The Instigator
Wnope
Pro (for)
Losing
0 Points
The Contender
RoyLatham
Con (against)
Winning
8 Points

The Balanced Budget Amendment is a bad policy response to the 2011 debt issue.

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Post Voting Period
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after 2 votes the winner is...
RoyLatham
Voting Style: Open Point System: 7 Point
Started: 7/29/2011 Category: Economics
Updated: 5 years ago Status: Post Voting Period
Viewed: 4,334 times Debate No: 17703
Debate Rounds (4)
Comments (16)
Votes (2)

 

Wnope

Pro

I would like to put forward that the Balanced Budget Amendment is bad policy for the 2011 Debt debate. Unless my opponent wishes otherwise, the version of the BBA we will use is that which was in H.J. 1 that House Republicans pushed for [1]. I am also willing to consider the Senate version, though they differ mainly in thresholds for military conflict exemptions and tax raises.

While lowering the debt is an admirable and necessary undertaking, there are wrong and right ways to go about it. BBA is the wrong way.

I mean to argue the BBA is inappropriate for the following reasons.

1. Given modern state of deadlock, the BBA practically ensures that there will be no second deficit increase in time to stop credit downgrading. (In HJ 1, the only way to increase the deficit is for both houses to pass an amendment which is sent to the states). Not only is it impractical to believe that the House and Senate will agree to a constitutional amendment; it is nearly inconceivable that 38 state legislatures will agree to the government tieing its hands behind its own back when states run into money issues.

2. The BBA is unenforceable and would lead to a constitutional crisis. [2]

3. The BBA leads to unrealistic cuts in the immediate future. "In�fiscal year�2009, we would have had to abolish every discretionary spending program, including national defense, to balance the budget and that still wouldn't have been enough without higher revenues. We would have had to cut more than $300 billion out of Medicare and Social Security as well. " [3]

4. The BBA makes America more vulnerable to exogenous shocks and any form of recession by nixing the effects of automatic stabilizers. As Norman Ornstein, a resident scholar at the CONSERVATIVE American Enterprise Institute. "It would virtually ensure that an economic downturn would end up as a deep depression, by erasing any real ability of the government to pursue countercyclical fiscal policies and in fact demanding the opposite, at the worst possible time." [4]

In 1992, Robert Reischauer — then director of the Congressional Budget Office and one of the nation's most respected experts on fiscal policy — explained in reference to freezing automatic stabilizers: "[I]f it worked [a constitutional balanced budget amendment] would undermine the stabilizing role of the federal government." [5]

The Economic Policy Institute also forecfully argues that the BBA destroys countercyclical fiscal policy at times of economic downturn. [ibid]

When the FDIC and PBGC uses assets it counts as deficit spending. That means that, if there was a bank run, it would be unconstitutional for the FDIC to pay for deposits or pension insurance unless there is an offsetting surplus IN THE YEAR OF THE RECESSION. That also undermines the faith Americans have in the banking system's ability to repay any losses. [2]

5. Other enforceable legislative means of controlling debt are available. For instance, the CATO institute gives an example mechanism through The Balanced Budget Veto [6].

Working off of HJ 1, an enforceable legislative tool would be just increasing the threshold vote needed for a spending increase. Alternatively, as can be found in the Boehner bill, a committee can be established with the purpose of making a number of cuts to the budget every year. While I am thoroughly against it, even Ryan Paul's plan is preferable to the BBA.

1. http://www.gpo.gov...

2. http://www.cbpp.org... Center on Budget and Policy Priorities: A Constitutional Balanced Budget Amendment Threatens Great Economic Damage

3. http://www.thefiscaltimes.com... Fiscal Times: Balanced Budget Amendment a ‘Phony' Deficit Solution

4. http://dropfox.com... "Fox News Lobbies For Balanced Budget Amendment That Economic Experts Say Would Hurt The Economy"

5. http://www.cbo.gov... CBO Testimony 1992

6. http://www.cato.org... Cato Analysis "Balanced Budget Veto."
RoyLatham

Con

The Resolution

Pro has picked an excellent debate topic. A Balanced Budget Amendment (BBA) deserves serious consideration, and I'm looking forward to our debate giving it the attention it deserves.

Pro said that he would consider the Senate version of the BBA [1. http://www.heritage.org...], which is what I will do. The Amendment has eleven sections which I'll refer to a S1 ... S11, respectively.

Pro points out that that there are relatively minor differences between the House and Senate versions and properly considers the differences not to be critical to the debate. I agree. In fact, the resolution is whether a balanced budget amendment is appropriate, not whether the exact language of either the House or Senate version could be improved upon. Proponents of a BBA have proposed a starting point for negotiation of the exact wording. Boehner's most recent proposal passed in the House for solving the debt crisis didn't say what balanced budget amendment had to be voted on, just that some balanced budget amendment had to be voted on. It did not required that an Amendment be approved, just voted upon. The resolution asserts that any talk of a BBA in conjunction with the debt issue is "inappropriate."

"Inappropriate" could mean that it should not be spoken of in front of liberals, just as certain offensive language is inappropriate when speaking with your Grandma. However, I'll just stick to policy issues.

First, I will respond to Pro's case.

Pro 1: No way to stop near-term downgrading.

This is false under any version of the BBA. A BBA would have to be ratified by three-quarters of the state legislatures before taking effect. Recent amendments have been taking about two-years to ratify [2. http://en.wikipedia.org... ] Some state legislature only meet every other year. However, S11 of the proposed BBA says that "This article shall take effect beginning with the fifth fiscal year beginning after its ratification." (The House version is two years after ratification.) So Congress would be able to operate under current rules for about seven years.

Moreover S5 allows "The limit on the debt of the United States shall not be increased, unless three-fifths of the duly chosen and sworn Members ..." Currently, it takes a 60% vote to increase the debt limit in the Senate, so the change is that the House approval is increased from 50% to 60%. That's a stiff requirement, but certainly not an insurmountable one in the case of true national emergency. For example, the TARP bailout of the banks passed with over 60% in both the House and the Senate. [3. http://www.huffingtonpost.com...]

Pro 2: BBA Unenforceable

Pro made no case, so I need not respond.

S10 provides: "The Congress shall have power to enforce and implement this article by appropriate legislation, ..." That simply allows the BBA to be put into law through specific procedures. So the question is then how can Constitutional limits on the power of the legislature be enforced. First of all, we expect elected legislators sworn to uphold the Constitution to obey the Constitution whether there is additional threat of enforcement or not. A legislator ho fails to do so could be recalled by his state. Second, we have similar restrictions on powers other than the power to spend, and those restrictions are enforced by Court order. The First Amendment starts "Congress shall make no law ..." If congress makes a law against free speech, the Judiciary strikes it down. Similarly, the Courts can invalidate excessive spending.

There is precedent with the 49 states that have balanced budget amendments. The State legislature go through all manner of accounting tricks to try to evade the requirements of the State constitutions, and the state courts determine what is legal and what is not.

Pro 3: Unrealistic near term cuts

As previously established, full cuts are not required for about seven years. There are no unrealistic near-term cuts. In the long term, entitlements would indeed have to be cut. However, that is inescapable in any case. The growth in debt and entitlements will consume the entire GDP if nothing is done. The BBA forces proper action before a crisis is reached in entitlements.

Pro 4: Vulnerability to recession

What causes recessions? Politicians want to overspend to get votes from constituents, and whoever is in office wants to spend to keep as much stimulus as possible. Required fiscal sobriety will prevent severe recessions in the first place. Not overspending in the first place removes the corrections of deep recessions.

The states that have balanced budget amendments cope with downturns through the use of "rainy day funds." [4. http://en.wikipedia.org... ] There is no prohibition on running surpluses and saving them for bad times. That's a much better mechanism than relying on debt. Private insurance companies do not rely upon debt to handle claims in bad years (as with hurricanes) they build equity to draw upon.

There is some ambiguity as to whether spending from past savings is an "outlay" under the Amendment. It's probably not, because state BBAs do not consider it so. If so, then it should be made clear that saved funds are allowed. The debate question here is whether a BBA is inherently bad policy.

In the worst times, in takes 60% of both houses to increase the debt limit. That's prudent, but it provides an escape.

Pro 5: Alternative mechanisms

Congress might just choose on it's own to stop excessive spending. That has not happened. The CATO proposal is to allow the President to have a line-item veto in yeas with deficits. So, for example, President Obama could go in and cut all the wild spending programs of which he disapproves. The problem with that is that aren't any wild spending programs of which he disapproves. There never has been and never will be. The alternative does not approach the fundamental problem: politicians get re-electing by spending.

A line item veto requires a Constitutional amendment. If it worked to provide a balanced budget, it would therefore be a BBA.

Con 1: Fixes a flaw in democracy

A flaw in democracy was observed by Edmund Burke in 1754 (my emphasis):

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. [5.http://www.americantraditions.org... ]

The source gives many quotes from the Founders expressing similar sentiments. The cure to this problem was envisioned by Burke and by the Founders to be a constitutional republic, in which democracy worked within constraints o power established by a Constitution. Jefferson favored a balanced budget amendment. [6. http://www.csmonitor.com...] The time has arrived for a limit embodied in the Constitution. We can debate the details, but the problem is fundamental.

Con 2: The BBA discussion is appropriate because it addresses chronic deficits

Raising the debt ceiling does not ensure that the US will have sound fiscal policies. It does not even ensure that the US will preserve the AAA credit rating on its debt, because the long term outlook is so poor. [7. http://economicsnewspaper.com...]

The reason a BBA is appropriate to the discussion is that it addresses the real problem, which is chronic overspending by government. That's good even if a BBA is not passed.


Debate Round No. 1
Wnope

Pro

First, I'd like to thank RoyLatham for taking me up on this highly specific debate.

While we could debate the use of the term "inappropriate" vis a vis my grandmother, my intent was more that among the smorgasbord of policy tools available in this default debate, the BBA should be off the table. The BBA itself is not some sort of taboo, that's why this debate is focused on it specifically pertaining to 2011.

Pro 1: In terms of stopping the current risk of downgrade, what is necessary (but not sufficient) is meeting the August 2nd deadline. This point does not apply to BBA-related legislation that would pass after the ceiling lifted. It would similarly apply to legislation for 100% defense related cuts.

TARP and other "bailouts" are quite different from the simple ability of FDIC to back banks. Thanks to the BBA, for the first time since the Great Depression, consumers could not be positive that their money is safe in banks. TARP isn't a great example of Congress pulling through. It was first voted down in the House in 2008. It only passed after the Dow lost almost 800 points. Even then it only got 60% of the House.

Pro 2: A faux pas on my part. Let's say Congress decides to not balance the budget several years after the BBA goes into effect. How can it be constitutionally enforced?

Since the initial problem comes from legislators not acting constitutionally, legislators won't be providing a remedy themselves. If the President is unable to veto, can he just unilaterally balance the budget? Does he jail any legislators who say the BBA shouldn't be enforced? If the budget isn't balanced or if the President vetos a balanced budget, is it the court who will make decisions? Can the Supreme Court declare a veto invalid? Will we give the court the power to invalidate appropriation bills that don't balance? There would be an inevitable shift in the balance of power.

As to the states analogy, your argument is misleading. As a statement from five Nobel Laureates argues, of the many reasons a Balanced Budget Amendment is unsound is that, unlike the federal government, states only have to balance their operating budget [1]. They can borrow as much finance capital as they like.

Pro 3: If we are using a version that waits to implement the BBA for approximately seven years, then no the cuts will not be immediate. However, once the BBA comes into effect, we may find ourselves in the situation described in 2009. Once the BBA is active we will face those extreme cuts.

Pro 4 I can't agree with your definition of a recession. Overspending is one way to get a recession. However, there are many other ways. For instance, stock market crashes due to bubbles, exogenous shocks, positive feedback loops (ex. Mark to market pricing) etc.

Recession does not mean "government takes in less revenue than it spends." It means, among other things, that trade and industrial activity is reduced, credit markets cooling, and/or a fall of GDP for two successive quarters.

Automatic stabilizers dampen fluctuations of real GDP. There is a good reason we have "automatic" and "nonautomatic" stabilizers. Something like TARP is a stabilizing tool that had to be voted through. The Balanced Budget Amendment would make it unconstitutional for automatic stabilizers to function if the government takes in less money than it makes or the rainy day fund isn't enough.

Pro 5. Your definition casts far too wide a net. A "Balanced Budget Amendment" involves a program where at some point the budget must on a yearly basis have outlays (or similar term) less than or equal to revenue. A line item veto is most certainly not a BBA.

Con 1. While you can argue that the founders were for fixing the constitutional issue you just mentioned, it does not follow that they would agree with the reasoning of the balanced budget.

Founders like Alexander Hamilton, while very interested in the US paying debts, was adamantly opposed to such policies (not to mention amendments). Hamilton favored the US having flexibility as to responding to slowing of credit or other tools. This makes it especially hard to think that the Founders wanted such specific and restricting economic policy as an amendment dictating yearly fiscal budgets. Jefferson was suggesting the amendment in a letter about reigning in John Adam's spending.

Like Jefferson, Hamilton also argued that the US should not incur debts that it cannot pay off. However, he would not accept a yearly balanced budget. His plans for paying off debts, none of which involved amendments, occurred over decades. And after 30 years, his plan worked and the war debts were paid. He used debt and credit in order to start off the immense banking system we have today. Under BBA none of Hamilton's policies would be possible.

The BBA will only solve Burke's problem if it is enforceable.

Con 2. See intro for reference to "inappropriate."

[1] http://blog.ctnews.com...
RoyLatham

Con

Pro 1: No way to stop near-term downgrading.

Pro concedes that a BBA would not cause near-term downgrading, because Congress would retain all of it's current authority for about seven years.

The main protection against bank failure is government insurance, the FDIC, now paid for by collecting fees. Rather than spending the fees, the money could be retained to pay claims. That's the way private insurance works. In a great emergency, a 60% vote in Congress would allow deficit spending.

After a BBA is in effect, it allows debt increases with a House super majority of 60%, rather than the present 50%. Pro argued that meeting the requirement was next-to-impossible, requiring the equivalent of another Constitutional Amendment. That's not true. It's much easier. I pointed out that, for example, TARP passed with more than 60% in both houses, so it's clearly possible. Pro rebuts that it was really difficult to get TARP passed. Sure, the whole point of a BBA is to make deficit spending difficult. We have accumulated a $14+ trillion deficit by making it easy for politicians to dole out benefits to get votes, while leaving the bill for future generations to pay. Even though difficult, it is only a 60% vote, and the case can be made, as it was with TARP.

Note that 2010 census was declared an "emergency" for spending purposes, even though it was known it was going to happen 200 years ago. http://www.washingtonpost.com... Congress retains substantial flexibility under a balanced budget amendment.

Pro 2: BBA Unenforceable

I believe I made the mechanism for enforcement clear in R1. I said, "... we have similar restrictions on powers other than the power to spend, and those restrictions are enforced by Court order. The First Amendment starts "Congress shall make no law ..." If Congress makes a law against free speech, the Judiciary strikes it down. Similarly, the Courts can invalidate excessive spending."

Pro asks, "Will we give the court the power to invalidate appropriation bills that don't balance? " Yes, the Court will have that power. There is precedent on the state level.

The BBA anticipates Court enforcement. The Court could either invalidate spending authorization or they could raise taxes to achieve balance. S8 forbids the Court from requiring increased revenues, so the remedy is to invalidate spending. Like the rest of the Constitution the Court decides whether a violation of the BBA has occurred after someone brings suit claiming it has.

An article in National Journal summarized:

"Who would be eligible to sue? Courts would have to decide, but Phillips said any member of Congress involved in the budget process would certainly be eligible. Individual citizens, political organizations, and class-action groups would probably line up to file such suits, and courts would have to decide whether they had "standing," in legal terms, to press their claims.

If the constitutional amendment had been violated, a federal court would issue an injunction ordering Congress and the president to stop breaching it. The legislative and executive branches would then have to decide what to do about that." http://mobile.nationaljournal.com...


The President currently has the power to veto legislation, so he can veto laws and demand that Congress trim them down. We have unacceptable deficits because presidents haven't done that often enough.

Pro 3: Unrealistic near term cuts

Pro concedes that unrealistic near term cuts are not required by the BBA, because no near-term cuts are required.

Pro makes a new argument that Congress can refuse to reduce spending even with seven years' notice, so a crisis occurs in seven years when it takes effect. That presumes a Congress and a President even less responsible than what we now have, which is unlikely. If that is the case, then clearly a BBA is necessary to avert bankruptcy from chronic overspending. The temporary crisis would be better than bankruptcy.

Pro 4: Vulnerability to recession

Reduction of revenues is a consequence of recession; I didn't claim it was the definition.

There are no "automatic stabilizers" against recession. There is monetary policy controlled by decisions of the Federal Reserve Board, and fiscal decisions controlled by decisions of Congress. With fiscal policy out of control, stuck in the spending mode, an impossible burden is placed on the Fed to moderate recessions by lowering interest rates and changing reserve requirements. With fiscal discipline restored, there will be much less need for dramatic Fed intervention.

The primary mechanism for Fed intervention is to create new money and put it into circulation without borrowing it.

"By far the most visible and obvious power of many modern central banks is to influence market interest rates; contrary to popular belief, they rarely "set" rates to a fixed number. Although the mechanism differs from country to country, most use a similar mechanism based on a central bank's ability to create as much fiat money as required." http://en.wikipedia.org...

Nothing in the BBA prevents that. The BBA does not forbid creating too much money, but it substantially reduces the need to do that. Whether there should be further restrictions on the Fed is a topic for a different debate, but I can find nothing in the BBA that restricts it.

Pro 5: Alternative mechanisms

The alternative suggested by Pro was to give the President line-item veto authority to prevent deficits. I pointed out that Presidents could veto whole bills to demand cuts, but that mechanism has not worked. Line item veto authority removes Congressional authority on how to spend. The mechanism doesn't work and moves power from Congress to the executive, a bad idea.

Pro made no counter argument on its being ineffective. What it's called is irrelevant.

Con 1: Fixes a flaw in democracy

I believe we agree that a flaw exists in the Constitution that allows disastrous overspending to curry favor among voters. Pro says that there was disagreement on how to fix the defect, with Jefferson favoring a BBA and others opposing it. Our debate is about whether some form of a BBA is good policy or not. History has now shown that other alternatives have not worked. A BBA would solve the problem, and Pro has not come up with a viable alternative.

The problem has to be solved, so clearly it is appropriate to bring a BBA into the discussion of a debt ceiling. The debt ceiling is not just a short-term problem of increasing debt, it is a chronic and potential disastrous problem that requires a change in the fundamentals. Hence, we need a BBA.

Con 2: The BBA discussion is appropriate because it addresses chronic deficits

My point here is that it's wrong to think that if the debt ceiling is raised the debt problem is solved. The debt ceiling was raised during the time of our debate and the problem is not solved. Since the agreement to raise the ceiling was reached,

S&P officials said that a $4 trillion deficit reduction package would likely suffice to prevent a downgrade. By that measure, the legislation does not come close.

...

"We are still vulnerable to a downgrade," said Carmen Reinhart, an economist with the Peterson Institute in Washington, calling the deficit plan "still tenuous on all areas."

Nick Gartside, chief investment officer for global fixed income at JP Morgan, expects a downgrade because Washington's debt and deficit profile is "a huge anomaly" in the club of AAA countries.

"To our mind that means in time the US is likely to lose its triple-A rating," he said.

http://www.google.com...

We need a balanced budget amendment to solve the long term problem.
Debate Round No. 2
Wnope

Pro

Pro 1. As I noted for point 1 as to avoiding downgrade, "what is necessary (but not sufficient) is meeting the August 2nd deadline." The (but not sufficient) bit was in reference to a point you make that raising the ceiling is one of many steps.

As I say above, the BBA fails Pro 1 for the same reason 100% spending cuts from military source fails Pro 1.

Pro 2. What this system of enforcement says is that unelected judges will be the ones combing through our budgets finding what spending to nix. Consider this applying to the appropriations process. Congress and President agree on guidelines and then pass spending packages in chunks. If the entire budget is balanced except for a screw-up concerning funding two programs with the same chunk of money, the COURT will be the one who decides our economic policy. That's what activist judges will have in their hands.

Let's say you get an economic downturn in the middle of a fiscal year. If Congress didn't pass steep cut and their appropriation bills have passed, they are in unconstitutional waters. Since spending goes in chunks, let's say for instance that a defense spending bill is the last bill passed, and that puts us over the 18% mark. Does the court strike down defense spending, or do we give courts the ability to look through our whole budget and trim what they like?

Because the amendment doesn't bar citizens, what you'll end up with is a crisis predicted by former Supreme Court Justice Bork. There would be hundred of lawsuits across across the country leading to inconsistent theories and results (from individual judges making their own habits of where to cut from spending bills). [1]

You refer to "state-level" precedent, and again I point to the major differences between State and Federal balanced budgets. Namely, states do not need to balance their budgets, only their "operating budgets." States borrow enough to run deficits even while they claim they have "balanced the operating budget." States can go even further since, unlike the proposed Federal BBA, states do not need to be balanced at the start, during AND end of each year. [2]

Pro 3. Assuming that, over seven years, our government was able to entirely balance the budget, so that we have no more debt (a weighty assumption, but for Pro 3 I will take it). If an economic disaster like the one from 2008 occurred, we would face similar spending cuts to those referred to earlier. The BBA doesn't allow for any sort of protracted response to a recession. We have to pay the deficit immediately without any concern of future investment of resources.

Pro 4.

You claim "What causes recessions? Politicians want to overspend to get votes from constituents, and whoever is in office wants to spend to keep as much stimulus as possible. Required fiscal sobriety will prevent severe recessions in the first place. Not overspending in the first place removes the corrections of deep recessions "

Then you claim below that "Reduction of revenues is a consequence of recession "

Which is it? Are you going to argue that recessions are caused by overspending, or are they a consequence of government spending?

I'm not sure what you mean by saying there is no "automatic stabilizer." Most economists agree that they exist, to say the least. In essence, we're talking about negative feedback mechanisms. A stabilizer isn't meant to stop a recession head-on. Stabilizers are like break dampeners on a speeding train. You can't stop a runaway train by just slamming on the breaks. Stabilizers are similar to "pumping the breaks." One of many examples is automatic increases in unemployment compensation.

Lowering interest rates through any mechanism will only benefit you to a certain extent. We can only affect the nominal interest rates. According to the taylor rule (interest(nominal)= inflation – interest(real)), monetary policy will lose all usefulness during a recession at a certain point. If the bank is able to get nominal interest rates to zero, and we are in a recession, then the equation becomes 0 = interest(real) + deflation.

That means that even with nominal interest rates set at zero, and any sort of deflation, the real interest rate will be BELOW zero. Automatic stabilizers are complements that become even more important when monetary policy fails.

Automatic stabilizers do exist, and they are in place. I quote five economic nobel laureates who also agree "automatic stabilizers" exist for recessions.

Pro 5: I never said I wanted a line-item veto in the constitutional sense. There are variations which in the past have been shown to be more promising than a straight line-item veto. That would be revisiting the Presidential impoundment power.

Thomas Jefferson first used it to stop unnecessary military spending in 1801. [3] It was in function until Nixon and the �Congressional Budget and Impoundment Control Act of 1974. This is different from just the veto power and has political flexibility built into it. Again, no amendment is necessary. Historical precedent has shown Impoundment to be a well-used tool unlike the straight veto. [3]

Historically, Impoundment power has an actual record of success while federal-level balanced budget has never been tried.

Con 1. We do agree a basic problem in Constitution. There are several.

History has shown that there alternatives. I provided Alexander Hamilton as an example of how we got out of war debts over 30 years while simultaneously growing our credit and banking system. Jefferson's "full balance" approach would have crippled us.

As noted above, however, when in office Jefferson's tool of choice was Impoundment. It was NOT a congressional balancing mechanism.

Con 2: As noted above, I completely agree that in the long term raising the debt ceiling is not enough. In fact, I wouldn't mind cuts even greater than the $4 trillion. However, as noted in Pro 1, as a policy response in the downgrade debate, it was inappropriate. It would have pushed us past the August 2nd deadline and forced a downgrade. Once the deadline has been lifted, then we can talk about extreme plans like 100% defense cuts, a Supreme Court that pushes our pennies for us, and.or a Balanced Budget Amendment.

1. http://www.cato.org...

2. http://www.cbpp.org...

3. http://law.onecle.com...
RoyLatham

Con

Pro 1: No way to stop near-term downgrading.

I have been trying to figure out what Pro's point is in this argument, so far it seems unsuccessfully. Why would a BBA stop prevention of downgrading? It cannot be that a BBA would prevent raising the debt ceiling, because the BBA would not take effect for about seven years. So what is Pro trying to argue? My current guess is that he is claiming that because passing the BBA was a condition in the House-proposed legislation that raised the debt ceiling, that because the BBA would take so long to enact, the raising of the debt ceiling would be too late to avoid the August 2nd deadline. If that is what Pro meant, it is a misunderstanding of the House legislation. The House legislation only required that Congress pass a BBA, not that it be ratified by the states. Congress could pass the amendment in as little as a day if it wanted to, as it just requires a two-thirds vote. There was no requirement that the states ever ratify it.

Pro 2: BBA Unenforceable

Pro argues, "What this system of enforcement says is that unelected judges will be the ones combing through our budgets finding what spending to nix." That isn't quite it. I quoted the National Journal article which correctly states, "If the constitutional amendment had been violated, a federal court would issue an injunction ordering Congress and the president to stop breaching it. The legislative and executive branches would then have to decide what to do about that." The Courts throw the problem back to the legislature and executive with an order to cut a certain amount, and they, not the courts, get to decide exactly what to cut.

Theoretically, the legislature and executive might refuse to make the cuts ordered. In that case, the problem would revert back to the Courts who would decide what to cut. The most likely result would be for the Court to order a straight across-the-board percentage cut.

The potential problem is no worse than that with any other Constitutional requirement. The Courts order general remedies and if those fail, they order specific actions. For example, the Courts ultimately ordered busing as the specific remedy to racial discrimination in education.

Pro says that state BBAs are not precedents because states can run deficits in capital budgets. It could be reasonable for a state to borrow to build an expensive bridge or rail line, then repay the debt with bridge tolls or train fares. The Federal government has no need for such a provision because Federal capital expenditures are a negligible part of the budget. The Federal budget comprises Medicare, Social Security, other entitlements, interest on the national debt, regulatory agencies, and Defense. The Defense Department acquires some capital goods, but the dollar value is small compared to the budget, and there is no associated revenue from use. The operating budget of states is fully comparable to the Federal budget.

States use some accounting tricks to try to convert expenses to the category of "capital." They issue "revenue bonds" against future fees. That evasion is not a benefit, and should not be in a Federal BBA.

If some extraordinary high-capital project appeared, it would only take a 60% vote to finance it with bonds.

Pro 3: Unrealistic near term cuts

Pro concedes that unrealistic near term cuts are not required by the BBA, because no near-term cuts are required.

Pro says that if an economic disaster occurred, "The BBA doesn't allow for any sort of protracted response ..." That's not true, It only takes a 60% vote to incur new debt. Under the present system, legislation that is opposed requires 60% to get through the Senate. The change is to increase the requirement from 50% to 60% in the House. The legislation passed in response to the 2008 financial crisis, both TARP and the Stimulus Plan, http://www.google.com... met the 60% requirement in both houses. The option is entirely up to Congress.

Pro 4: Vulnerability to recession

Pro asks, "Which is it? Are you going to argue that recessions are caused by overspending, or are they a consequence of government spending?"

I said that government overspending is a cause of recessions. That's because government overspending creates an artificial bubble that eventually bursts. Leading up to the 2008 crisis, the Fed had kept interest rates too low, encouraging unsound speculation. Government spending by Freddie and Fannie buying up unsound loans caused unsustainable speculation in housing. Had the government maintained normal interest rates and insisted on 20% down payments for housing loans, the recession would not have been nearly as severe. There might have been some recession but not the disaster that occurred.

I said that after a recession occurs, revenues into the government drop. There is nothing contradictory about that. Overspending is the cause, and revenue drop to government is the result.

I said that there are no automatic stabilizers, which Pro claimed would be destroyed by a BBA. Pro had not named any, so his obligation was to name them. I argued that monetary policy was a significant stabilizer, and that a BBA enhanced the effectiveness of monetary policy controlled by the Federal Reserve. So what did Pro cite as an automatic stabilizer? The only one he could name was unemployment insurance. However, unemployment insurance is provided through states with funding from employers. It operates without regard to a Federal Balanced Budget Amendment. In the current recession, Congress voted to extend unemployment benefits beyond the states "automatic stabilizer" limits.

Paying long term unemployment hurts recovery because people tend to stay unemployed for as long as benefits are paid. This was demonstrated by policy in Denmark. When they paid benefits for five years, people stayed on unemployment for five years. They reduced it to four years and people remained unemployed for four years. Now they are reducing it to two years, http://economix.blogs.nytimes.com... Nothing in the BBA inhibits the stabilizer function, but it beneficially discourages paying long term benefits financed with Federal deficits.

My claim is that if fiscal policy is sound, monetary policy is more effective, because it doesn't have to do the work of both monetary and fiscal policy.


Automatic stabilizers like unemployment insurance can be provided through rainy day funds, previously argued. It's Pro's obligation to cite any that cannot. He has not done so.

Pro 5: Alternative mechanisms

Pro says he never advocated a line-item veto authority, but that's what the Cato Institute study he referenced proposes. Impoundment means the President refuses to spend money appropriated by Congress That's functional equivalent to line-item veto, because the President makes an item-by-item choice of what to fund. I argued that it doesn't work because it requires a President that is opposed to deficits. Obama wants massive deficits, which has engendered our current predicament. Overspending is now a characteristic of presidents. A BBA solves the problem.

Con 1: Fixes a flaw in democracy

Pro's example is that politicians, like Hamilton, can act with fiscal responsibility even when not required by the Constitution. We are 200 years past that solution. The fix should be made permanent with a BBA that provides a limit.

Pro says that Jefferson preferred impoundment. That requires a President that believes in fiscal responsibility. We don't have that either. If we did have a responsible president, that would provide no guarantee of future presidents.

Con 2: The BBA discussion is appropriate because it addresses chronic deficits

The August 2nd deadline was met wihout a BBA. The US credit rating was downgraded anyway, http://www.npr.org... because the long term was not well addressed. A BBA ould have avoided the downgrade.
Debate Round No. 3
Wnope

Pro

Pro 1: When the debate over raising the debt ceiling began, there was a certain range of policy options that were reviewed. As the August 2nd deadline approached, each side had to choose the policy tools they would implement in the plans they would present to congress.

One way to go about this would be to create a plan which has absolutely no way of passing but will please constituents. For instance, a Democrat in the House might propose all cuts come from our military, much to the delight of his pacifist constituency. However, the Democrat is quite aware that even if he could garner the House, it would be impossible to pass legislation through the Senate. This time-wasting move accomplishes nothing other than running out the clock and grandstanding.

The Balanced Budget Amendment would require a vote passing a balanced budget amendment that goes to the states. Since day 1, House conservatives and tea party members knew this was a non-starter. Yet this group brought the BBA up to the table and drew a line in the sand. That kind of brinksmanship is bad policy. It shows a willingness to destroy America for the sake of some local constituency points.

Pro 2: State capital expenditures make up huge policy projects like building highways (by no means toll-operated), infrastructure facilities that are involved in long-term assets, and many other costly gaps in the budgeting process. This is far from laundering a little pork barrel spending into an operating budget. Con is wrong in suggesting that we can make such a simplistic comparison.

Con's BBA would lead to a massive shift in policy-making power from our legislative to our judicial arena. This would be the perfect spawning point for “activist judges” looking to apply their economic beliefs to national budgets.

We elect legislators to handle appropriation. Legislation concerning the budget should involve shaping legislative enforcement, not judicial enforcement. Shifting that to the judicial branch alters the balance of powers in both foreseeable and unforseeable ways. And when the judicial branch decides to cut program A or program B, there will be no constitutional remedy. Legislators will have to start from scratch.

Pro 3: We now face a system where congressmen actively support America defaulting, and that's just the far extremists. Others are willing to let our system default in order to obtain a far-reaching policy gain like “no tax increases for anyone whatsoever.” As many have noted, we are in a system where holding the economy hostage has so far paid off. There are both Democrats and Republicans in this group.

Obama fought tooth and bone to get the stimulus passed, and that was at the PEAK of his political capital. If the BBA were in place, every year the democrats would have to re-argue and re-vote when it inevitably turns out revenues and expenditures are different from expectations.

With a BBA, any attempt at a protracted response to a recession will be inviting a barrage of political maneuvering by re-calculating and re-balancing the budget every year.

Pro 4: Con's explanation of recessions entirely leaves out the over-leveraging, derivative trading, and shadow banking systems that lead to hundreds of trillions of dollars blowing up in our faces. TARP was to fix derivatives, not the housing market.

Bubbles are caused by many, many factors. Bubbles pop for even more reasons. Countries that have LOW public debt have still experienced deep recessions.

Con wishes to incur a federal “rainy day fund” to explain any sort of problem the BBA may face down the road. Not only does the BBA lack any enforcement for creating a rainy day fund, but even with the most hopeful prospects, America won't face a surplus so large as to not only overturn our debt but ALSO create an invulnerable fund to counter any fiscal difficulty. Many states have rainy day funds, but we have already discussed the problem with that comparison.

Automatic stabilizers have been shown in cross country studies to cushion shocks to a nation's GDP [1]. The IMF study of 49 industrial countries compared policy responses by divvying them up as automatic stabilizers, fiscal stabilization unrelated to automatic stabilizers, and fiscal policy volatitlity unrelated to stabilization.

Exclusive reliance on automatic stabilizers is bad, but their ability to produce consistent and timely results allows it to address economic fluctuations in ways that non-automatic monetary policy cannot accomplish. As GDP falls from potential GDP, automatic reductions in revenue and increases in spending lead to temporary budget deficit depending on the scale of the recession. This CBO report is an example of how auto-stabilizers will increase and decrease deficit over time in consistent manner. [2].

If Con has an infinite rainy day fund, then it is hard to imagine any problem here. However, in reality, when we end up in a recession, we'll have balanced budgets that don't include estimates for automatic stabilizers.

The effectiveness of these stabilizers end if their implementation must be already accounted for in the yearly budget.

Even if Congress passed the stabilizer every time they voted, it still would lack the timely effect that makes it so important.

That's why the major economists are all so terrified of the effects of a BBA on a recession. Even with an infinite rainy day fund to blunt the imagination, it's quite easy to see why the BBA is so destructive.

Again, even with a rainy day fund Congress votes on, the BBA destroys all effectiveness of automatic temporary deficit increases by forcing them into time-delayed votes.

Pro 5: Pro was clarifying that he never argued for a constitutional line-item veto. The line-item veto mechanism suggested by CATO does not need a constitutional amendment.

Con is sure that we are “200 years past Hamilton's solution” even though the BBA as a solution has never been brought up on a national level.

“Hamilton's solution” was not made in a friendly environment. Several founders and many more politicians were adamantly opposed plans to lower the war debt through credit extensions.

As is it, Con's position seems to be that because we can trust neither congress nor the president, we ought to trust the appointed judges such as Sonia Sotomayor with our budget.

Con 2: See point 1.

Note: I would again like to thank Roy for sticking with me through my first debate. He has been quite generous throughout and has made this a very pleasant experience.

[1] http://www.imf.org...

[2] http://www.cbo.gov...
RoyLatham

Con

Pro has brought us an important and timely topic, which I appreciate. We need more such topics on DDO. Thanks to Pro for a vigorous debate.

(Con 1) The heart of the debt issue is the fundamental flaw in democracy identified by Burke in the eighteenth century:

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, ... [5]

The remedy is a republic in which powers are limited by a Constitution. Whatever the checks at present, they are clearly inadequate. Pro argues that in the time of Hamilton and Jefferson, when there ere no entitlements, that we got by without a balanced budget amendment. I challenged Pro to make the case with respect to present-day politicians entitlements, and he did not respond to the challenge. Because the Constitution lacks sufficient checks, discussion of a BBA is always appropriate in the context of the debt issue.

(Con 2) The August 2nd deadline on raising the debt ceiling was met by a compromise that did not require a BBA. The US credit rating was downgraded anyway, because the long term deficit problem was not solved. A BBA would have solved the long term problem and prevented the downgrade. That mans it was appropriate to raise the BBA as part of the debt issue.

Pro 1: No way to stop near-term downgrading.

Pro claimed in R1, "the only way to increase the deficit is for both houses to pass an amendment which is sent to the states." This is false because the Senate version of the BBA, which Pro agreed to an acceptable basis for the debate, only requires a 60% vote both houses to increase the debt, and the requirement does not take effect at all for seven years.

Pro then argued that even in seven years Congress would not be ready for the imposition. I replied that Congress would meet the hard deadline because they are sworn to uphold the Constitution. If they were not ready, then that would show that the process was in desperate need of Constitutional limitations on out-of-control spending.

Later, (I had trouble figuring out what Pro's argument was until the end) Pro argued that House Republicans should not have proposed a BBA because they should have known it would not pass the Senate. The starting point in virtually any negotiation is a position unacceptable to the other side, and it's always appropriate to present a position that represents the viewpoint of constituents.

Pro 2: BBA Unenforceable


Pro argued, "What this system of enforcement says is that unelected judges will be the ones combing through our budgets finding what spending to nix." I responded by quoting a National Journal article which correctly states, "If the constitutional amendment had been violated, a federal court would issue an injunction ordering Congress and the president to stop breaching it. The legislative and executive branches would then have to decide what to do about that." The Courts throw the problem back to the legislature and executive with an order to cut a certain amount, and they, not the courts, get to decide exactly what to cut.

Pro did not reply, but repeated that judges would make policy decisions. In truth, judges would force the legislature and executive to make the budget-cutting policy decisions.

I further argued that if the other branches refused to obey the Court, the likely remedy was policy-neutral across-the-board cuts. Pro did not respond to that argument.

Pro 3: Unrealistic near term cuts

Pro concedes that unrealistic near term cuts are not required by the Senate BBA, because it would not take effect for about seven years.

Pro 4: Vulnerability to recession

Pro argued that a BBA would defeat "automatic stabilizers" that help minimize recessions. I argued that "rainy day funds" --which are savings accumulated in good times to be spent in bad times could be used to perform stabilization functions. I also argued that the Federal Reserve functions of controlling the money were unimpeded by a BBA. In addition, I pointed out that the BBA was likely to dampen recessions by preventing over stimulation by borrowing, as happened in the present recession. I challenged Pro identify the stabilizers and say which could not be supported as I described.

Pro pointed to unemployment insurance and the insuring of bank accounts, and did not identify any other stabilizers. Unemployment insurance is a state benefit paid by employers contributing to a fund. Similarly, bank accounts are insured by payments made by banks to the FDIC. Neither depends upon deficit financing. Pro argued that payments out of a fund are deficit spending. Obviously they are not, but if that's an issue BBA wording could make it clear.

In a protracted financial crisis the Federal Government could provide debt-financed bailouts upon a 60% vote of Congress. It's appropriate that bailouts only be provided in circumstances that really require it; that's the purpose of a BBA.

In this final round, Pro cites an IMF paper on the effectiveness of automatic stabilizers, but he never says what the stabilizers are. The paper refers to fiscal policy decisions that are not automatic in the United States. Congress must authorize spending each year. The prime stabilizer is that government employees never are fired and never take a pay cut. That's not a good policy to adopt automatically. It's extremely inefficient to have an entitled class immune from economic conditions. Nonetheless, it only takes a 60% vote of Congress to authorize deficit financing if the case can be made.

Pro 5: Alternative mechanisms

Pro says he never advocated a line-item veto authority, but that's what the Cato Institute study he referenced proposes. Impoundment means the President refuses to spend money appropriated by Congress. Impoundment was ruled unconstitutional when Nixon tried it. In any case, the mechanism requires a president willing to use it, and I claimed that no recent president has shown any such inclination. Pro did respond to my claim.

Pro claims "the BBA as a solution has never been brought up on a national level. the BBA as a solution has never been brought up on a national level." That is factually incorrect. There have been many attempts since 1936. http://www.heritage.org... In 1995 a balanced budget amendment was approved by the House and fell only one vote short in the Senate. Keep in mind that there was no income tax until after 1900, so the opportunity for politicians to drain the Treasury for benefits given to voters was limited before the 20th century.

=======================

This was a difficult debate because it involved many issues. Pro had the burden to prove that the Balanced Budget Amendment is a bad policy response to the 2011 debt issue. Pro did not meet the burden of proof because the debt issues flow from a defect in the Constitution that permits politicians to drain the Treasury to buy votes. The problem is long-term, not just a side issue of the debt ceiling debate. We know that because the US bond rating was downgraded despite the debt ceiling deadline having been met.

Perhaps some fine tuning of the BBA is required. Pro accepted that possibility when he offered to debate either the House or Senate versions. The issue we debated is whether a Constitutional limitation on debt is bad policy. It is not bad policy.

In the debate, my opponent had few references and in some cases, as with "automatic stabilizers" and the CATO proposal for impoundment, relied too much on my reading the references to discover what the argument was. He should have made the arguments directly.

The resolution is negated.
Debate Round No. 4
16 comments have been posted on this debate. Showing 1 through 10 records.
Posted by innomen 5 years ago
innomen
Well, yeah, long and boring, could have been a bit more concise, but that's sometimes the way the debates go.
Posted by RoyLatham 5 years ago
RoyLatham
Why has no one voted on this debate? Long and boring might be a deterrent. I suggest that just reading R1 and R4 will deliver the gist of it.
Posted by innomen 5 years ago
innomen
'The BBA would have avoided the credit downgrade'- Yeah, probably.
Posted by innomen 5 years ago
innomen
Every other year is unthinkable. NH isn't bad, they only pay their reps about $900. a year. I like NH politics and their mindset, but like Nevada, they are getting an influence from Mass and Vermont, which isn't good. They call us massholes up there.
Posted by RoyLatham 5 years ago
RoyLatham
Nevada, Connecticut, and four others states have legislatures that meet every other year.

Nevada limits the session to 120 days. That keeps them from making trouble. When I lived in Nevada, there were roads with no speed limits, a company could be incorporated for $15 by filling out a short form, and most of the state had no zoning laws. Now they are getting the bureaucracy disease, caught from California. Prostitution and gambling are still legal, of course.
Posted by innomen 5 years ago
innomen
Nice debate

@ Roy: "Some state legislature only meet every other year." - how can that be, and where can we get one of those legislatures?

Wnope, nice point on enforceablity, what is the penalty to congress if it's not adhered to, what can the courts do? My state us such a provision, and are usually okay with sticking to it, but have found loopholes. The budget that is submitted each year must be balanced, but sticking to that budget hasn't always been the practice.
Posted by RoyLatham 5 years ago
RoyLatham
The BBA has a cap on Federal spending of 18% of GDP. It's derived as the average of the last several decades. It only caps spending by the Federal government. The total spending by all levels is between 48% and 62% of GDP, depending upon which source you believe.

That also doesn't include hidden "taxes," like laws requiring utilities to provide green energy; that can quadruple utility costs without being counted as tax. A special EPA ruling punishes Florida by adding requirements for that state alone that will cost each household a $1000 dollars. Ethanol subsides may end, but not the requirement to add ethanol to gasoline. The increased cost will be borne by the motorist.
Posted by innomen 5 years ago
innomen
Definitely a debate worth reading.
Posted by Wnope 5 years ago
Wnope
Kohai, on the subject of spending caps, I believe the Ryan Paul plan has a 18% cap for all expenditures. A silly, arbitrary number, but something along the lines of what you are talking about.
Posted by kohai 5 years ago
kohai
as am I. I think what we need is a SPENDING cap!
2 votes have been placed for this debate. Showing 1 through 2 records.
Vote Placed by innomen 5 years ago
innomen
WnopeRoyLathamTied
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Reasons for voting decision: I give a lot of credit to Wnope for his first debate, but the argument simply wasn't compelling enough to negate the need for spending reform to be systemically implemented in our governmental processes.
Vote Placed by larztheloser 5 years ago
larztheloser
WnopeRoyLathamTied
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Total points awarded:03 
Reasons for voting decision: Pro set out that it won't work and leaves the US vulnerable to shocks. Con set out a more principled line. I felt con was able to cast reasonable doubt on some of pro's points and made him drop others, however I was willing to grant the legislation had problems. However, con showed a greater harm was in democracy's flaws. Pro should had principled points of his own to supplement his economic analysis, and run a consistent case. Narrow con win.