Heartland Institute Responds to Balanced Budget Amendment Debate, Vote

November 17, 2011

The U.S. House of Representatives today has begun debate on a balanced budget amendment to the U.S. Constitution. Speaker John Boehner’s version has no spending limits or supermajority taxing requirements – unlike ideas pushed decades ago by free-market economist Milton Friedman, who suggested a spending cap at about 17 percent of national GDP.

The following statements from budget, tax, and economics experts at The Heartland Institute – a free-market think tank – may be used for attribution.

For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Tammy Nash at tnash@heartland.org and 312/377-4000. After regular business hours, contact Jim Lakely at jlakely@heartland.org and 312/731-9364.

“A balanced-budget amendment without limits on government spending is worse than doing nothing. It’s a ruse. It’s nothing more than a meaningless political statement designed to deceive the public into believing Congress has done something useful.”

Robert Genetski
Policy Advisor, Budget and Tax Policy
The Heartland Institute

“A ‘balanced budget’ amendment to the Constitution, without protections against tax increases, is a clever trick to force tax increases in the future. What government spends takes real resources out of the private sector. How the government finances that taking, whether by taxes now or by borrowing, does not reduce the cost to the American people.

“A government bond sold to finance a budget deficit is just a promissory note pledging future taxes to be collected. So a ‘balanced budget’ amendment that does not limit current and future taxes is just a tax increase in tea party clothing.”

Joe Cobb
Policy Advisor, Economics
The Heartland Institute

“Instead of a balanced-budget amendment, I’d rather see Congress vote to limit government spending to a fixed percent of annual economic activity. Historical studies place this figure at between 18 percent to 20 percent of GDP. Anything higher will tend to curb real economic growth beginning within a year.”

John Skorburg
Lecturer in Economics
University of Illinois at Chicago
Associate Editor, Budget & Tax News
The Heartland Institute

“Regardless of the nature of the expenditure or how it is funded, the true cost to society of a government expense is that it takes resources from how it will be used in the private sector. This is not to say there are not some government programs that outweigh the cost to the private sector. But whether we borrow or pay cash, those resources are no longer available for private-sector use. Every expense should be viewed through this prism.

“Anyone who supports a balanced budget amendment, with or without spending limits, should look to California. California needs to have a balanced budget, and we do, for about 30 days – until the real revenues and real expenses come in. We went through this exercise late last summer – and cheered ourselves for making tough decisions and balancing the budget. Less than four months later, Business Week reports that California may end the year with a $13 billion deficit.

“For a short period, those who are gullible will feel empowered and successful. Soon, however, we will have even more public cynicism towards our government than now, if that is possible. Rule making (and breaking) is no substitute for true leadership. That, unfortunately, is more scarce than government revenues.”

Dean Baim
Policy Advisor, Economics
The Heartland Institute
Professor of Finance and Economics
Pepperdine University

“States across the country have balanced budget requirements, yet most of them have budget deficits. I have no faith in any balanced budget requirement having an impact on the federal budget, because Congress will pull all kinds of accounting shenanigans to get around the requirement, or just flat-out ignore it.

“As long as Congress and the White House are occupied by people intent on growing the size and power of government, nothing will change.”

Steve Stanek
Research Fellow, Budget and Tax Policy
The Heartland Institute
Managing Editor
Budget & Tax News

“Prohibition didn’t stop people from drinking alcohol, and a balanced budget amendment won’t stop the government from spending like drunken sailors. What it would really lead to is debt, inflation, and further deception by creative accounting. Given that we already suffer from all of those things, it’s obvious a balanced budget amendment would do nothing but give the public a false sense of security – for a very brief time. And after that, a very bad hangover.”

S.T. Karnick
Director of Research
The Heartland Institute

The Heartland Institute is a 27-year-old national nonprofit organization with offices in Chicago, Illinois; Washington, DC; Austin, Texas; Tallahassee, Florida; and Columbus, Ohio. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.