The Good and the Bad of “Cut, Cap, and Balance”

Yesterday, the U.S. House of Representatives passed H.R. 2560, the “Cut, Cap, and Balance Act of 2011,” by a vote of 239-190.  I think there are some good ideas in this legislation, and some bad ideas.

Cut Cap and Balance

 

The Bill

I watched/listened to a substantial portion of the debate on this bill, and I’ve read the bill (which is probably more than a lot of members of Congress have done).  If you’d like to read the bill, you can read it here.  Here’s what the bill does:

  1. Cut federal spending this year – the bill would cut more than $100 billion from the budget this year.  It also increases the debt ceiling by $2 trillion, if I’m reading it correctly, to $16.7 trillion.
  2. Cap the federal spending over the next 10 years – the bill stipulates a GDP cap on spending each year until 2021, stepping down the cap from 21.7% in 2013 to 19.9% of GDP in 2021.
  3. Require a balanced budget constitutional amendment – the entire bill is contingent upon Congress taking another action.  They must pass a constitutional amendment that requires a balanced budget.  This requires a two-thirds vote of both the House and the Senate.  The bill DOES NOT specify what the amendment must look like, only that it conform to three overarching traits:
    1. Requires that outlays not exceed total receipts
    2. Contains a spending limitation as a percentage of GDP
    3. Requires that tax increases be approved by a two-thirds vote

The Bad

First, the bad.  It seems that postponing the implementation of the debt limit increase until Congress passes a constitutional amendment is a risky thing, at best.  Congress is unlikely to get its act together in the next two weeks and have two-thirds of them agree on anything, must less an amendment to the Constitution.

Another bad thing about the bill is that President Obama has threatened to veto this legislation if it’s passed by Congress.  This makes it less likely that the bill will pass Congress.  However, it would be interesting to see if the president would actually follow through with his threat if the bill actually made it to his desk.  I suspect that he was making an idle threat.

The Good

I think that the overall ideas of H.R. 2560 are good.  The cutting that’s done is relatively small ($100 billion, which is a drop in the bucket).  The capping of government spending is generous—it gives the government 10 years to get down to 19.9% of GDP, which is still 2% above the government’s historic spending levels.

The most contentious part of the debate in the House was over the requirement of the Balanced Budget Amendment.  Democrats complained (several times) that it would take a two-thirds vote to get rid of the tax deduction for private jets, but only a majority to introduce tax cuts.  They said (incorrectly) that the bill required the GDP cap to be at 18% (which it doesn’t), and complained that with a cap of 18%, we couldn’t keep our basis social nets (which is also untrue).

I think most people would agree that our federal government needs a Balanced Budget Amendment to the Constitution.  Even though President Obama says we don’t need a constitutional amendment to “do our jobs,” most Americans would disagree.  49 of the 50 states have a balanced budget provision in their state constitution or in their statutes, and they live within their means.  The only exception is Vermont.

If we have a balanced budget amendment, there would be no need to talk about raising the debt ceiling.  If we have a balanced budget amendment, then conservatives and liberals don’t have to fight about the size of government.  If we have a balanced budget like the one advocated by this legislation, then the business community doesn’t have to worry about huge tax increases, and there will be a more stable business climate.

The bottom line: All in all, I think this is good legislation, and that a balanced budget amendment to the Constitution is necessary.  Whether it happens now or in ten years when we’re forced to make major changes, it’s going to happen.

Question: What do you think of this bill?  Do you think the U.S. needs a balanced budget amendment?  You can leave your comments by clicking here.

  • http://brocmiddleton.blogspot.com/ Broc Middleton

    First of all, I HATE the statements by all politicians that are made about “mandates from the public” or “this is what the public wants us to do” every politician uses these statements to try and justify their position. However no one in Congress seems to understand America does NOT want ideological posturing but they want Congress to get stuff done, legislation is achieved through compromise not “standing on principal.”   This Cut/Cap and Balance Bill is a perfect example of political theater, they know it has ZERO chance of becoming law but still, SOLEY, so they can go back to their districts and say they voted to pass Cut/Cap and Balance they put up for a vote. 
    Very little specifics are actually in plan which means this plan basically punts on the fiscal issues down the road to be debated and figured out later… a criticism Republicans have laid against President Obama.
    It does allow deficit spending for the war of terror but does NOT allow deficit spending for emergencies like Katrina, BP oil spill, or tornadoes in Joplin Missouri this would need to be altered. 
    2/3 vote for tax increases but simple majority for tax decrease this is an obvious play to set the table in favor of Republicans to get a balanced budget through spending cuts and not increased revenues.  This attempts to force a situation of ever shrinking government, which depending on your view may be a good thing or a bad thing, but it is definitely NOT going to be allowedto pass the Senate or the White House as is, and nor should it. 

    • http://bobewoldt.com Robert Ewoldt

      Broc, do YOU want a balanced budget amendment? If not, why not? It would
      be interesting to get a perspective from the other side of the aisle.

      Also, where are you getting your information from that the bill allows for
      deficit spending for the war on terror, but not for other things? Nothing I
      read in the bill said that. From what I read in the bill, it says that
      there will be a limit on the Global War on Terrorism, but doesn’t put the
      same limit on other spending, as you say.

      • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

        Well I thought I posted my response but even after I confirmed it with the verification I guess it never made it which means I have to retype it…TWICE NOW grrr. No I do not support a balanced budget amendment because it is only being considered due to Congress’s utter failure to do its job.  You know, pass legislation.  This problem is caused by hyper-partisanship. It pretty hard to tell your voters that democrats or republicans are “destroying the nation”; then after elected, co-sponsor a bill with the “bringer of doom” it’s pretty hard to maintain credibility if that’s the way business is being conducted.  Passing a balanced budget amendment is only going to treat these “symptoms” not the “disease.”
         
        As for sources I heard on CNN and MSNBC the pundits talking about the exceptions however I could not find those videos so here are some websites which reference the same type material.
        http://www.cnsnews.com/news/article/two-2012-hopefuls-among-9-republicans-vo
        “…Paul also opposes provisions in the bill that permit exceptions to spending caps to fight the war on terror. “Since this war is undeclared, has no definite enemies, no clear objectives, and no metric to determine victory, it is by definition endless.  Congress will never balance the budget until we reject the concept of endless wars.”…”
         
        http://reason.com/blog/2011/07/18/republicans-cut-cap-balance-pl
        “…“There is an exception for operations related to the global war on terrorism of $126 billion.” So are two of the biggest entitlements: Page five of the legislation lists exemptions, exemptions for Social Security and Medicare, as well as military retirement, veteran’s health care, and interest on the debt…Lots of conservatives back the plan, and balanced budget requirements typically poll well across the political spectrum. But a spending cap that quietly exempts Medicare, Social Security, military health care (which has also been beset by exploding costs in recent years) seems awful convenient, and unlikely to be all that effective in the long run.”
        http://www.house.gov/apps/list/press/pa19_platts/pr_20110720_cutcapbalance.shtml
        The Balanced Budget Amendment would impose a similar requirement for annually adopting a balanced budget as currently exists in 49 states, recognizing only a common-sense exception for defense under limited circumstances. 
         
        Hey I speak fluent congress language as well as any other “Joe 6-Pack” so I don’t read and understand all this stuff but there does seem to be a few loop holes to the “hard caps” in the bill.  I simply want a couple more holes for natural disaster relief in the US or globally like Japan’s tsunami.  However generally speaking, the problem with “hard caps” or black and white legislation is life happens most in shades of gray. 

      • http://bobewoldt.com Robert Ewoldt

        Test comment.

        • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

          Test comment

          • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

            Well I thought I posted my response but even after I confirmed it with the verification I guess it never made it which means I have to retype it…TWICE NOW grrr. No I do not support a balanced budget amendment because it is only being considered due to Congress’s utter failure to do its job.  You know, pass legislation.  This problem is caused by hyper-partisanship. It pretty hard to tell your voters that democrats or republicans are “destroying the nation”; then after elected, co-sponsor a bill with the “bringer of doom” it’s pretty hard to maintain credibility if that’s the way business is being conducted.  Passing a balanced budget amendment is only going to treat these “symptoms” not the “disease.”
             
            As for sources I heard on CNN and MSNBC the pundits talking about the exceptions however I could not find those videos so here are some websites which reference the same type material.
            http://www.cnsnews.com/news/article/two-2012-hopefuls-among-9-republicans-vo
            “…Paul also opposes provisions in the bill that permit exceptions to spending caps to fight the war on terror. “Since this war is undeclared, has no definite enemies, no clear objectives, and no metric to determine victory, it is by definition endless.  Congress will never balance the budget until we reject the concept of endless wars.”…”
             
            http://reason.com/blog/2011/07/18/republicans-cut-cap-balance-pl
            “…“There is an exception for operations related to the global war on terrorism of $126 billion.” So are two of the biggest entitlements: Page five of the legislation lists exemptions, exemptions for Social Security and Medicare, as well as military retirement, veteran’s health care, and interest on the debt…Lots of conservatives back the plan, and balanced budget requirements typically poll well across the political spectrum. But a spending cap that quietly exempts Medicare, Social Security, military health care (which has also been beset by exploding costs in recent years) seems awful convenient, and unlikely to be all that effective in the long run.”
            http://www.gop.gov/bill/112/1/hr2560
            “…The bill would, if necessary, enforce spending cuts through sequestration which would automatically cut spending in order to maintain the caps.  Under the legislation, mandatory funding for Social Security, Medicare, veterans’ benefits and net interest would be exempted from sequestration. The bill would establish a point of order against a bill that would waive a sequestration order unless the measure achieves the same amount of spending reductions as the sequestration itself…”
            http://www.house.gov/apps/list/press/pa19_platts/pr_20110720_cutcapbalance.shtml
            The Balanced Budget Amendment would impose a similar requirement for annually adopting a balanced budget as currently exists in 49 states, recognizing only a common-sense exception for defense under limited circumstances. 

          • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

            …continued

             
            Hey I speak fluent congress language as well as any other “Joe 6-Pack” so I don’t read and understand all this stuff but there does seem to be a few loop holes to the “hard caps” in the bill.  I simply want a couple more holes for natural disaster relief in the US or globally like Japan’s tsunami.  However generally speaking, the problem with “hard caps” or black and white legislation is life happens most in shades of gray.  

          • http://bobewoldt.com Robert Ewoldt

            OK, it looks like it’s working now. Yay!

          • http://bobewoldt.com Robert Ewoldt

            I disagree with your assertion that the imbalance of the budget is caused by (a) hyper-partisanship and (b) the Congress’ failure to do its job of passing legislation.  I think they they work together very well when it comes to passing legislation to spend money.  That’s what has caused this debt crisis.  The root of the problem is not hyper-partisanship, but the inability of politicians to say “No” to their own special interests.

            Each party passes legislation that increases spending for their own constituents/special interests, without thinking about what it does to (a) the overall economy and (b) future generations.  Spending money like drunken Congressmen is the problem, not partisanship.

            The reason there’s a need for a balanced budget amendment is to place a limit on what Congress can spend, because Congressmen will NOT limit themselves when it comes to spending.  We’ve seen this in the past 40 years.  Even in the years when we had a “balanced budget,” somehow the national debt increased (see http://en.wikipedia.org/wiki/United_States_public_debt).  A balanced budget amendment is needed because Congress has shown that it can’t balance its budget without being forced to do so.

            If what you were saying is true, that partisanship is causing the problem with the budget and/or debt, then we would see, in years where there was less partisanship, that budgets would be closer to balanced, and the debt incurred would be less.  Has that been the case?

          • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

            I agree with you that spending is a problem, obviously, but Republicans and Democrats both spending is not bipartisanship…its more like co-dependent addiction…lol seriously though YES spending is a problem and so is the special interest, so while BBA (Balance Budget Amendment) may help with the spending it won’t help the special interest problem for that you need a complete overhaul in campaign finance reform, which is also not going to happen since the Supreme Court just ruled that corporations are like people and can give unlimited funds to campaigns…ya that was a stupid decision…I am off topic, where was I…
             
             Bipartisanship…right, I do not know how you can say partisanship isn’t a problem when Mitch McConnell has stated his number one goal was to ensure Obama was a 1 term president.  No.1, not jobs, not the economy, not the wars, not the deficit, nope NUMBER 1 Goal – make sure Obama does not get reelected…does that sound like an environment where compromise and the good of country is coming first? Is spending a problem yes, but is a balanced budget amendment the only answer NO.  The other option would be for voters to actually hold elected officials accountable…I know it sounds extreme. 
             
            Listen you know I am not a constitutionalist but I think we should exhaust ALL other options before messing with the constitution.  Maybe you think we are at that point now…if you do I can see that, I simply do not we are at that point yet, especially with how the conversation has changed in the last 2 years. I do not support the Tea Party on a host of issues but they have changed the conversation and that was a net good thing for America.  However if we were to pass a balanced budget amendment it wouldn’t be apart of that Cut, Cap and Balance bill, it would have to be much more extended and flexible. It takes a machete (I know you love the scalpel/machete references) to Medicare, Medicaid which is understandable but Social Security.  Social Security is not projected to have problems for 20-25 years, if that isn’t “solvent” enough then just lift the social security cap and more revenue can poor in. 

          • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

            My comment is under review? Did I swear or something??

          • http://bobewoldt.com Robert Ewoldt

            I’m not sure why Disqus did this, and I can’t un-do it.  Disqus is having a bad day…  I posted the same information in an earlier comment…

            Sorry, I don’t know what’s up with Disqus on this post.

  • Sfields435

    FIRST:  HERE’S THE #1 HITCH — THE CONSTITUTIONAL AMENDEMENT WILL PREVENT CONGRESS FROM spending more than its “TOTAL RECEIPTS” — REMEMBER?? AND FEDERAL TAX REVENUES are not 19.9% OF GDP…THEY ARE [ THANKS TO THE BUSH TAX CUTS & UE & CHEATING COs] JUST 14.7% OF GDP –down from the 30 yr average of 18.3% OF GDP.  AND THE GOP WON’T LET US raise revenues.

    AND HERE’S HITCH #2:  19.9%  OF GDP is not “2% above  the government’s historic spending levels” –SPENDING FOR THE LAST THIRTY (30) YRS HAS AVERAGED  20.9% OF GDP; YET THESE FOOLS THINK WE CAN reduce it IN THE NEXT 10 YRS…JUST AS OUR BABY BOOMERS RETIRE.

    • http://bobewoldt.com Robert Ewoldt

      I’m not sure where you’re getting your information… some of your information is correct, some of it isn’t. 
      First, in terms of revenue, I’m looking at information from http://www.usgovernmentrevenue.com/, and it shows that the average revenue from 1990-2002 (before the Bush tax cuts were implemented) was 18.43% of GDP, which is close to what you state.  However, the average from 2003-2008 (the most recent information) is 17.11% of GDP, not 14.7% as you indicate.  And, you blame it on the “Bush tax cuts,” which probably had something to do with it, but you don’t take into account other economic factors, like, um, a recession and unemployment.

      You also say that it happened because of “cheating COs,” which I took to mean “cheating companies,” which I suppose is brought on by a desire to see the “tax loopholes” that President Obama is talking about closed.  However, these companies are not cheating, they are legally taking these deductions.  So, it’s inappropriate to characterize them as “cheating.”  However, I agree with you that these loopholes should be closed, and the overall corporate tax rate reduced, which will help ALL companies, not just the ones that are politically connected.

      Second, in terms of spending, average federal spending (as a percentage of GDP) from 1978-2007 (the 30 years before President Obama’s term began) is 20.4%, which is close to what you say, but not insignificant.  Since Social Security began, spending has averaged 19.6% of GDP.

      Your contention that we can’t balance our budget at 19.9% of GDP or less is incorrect, even as the baby boomers retire.

      This whole debate is about the size of government.  Republicans believe that government should be smaller (hence the insistence on not raising taxes), while Democrats believe that government should be bigger.  I realize that you’re on one side of the aisle.

      Would you support a balanced budget amendment without the two-thirds requirement to raise taxes, and a “more reasonable” spending level (like 21%)?  Or are you OK with the U.S. government spending more than it makes every year?

      • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

        I only have a few minutes but I wanted to answer your
        question Bob, Yes I would support a balanced budget amendment that only
        required a simple majority to raise taxes and a spending cap of around 21-22%.
        However I stated before that I would also have to see an exception for disaster
        relief funds in addition to the war exception. 

        Q: Is it possible for any Republican to say “close the tax
        loop holes” WITHOUT saying “and lower the rates” afterward? LOL we
        could find a deficit deal if that was possible. 

  • http://www.facebook.com/people/Broc-Middleton/1320338877 Broc Middleton

    What did you think of President Obama/Speaker Boehner addresses? It’s getting too close for comfort for me, a deal needs to get in motion.

    • http://bobewoldt.com Robert Ewoldt

      I haven’t watched them yet. I’ll do that soon.