US Debt Ceiling And A Balanced Budget Amendment - An Unlikely Pair

Online, March 28, 2011 (Newswire.com) - Let's start with some background on the debt limit. Congress has issued a statutory debt limit since 1917, and as the national debt has increased, Congress periodically has to increase the debt limit for the government to continue borrowing money. The debt limit has increased substantially in recent years. Most recently, the debt limit increased to $14.29 billion in February 2010, 97 percent of the US GDP, which makes the 1993 limit of $4.37 billion look like child's play. Congress likes to hem and haw about the debt limit, but tends to dutifully raise it when necessary.

And it's that time again: in January, Treasury Secretary Tim Geithner sent a letter to Congress, informing them that government would surpass the debt limit between March 31 and May 16. That timeframe has since been revised to between April 15 and May 31, but as Geithner and the Washington Post's Jonathan Capehart point out, Congress needs to take action soon lest the government become legally unable to pay its creditors for the first time in its history, in turn leading to disastrous effects on the economy.

Though Senate Republican leadership surely realizes the need for a higher debt ceiling, pressure from Tea Party types and other conservatives mean they won't be able to simply raise it without opposition. Republicans, then, are tying support for an increase in the debt limit to a vote on a balanced budget amendment, which would require Congress to balance the federal budget every year. Every state except Vermont has some form of a balanced budget requirement, and modern support for a balanced budget amendment to the Constitution has been increasing since the 1970s, alongside the rise of the modern American conservative movement and of federal debts and deficits. This is the biggest noise about a balanced budget amendment since 1995, when a proposal failed by one vote in the Senate. Republicans even have a four-page proposal and a one-page information sheet, as well as the likely support of all 47 Republican senators.

Is a balanced budget amendment even a good idea? Suffice it to say that most Keynesian economists and Democrats hate the idea, while economists following Milton Friedman and Friedrich Hayek's models and many Republicans are in favor. I'll give you some pro and con materials to go into further detail, though.

A vote on a balanced budget amendment would almost certainly not gain the required two-thirds approval of the 112th Congress, so Allen wrote that Democrats "would LOVE for the only cost of the debt-limit increase to be a vote on the balanced-budget amendment." Still, as Allen reports, a nonbinding Senate resolution received the support of 47 Republicans and 11 Democrats. Republicans seem to have an easy road toward taking back the Senate in 2012, and if they took 56 Senate seats and retained that support among Democrats, we might be looking at a gamechanger.

Source: http://www.redandblack.com/2011/03/28/the-debt-ceiling-and-a-balanced-budget-amendment/

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