This week, the House is considering a GOP "Balanced Budget" Constitutional Amendment (H.J.Res. 2) which would destroy jobs, drastically cut Medicare and Social Security, and give federal judges power to raise taxes and make spending decisions.  H.J.Res. 2 not only provides that there be a balanced budget every year, unless three-fifths of the Congress votes for a specific excess of outlays over receipts; it also requires a three-fifths vote of the Congress to raise the debt ceiling.  It is likely that H.J.Res 2 would require balancing the budget by about FY 2018 (it states it shall take effect beginning with the fifth fiscal year beginning after its ratification; if ratification occurs in 2013, balance would have to be achieved by FY 2018.)     

Impact of key provisions:

This Constitutional Amendment Does Not Simply Require A Balanced Budget; It Also Requires A Supermajority Vote To Raise The Debt Ceiling. 

• H.J.Res. 2 is not a “clean” balanced budget amendment.  It does not simply require a balanced budget every year.  It also contains a provision that requires a three-fifths vote to raise the debt ceiling.  This requirement could make it much more likely that the United States would default on its debt and not meet its financial obligations.  

Our Economy Is Fragile And Nonpartisan Macroeconomic Advisers LLC States A Balanced Budget Amendment, Implemented Today, Would Destroy 15 Million Jobs. 

• A top economic forecasting firm, Macroeconomic Advisers LLC, states that, if a Balanced Budget Amendment were enforced through spending cuts in FY 2012, it would throw 15 million more people out of work, double the unemployment rate from 9 percent to approximately 18 percent, and cause the economy to shrink by about 17 percent instead of growing by an expected 2 percent. 
  

Reagan Advisor Bruce Bartlett Similarly States A Balanced Budget Amendment, Implemented Now, Would Cause Another Recession. 

• Bruce Bartlett, a top economic advisor in the Reagan Administration, points out, “It’s one thing to require a balanced budget when starting from a position of balance or near-balance.  It’s quite another when we are running deficits of over $1 trillion per year for the foreseeable future. … A rapid cut in spending of that magnitude would unquestionably throw the economy into recession just as it did in 1937.”

This Constitutional Amendment Would Lead to Even Deeper and More Radical Cuts than The Ryan Budget. 

• This BBA requires much deeper spending cuts than those in the Ryan budget, which House Republicans adopted on April 15.  According to the nonpartisan Center on Budget and Policy Priorities, adoption of this BBA could force Congress to cut all programs by an average of 17.3 percent by 2018.  If revenues are not raised and all spending cuts are spread proportionately, Medicare would be cut by about $750 billion, Social Security by almost $1.2 trillion, and veterans’ benefits by $85 billion, through 2021.  If policymakers limit cuts to some programs, other programs would have to be cut more deeply.

Untrue That This BBA Simply Requires Federal Government To Operate As States and Families Operate Every Day. 

• The Federal Government operates under a unified budget and this BBA requires that this unified budget be balanced.  By contrast, states have both an operating budget and a separate capital budget that covers infrastructure spending, and it is only the state operating budget that must be balanced.  Similarly, families use borrowing for long-term investments – such as a mortgage for their house and student loans for their children’s college educations.  By contrast, this BBA requires the Federal Government to have even long-term investments balanced against this year’s receipts.    

This GOP BBA  Could Undermine Our Military, Requiring Congress to Set A Specific Limit on Funding A Military Operation That Creates A Deficit. 

• H.J.Res. 2 states that the balanced budget requirement can be waived for any fiscal year in which the U.S. is engaged in a military conflict which causes an imminent and serious threat to national security and is so declared by a joint resolution.  It also specifies, “Any such waiver must identify and be limited to the specific excess or increase for that fiscal year made necessary by the identified military conflict.”  In practice, this would mean that every time additional funds are needed for a military engagement, such that those additional funds would take the budget out of balance, Congress would have to pass legislation giving a specific dollar amount and allocating it to a particular conflict, in addition to the legislation actually appropriating the money. 

Finally, This Amendment Likely to Give Federal Judges Power to Raise Taxes and Make Spending Decisions. 

• By writing a budget requirement into the Constitution, budget disputes become Constitutional questions.  Accordingly, there is a growing consensus that if such an amendment is passed and ratified, the courts will become involved in budget controversies.  Federal judges could have the final say on taxing and spending decisions, even determining whether the budget was balanced in the first place.