Cut, Cap, and Balance Ain't That Bad


House Republicans voted yesterday for a  “cut, cap, and balance” (CCB) strategy to address the debt situation. Under this plan, there would be immediate spending cuts, future spending would be limited, and any spending that did get done would have to be fully financed. In other words, the federal budget would have to be balanced.

There is no doubt that this is political theater. The Senate will not pass the bill, but I'm surprised at the reception that the plan itself has gotten. Several articles have been very critical about the wisdom of adopting a tripartite strategy of limiting spending, balancing the budget, and cutting current spending.

I am not a huge fan of the tea party, and I don't think the CCB legislation as it is worded is that smart, but it is not ridiculous and some of the charges being leveled at it are either wrong or easily corrected. Here, I am going to focus on the constitutional amendment part of the plan, which requires a two-thirds vote from the House and Senate as a joint resolution to send the plan to the states for their three-fourths approval. The media has created a sense of confusion about the bill that is unecessarily critical and that drives attention away from the key issues that should be in debate. 

For example, many outlets are reporting on Obama promising to veto such a bill. The coverage has been very sloppy, as if included in the bill is the constitutional amendment itself. Actually, the proposed constitutional amendment cannot be vetoed, and besides, a two-thirds vote is needed to pass the thing in the first place, meaning that there would be enough votes to override even if Obama were allowed to veto it.

Critics also point out that the bill hamstrings Congress by forcing a supermajority vote to authorize increased spending over the cap amount (which is currently set at about 18% of GDP). This is anti-majoritarian and might prevent Congress from getting funds at a critical time. For instance, what if we need to spend 40% of our GDP on a war of defense?

However, both of these complaints might be solved by a more clever authorization for future funds. Rather than requiring a supermajority vote by both houses to spend above the 18% cap, the amendment could specify that spending above the cap could be authorized by a national referendum with only a majority requirement. This would be more majoritarian than allowing Congress to set spending priorities as it would allow each and every American citizen to speak on high spending decisions.

And there are benefits of such a majority referendum requirement. For one thing, it would make budget negotiations much more effective. If there is no limit on spending at the start of negotiations, then there is little reason for one senator to object to another's silly spending proposals. Both senators can just agree to fund both projects. That way, both senators are happy and the political cost is just a little more debt. With a pre-determined limit though, spending is zero sum. Someone trying to finance a wasteful scheme for her home district will be met by other senators who now have a reason to unite and defeat the measure so that more money is available for their projects. A cap puts representatives in competition for dollars which means more scrutiny of every proposed spending initiative.

All together, I have been disappointed with the commentary on this latest move by the GOP. The amendment on the table is not vetoable. It does not contravene the principles of our constitution, but there are and it has a mix of reasons for and against it. Let's focus more carefully on those.

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