Yesterday, the U.S. House of Representatives passed H.R. 2560, the “Cut, Cap, and Balance Act of 2011,” by a vote of 239-190. I think there are some good ideas in this legislation, and some bad ideas.
I watched/listened to a substantial portion of the debate on this bill, and I’ve read the bill (which is probably more than a lot of members of Congress have done). If you’d like to read the bill, you can read it here. Here’s what the bill does:
- Cut federal spending this year – the bill would cut more than $100 billion from the budget this year. It also increases the debt ceiling by $2 trillion, if I’m reading it correctly, to $16.7 trillion.
- Cap the federal spending over the next 10 years – the bill stipulates a GDP cap on spending each year until 2021, stepping down the cap from 21.7% in 2013 to 19.9% of GDP in 2021.
- Require a balanced budget constitutional amendment – the entire bill is contingent upon Congress taking another action. They must pass a constitutional amendment that requires a balanced budget. This requires a two-thirds vote of both the House and the Senate. The bill DOES NOT specify what the amendment must look like, only that it conform to three overarching traits:
- Requires that outlays not exceed total receipts
- Contains a spending limitation as a percentage of GDP
- Requires that tax increases be approved by a two-thirds vote
First, the bad. It seems that postponing the implementation of the debt limit increase until Congress passes a constitutional amendment is a risky thing, at best. Congress is unlikely to get its act together in the next two weeks and have two-thirds of them agree on anything, must less an amendment to the Constitution.
Another bad thing about the bill is that President Obama has threatened to veto this legislation if it’s passed by Congress. This makes it less likely that the bill will pass Congress. However, it would be interesting to see if the president would actually follow through with his threat if the bill actually made it to his desk. I suspect that he was making an idle threat.
I think that the overall ideas of H.R. 2560 are good. The cutting that’s done is relatively small ($100 billion, which is a drop in the bucket). The capping of government spending is generous—it gives the government 10 years to get down to 19.9% of GDP, which is still 2% above the government’s historic spending levels.
The most contentious part of the debate in the House was over the requirement of the Balanced Budget Amendment. Democrats complained (several times) that it would take a two-thirds vote to get rid of the tax deduction for private jets, but only a majority to introduce tax cuts. They said (incorrectly) that the bill required the GDP cap to be at 18% (which it doesn’t), and complained that with a cap of 18%, we couldn’t keep our basis social nets (which is also untrue).
I think most people would agree that our federal government needs a Balanced Budget Amendment to the Constitution. Even though President Obama says we don’t need a constitutional amendment to “do our jobs,” most Americans would disagree. 49 of the 50 states have a balanced budget provision in their state constitution or in their statutes, and they live within their means. The only exception is Vermont.
If we have a balanced budget amendment, there would be no need to talk about raising the debt ceiling. If we have a balanced budget amendment, then conservatives and liberals don’t have to fight about the size of government. If we have a balanced budget like the one advocated by this legislation, then the business community doesn’t have to worry about huge tax increases, and there will be a more stable business climate.
The bottom line: All in all, I think this is good legislation, and that a balanced budget amendment to the Constitution is necessary. Whether it happens now or in ten years when we’re forced to make major changes, it’s going to happen.
Question: What do you think of this bill? Do you think the U.S. needs a balanced budget amendment? You can leave your comments by clicking here.