Why Not Make Sound Budgeting Constitutional?

Matt Yglesias gives us his concept of a Progressive Balanced Budget Amendment. The idea is basically to make something like the pay-as-you-go rules constitutionally mandated, such that no act of Congress could increase the long-term debt level. Though I have some problems with the workability of this idea in practice, I'm actually drawn toward thinking it's a good idea in theory, for reasons that relate to my thinking about the proper way to do budgeting.


The way I think people should do budgeting is to a) figure out what they want to spend money on, b) calculate how much those things will cost, and then c) figure out how best to raise sufficient revenue to cover those bills. That's instead of the way we do things here, where we get a notion that overall spending levels are too high, not because of any particular sign of economic calamity but because we feel like it, and then we go looking for things to cut, and we end up cutting the programs that have the fewest powerful interests lining up behind them. Part of the way Republicans do this is by making people think the word "deficit" means "spending," so that "high deficits" is code for "high spending" and therefore high spending must be bad, and therefore we must cut spending.

So, might something resembling this Progressive Balanced Budget Amendment help matters? The thing I like philosophically about pay-as-you-go is that it reinforces the notion that spending and revenues are inherently connected. You have a program you want to enact, so you decide how you want to pay for it. Now, in my ideal budgetary process you might not do this item-by-item, but rather have one process in charge of appropriating money and another committee in charge of adding it all up and figuring out how to pay for it. But that might be harder to do in practice, and the PAYGO rules are a reasonable approximation. Moreover, having some sort of long-term rule requiring you to pay for things would take the deficit completely off the table as a political issue, which it ought to be. If the Constitution mandated that you couldn't increase the long-term debt by a legislative act, then you couldn't accuse people of running up deficits (unless you were accusing them of violating the Constitution). It would lock in the one sane rule of budgeting, namely that the budget must be balanced over the long term, without forcing any pro-cyclical budget cutting in recessions or what-have-you. All of this sounds like a pretty good idea to me.

My problems with it are two-fold. First of all, I continue to feel that constitutionalizing too much stuff isn't a great idea. Nobody quite knows how much revenue a given tax will raise, or how much most spending programs will cost. It's all estimates, and those estimates are made by the Congressional Budget Office. So do you really say, in the Constitution, "the CBO's estimates of spending increases must be matched by newly-levied taxes that the CBO estimates will be equal in value"? It just strikes me as a wee bit off. The second thing is a little more about the economic consequences, namely that if your economy is growing then a balanced budget will shrink your debt-to-GDP ratio rather significantly over the years. Requiring a balanced long-term budget as Yglesias proposes would, therefore, make the long-term debt burden on the economy insidiously shrink. Is that good? I don't know, but I do know that for the government to pay off all of its debt or for there to stop being enough Treasury bonds for them to play their accustomed role in global finance would be rather problematic. So I would kind of like to modify the idea to say, "things must be paid for, except that they should slightly not be paid for so that the debt-to-GDP ratio stays constant at a reasonable level, maybe around 40%." But putting that in the Constitution is even more absurd! First of all, how do you work it in practice, i.e. how do you calculate in each new bill exactly how much to not pay for your new spending or tax cuts? But more to the point: GDP is not constitutionally defined. The debt-to-GDP ratio isn't, either. Again, we're constitutionalizing things that probably aren't concrete enough that it's good to do that. What if people figure out a new, better way to calculate GDP? Is the old way of calculating GDP defined in the constitution? Do we need to amend it to incorporate new economic thinking? If not, is the term "GDP" defined in the Constitution at all? I think it's kind of problematic.

But anyway, I think it's an interesting idea, and one that might be worth talking about some in public if not making a serious push to enact it.