NY Times - Simon Johnson (MIT Economist) - "Is a Balanced Budget Amendment a Good Idea?" No.

[TomCADem]

Excellent, concise, spin-free explanation of why the Balanced Budget amendment being pushed by Republicans is a terrible idea.

http://economix.blogs.nytimes.com/2011/08/02/is-a-balanced-budget-amendment-a-good-idea/

Some House and Senate Republicans have pushed hard to include a “balanced budget” constitutional amendment as part of any agreement on a debt ceiling, and the final accord — passed Monday by the House of Representatives and awaiting action by the Senate — identified such an amendment as one path to the bill’s deficit-cutting provisions.


The first issue, which has been forcefully identified by my fellow Economix blogger Bruce Bartlett, is that there is no way to make this amendment work. The language proposed would, as part of the “balance,” limit federal government spending to 18 percent of gross domestic product, and only a two-thirds majority in both houses of Congress could waive that limit. On the table, in effect, is a balanced budget amendment with a spending cap.

* * *
b]Second and more seriously, imagine that this constitutional amendment were in place and that federal spending were roughly at its limit relative to the size of the economy. Then, what happens should the financial sector blow up again — either through no fault of its own (which, believe it or not, is the current prevailing myth on Wall Street about 2007-9) or because of some toxic combination of malfeasance and malpractice (the current predominant view of 2007-9 among many other people)?

The blame game is irrelevant when G.D.P. drops 10 percent; the issue is how to prevent a Great Depression. But note that with such a decline in G.D.P., a level of nominal spending that was 18 percent of G.D.P. is suddenly 20 percent, and now a constitutional crisis awaits – even before we get to the question of whether tax cuts or other forms of stimulus might be appropriate.

It makes no sense to take aim, as a matter of constitutional process, at two numbers that are both outcomes of deeper economic processes.

[moondust]

1. It's a stupid idea.

As is Grover Norquist's idiotic no-taxes pledge for the same reason: Nobody knows what the future may bring or what it may take to deal with it.

As this layman sees it, BBA is okay at the state and/or local levels because there is always somebody standing in the background to catch them in case of the unexpected: the federal government. But to be the Catcher in the Rye the federal government needs great flexibility. BBA would severely limit that flexibility.

There's no good reason for it. Better to simply find properly motivated, competent, disciplined, reality-based, incorruptible lawmakers.

:rant:

[housewolf]

2. Good read, thanks for psting

n/t