A Balanced Budget Proposal in Name Only

Here's today's riddle: When is a balanced budget amendment not balanced? When the current crop of do-nothing Republicans in Congress proposes it.

To see why, let's first review some budgeting basics. A budget is a plan that projects income and spending for a discrete time frame, which typically spans a week, a month, or a year. In its simplest form, budgeting encompasses two basic estimated monetary amounts: income and spending. In a balanced budget, both of those numbers are equal. Here's a quick example: A person who earns $4,000 a month projects spending of $4,0000 a month. That is a balanced budget.

Simple, right? Perhaps for your family, yes. You might have two or three sources of income with regular amounts coming into your bank account. You certainly have regular bills to pay, as well as some optional spending to consider, making the spending part of the equation more of a guessing game. Over time and through experience, though, even that number is relatively easy to arrive at.

Budgets are estimates, then, derived from a process of review that considers historic amounts of known income sources and predictable spending commitments. In order for a budget to achieve balance on paper, all that's necessary is a pencil and eraser. In the real world, though, the only road to balance is to earn adequate income to cover your expenses and spend only the money you've earned.

And, as night follows day, balancing a budget always works out perfectly, right? Well, no, never has as far as I'm aware. That's because a budget is a plan, and achieving equilibrium is, to say the least, problematic. If your car battery suddenly dies, you buy a new one even though it wasn't included in your budget estimates. If your spouse gets ill and has no more sick leave left, your income falls short of the expected, budgeted amount. When the economy tanks and one of you is out of work for weeks or months, you do what more Americans than ever have done over the past decade: pull out the credit card.

A budget that anticipates all such unknown spending circumstances is a rarity, but a good budget plan usually comes close to achieving balance when it acknowledges such uncertainties, builds in a buffer, and encourages flexible reactions along the way to adjust for such challenges. Moreover, a good budget plan sets up guiding principals for making such adjustments on the fly without much argument over how to proceed.

OK, now that we have that down, let's look at the federal government's situation and the Republican Balanced Budget proposal. Like any other family, the United States has income and spending. It derives its income from taxes collected and depletes those dollars with annual spending to run the government, fund numerous programs for the general wellbeing of its citizens, and pay the interest on its loans. The estimated receipts for fiscal year 2012 (which began in October) are $2.627 trillion. Spending proposed for fiscal 2012 totals $3.729 trillion -- a difference of $1.1 trillion.

That single-year deficit amount, incidentally, equals the level of reductions mandated to take place if the Select Committee on Deficit Reduction fails this year in its efforts to take a $1.5 trillion slice out of federal spending over a 10-year period. Whether certain draconian spending cuts are even necessary has economists on opposite sides. Many argue that targeted deficit government spending, such as proposed by President Obama's American Jobs Act, could spur jobs and economic growth, leading to enough growth in tax revenues to wipe out the deficit over the next decade. Support for those predictions comes not only from historic data collected on the Great Depression-era budgets during the President Roosevelt era but also more recently from President Clinton's two terms, which by the year 2000 delivered federal budget surpluses.

But facts have never stopped Republican fiscal folly, nor would stimulus spending fit the longtime Republican strategy called "starve the beast" that is designed to shrink the federal government by denying Congress of needed tax receipts. Under President Reagan and both President Bushes, Republican in Congress cut taxes, thus decreasing U.S. government's income, in hopes that less money in government coffers would force Congress to cut spending. Instead, deficits under Republican rule have soared because they dropped any pretense of trying to balance the budget. Who doesn't recall Vice President Dick Cheney arrogantly declaring, "Deficits don't matter."

Of course, they do and they don't, depending on how the underlying economy is behaving. But that hasn't stopped the Tea Party-infected Republicans. Their latest House bill calling for a balanced budget would only restrain spending, while effectively taking the other half of the equation -- tax revenue increases -- off the table altogether. In fact, the balanced budget proposal would continue to permit tax cuts regardless of their effects on the deficit. In calling for an amendment, Republicans don't appear to have much chance of victory, because passage requires a three-fifths majority in both houses of Congress, and still has to pass the high hurdle of ratification by three-quarters of state legislatures.

Which raises the question: Why do Republicans bother bringing up a sure to be defeated Constitutional amendment proposal at all? Let me give you this explanation, revealed today by Bruce Bartlett, an adviser in the Reagan and Bush I administrations. “The truth is that Republicans don’t care one whit about actually balancing the budget,” Bartlett writes in a blog for the New York Times. “They prefer to delude voters with pie-in-the-sky promises that amending the Constitution will painlessly solve all our budget problems.” Bartlett concludes, "The idea of mandating a balanced budget through the Constitution is dreadful. And the proposal that Republican leaders plan to bring up is, frankly, nuts."

P.S. To understand our country's dilemma with budget balancing and the voters own part in fostering the nuttier aspects of it, I pass on the results of a recent poll by Politico: It finds that Americans support increasing taxes on the wealthy and corporations (increasing income) 66% to 31%, while they oppose cuts to Medicare 76% to 19% (increasing spending). To quote a political savant, "Oops!"