Thursday, the Senate fell just short of passing a balanced budget amendment, a radical provision that shows just how far to the right the current discourse on fiscal matters has moved. The amendment picks up the oft-repeated right-wing comparison of the federal budget to the family purse: you have to make sure what your household spends on the mortgage, car payments and food doesn’t exceed your pay check. For the government, this means it would be prohibited from spending more than it makes off taxes.
The trouble is that the government is so much more than a making-and-spending machine. It’s a complex body that can offset swings in the economy, and those offsets are needed now more than ever. Consider 2009: at a time when the economy was grinding to a halt and unemployment rolls were swelling, the CBO says the government’s Recovery Act was able to create as many as 3.3 million jobs and raise the GDP by up to 4.5%. Instead of the Great Recession, it would be called the Great Depression and we would probably still be in it. We would also have a collapsed banking system, assuming that TARP, for all its faults, would also not have been implemented. The only way the government could increase spending is by collecting more taxes, and as the December tax compromise made clear, that’s no easy feat.
Balanced-budget bills wouldn't be a surprise if they came from budget hawks and Tea Partiers unwilling to face an ever-shifting economic reality. What’s disturbing, though, is that ten Democrats supported the bill, seven of whom are looking to prove their budget hawkery before they face tough re-election campaigns in 2012. Although the bill didn’t pass, it's another sign of the erroneous belief, held by both Congress and the media, that deficits are abnormal and dangerous. As opinion polls keep showing, Americans think a deficit is theoretically bad but aren’t willing to cut government services to deal with it, let alone to the dramatic levels this bill would require. Polls also show they’d accept some tax increases, which would be almost impossible to do in the political environment this amendment would create. Unless more Democrats step up to defend government’s proper role in the economy, proposals like this will erode any credibility they have in not giving into Republican demands on the budget.
This piece is part of a series of blogs and articles from Our Fiscal Security, a joint project of Demos, the Economic Policy Institute and the Century Foundation.