -- and provide full name and institutional
affiliation for identification purposes. I can also be reached by fax at
914-758-1149.
Please note that hearings may be held within a week and that a House vote
could come as early as 1/19/95. I will try to release the letter before
that vote, but will continue to accept signatories for as long as the matter
is alive in 1995. I look forward to hearing from you.
Charles J. Whalen
Jerome Levy Economics Institute
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BUDGET AMENDMENT OFFERS TOXIN, NOT TONIC
The undersigned economists and political scientists are united in opposing
enactment of a balanced budget amendment to the U.S. Constitution. While
our individual writings represent a wide spectrum of policy views, we all
agree that a balanced budget amendment would be a political and economic
toxin, not a tonic. Our primary concerns are as follows:
Political Dangers
1) The amendment threatens to distract us from the real task at hand:
setting national priorities and making difficult policy choices. Resources
required for its ratification would be used better if directed toward
substantive issues rather than symbolism.
2) The amendment is merely a statement of intention. Its objective cannot
be achieved without political will. And judicial enforcement is neither
likely nor viable.
3) The amendment invites increased use of federal mandates (on corporations
and state and local governments) and other types of evasion. And it sets
the stage for partisan disputes over the appropriateness of particular
evasions. This is the lesson we learn from both state-level experience and
the federal Gramm-Rudman experiment.
Economic Dangers
1) The amendment mandates an objective that almost no private economic
actor could or should meet. Contrary to the stated position of many
amendment supporters, the proposal does not require Congress "to live under
the same budget restraints as families and businesses." For example,
balancing the federal budget is not the same as balancing a checkbook.
Rather, it is like demanding that individuals pay cash for their homes and
that firms pay for an entire new plant out of this year's sales
receipts.
2) The amendment precludes development of federal "capital budgeting"
procedures. Such procedures have been used effectively by states,
localities and even some of our international competitors -- and would help
us bring a stronger investment orientation to federal expenditures.
3) The amendment hinders severely the public-sector's ability to compensate
for cyclical fluctuations. The need for federal action to stabilize the
economy has been widely recognized since the 1930s. A balanced budget
eliminates one of the few mechanisms preventing mild downturns
from developing into severe recessions.
The frustration Americans feel toward our federal budget is understandable.
And passing a balanced budget amendment might fill us with a sense of
accomplishment for a short while. In the end, though, it will produce a
more fragile economy, greater citizen frustration, and a further loss of
confidence in our political institutions.
