The wrong Balanced Budget Amendment?

After the House of Representatives failed to pass Balanced Budget Amendment legislation by a large enough majority to begin a for-now quixotic process to so-amend the constitution, it's been interesting to see fiscal conservatives criticize both the vote as well as the text of the proposed amendment itself.

The Wall Street Journal editorialized that "Not only did they fail to pass the amendment, but they succeeded in giving Blue Dog Democrats political cover as fiscal conservatives."

More interesting to me was that House Budget Committee Chairman Paul Ryan (R-WI) voted against the measure.

Congressman Ryan's press secretary sent me a link to Ryan discussing the proposed Balanced Budget Amendment with Racine, Wisconsin Tea Party members:

Here is a transcript of Ryan's remarks, leading me once again to state that I'd be pleased to support Paul Ryan for president in four or eight years:

The House will be voting on a Balanced Budget Amendment either next week or the week after. There’s a right way and a wrong way to do that from my personal perspective, and I want to give you my opinion on this issue.

You know the kind of fiscal crisis we have coming in this country. If you take a look at the math, the spending trajectory our nation on is absolutely unsustainable. Actually I’m glad Liza is standing here, she’s 9 I’m 41. By the time Liza is my age, the government will be more than double in size what it is today if we stay on the current path we are on.

For the last 60 years, our country has taken 20 cents out of every single dollar made in America to pay for the federal government. When Liza’s my age, we will be scheduled to take about 42 cents out of every single dollar made in America just to pay for the current government at that time.

I asked the Congressional Budget Office what will the tax rates be on my children’s generation, you know when I’ve got grandkids running around. They ran all their numbers through their computers and gave me their answer. The lowest tax bracket, the 10% bracket, goes to 25%, middle income taxpayers get a tax rate of 63%, and the top tax rate, which is what 80% of all those businesses, those subchapter S corporations, those partnerships, that goes to 88%. Then the CBO said, this could have some negative effects on the economy at that time. So, even these bean counters in government have got this figured out.

We all know where we’re going. We all know that the growth of our government is on an incredible upward trajectory, which is driven almost totally because of entitlement programs, programs that are going bankrupt and in urgent need of reforming. That’s what our budget is all about! You know anything about the Roadmap for America’s Future I put out or the Path to Prosperity that we put out?

(CLAPPING) Well, I won’t go through all of that. I will only say that if we wait and keep kicking the can down the road, it’s going to get really ugly. We’re going to have a European situation on our hand. It’s going to be bitter austerity. We’re going to be pulling the rug out of under current seniors after they’ve retired, and we’ll be cranking taxes up, which will slow down your economy and make it impossible for businesses to be formed, for young people to get jobs and careers. That’s what’s going on in Europe. We want to prevent that.

So what are the types of things we want to do to get ourselves disciplined and limited? That’s where the balanced budget amendment kicks in.

I think there’s a wrong way to do a balanced budget Amendment and there’s a right way to do it. The wrong way, and this is my personal opinion and good people in Congress disagree with me about this, is what I call a “vanilla BBA” where you simply say expenditures need to equal revenues.

Why do I say that that’s the wrong way?  Because under that kind of a formula, it doesn’t matter how big government gets, so long as the math adds up, so long as expenses and revenues add up, everything’s fine.

Well, I just told you what’s going on. We’re going from 40 million retirees in America to 80 million retirees. These are what we call pay as you go programs. Current workers pay their taxes for current beneficiaries. We’ve got a 100% increase in our retirement population, but only a 17% increase in the working population following them. 10,000 people are retiring every single day today in America, and so we know that our government is on this enormous trajectory of growth. If we allow that growth to continue unchecked, if we don’t reform the spending programs that are driving that growth, and we have just a balanced budget then we will crank taxes up in this country to the likes we’ve never seen before, and we will not have that economic liberty, that kind of freedom and prosperity we’ve had that defined this country, which have made our country the most prosperous nation in the world.

So a balanced budget amendment that simply says: have expenditures equal revenues. At worst we’ll split the difference, and we’ll go from taking 20 cents out of every dollar made in America, 20% of GDP, to 30% instead of 40%. Either way you go, you’re looking at European levels of size of government. We don’t want to get down that path.

To me, the root cause of this problem is spending. It is not a revenue problem that we have in Washington; it’s a spending problem that we have.

What really matters in my personal opinion is you have got to spending under control. That means that you have to have caps on spending. As long as I have been doing this job, I’ve been fighting for caps on spending. Every budget reform we have put out there capped spending. So, the version I’m in favor of is a balanced budget amendment with a constitutional limit on spending, that way you make sure you’re not going to tax your way out of the problem and crank up the size of the government…

You want to make it hard for Congress to go down the tax increase route, and you want to make it mandatory that Congress goes down the spending cut route to keep the size of government limited, and therefore the economy free, so there’s right way to do it and a wrong way to do from my own personal opinion…. The Spending Limit Amendment version that gives you the limited government version.

On the vanilla BBA, the last thing I’ll say is, we’re sometimes a blue state in Wisconsin, right? We have a balanced budget but you know what happens when liberals run Madison? I don’t have to finish the sentence. Liberals will run government from time to time. And what happens if we have the vanilla BBA, and you’ve got Nancy Pelosi and Harry Reid running Congress and Barack Obama as our President? They’ll just crank up taxes in order to balance the budget, and we will lose a lot of our freedom. Our government will grow very large and that’s why you need to have these artificial controls on spending, making it harder to raise taxes and pushing people towards limited government spending.

With that, thank you very much and I’ll be happy to answer your questions.

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