When Mike Huckabee launched his campaign Tuesday, he mentioned, as he often does, that he balanced Arkansas's budget for 10 years as governor. Families and states have to balance their budgets, he argued, so the federal government should, too.
"I’m running for president because I know there’s a difference between making a speech and making government accountable to the people who have to pay for it," he said. "You can't spend money you don’t have. You can't borrow money you can't afford to pay back. And the federal government ought to live by the rules that you have to live by, and they should function under a balanced budget law just like I had to every year I was a governor."
This is an early candidate for the best-sounding worst idea of the 2016 presidential campaign. Not to pick on Huckabee. John Kasich, Jeb Bush, Marco Rubio, Rand Paul, Ted Cruz, Ben Carson, Carly Fiorina, Lindsey Graham, and Rick Perry support a balanced-budget amendment to the Constitution. Kasich has been traveling to states to try to jump-start a constitutional amendment process that the president plays no formal role in.
And it would be shocking if Hillary Clinton made it through the presidential campaign without pointing to the surpluses the government ran when her husband was president and Kasich was the chairman of the House Budget Committee.
So it's easy to find advocates for balancing the budget. After all, there's a certain sentimental value to the notion that black ink in the ledger is a sign of good stewardship. And it's clearly good politics, particularly the way Huckabee phrased it. Eighty-five percent of those surveyed for a Fox News poll two years ago said they agreed with the idea that "the federal government should be required to balance its budget just like American families do at home."
But peel back the appeal of the rhetoric, and you'll find a solution in search of a problem.
Why the Constitution
The conservative economist Tim Kane puts the argument for a balanced-budget amendment in succinct terms. "Congress would finally have to make real choices, prioritizing programs and forcing a balancing of what voters really want," he wrote.
That is, politicians won't ever self-limit. They need the force of the Constitution. That's also the logic at the lower level, where most states have constitutional provisions requiring the governor to propose a balanced budget, the legislature to approve one, or both.
Congress has, in fact, imposed spending caps in recent years that suggest it's possible for lawmakers to freeze or reverse the growth of government without the hammer of the Constitution.
Either way, Bruce Bartlett, an economic aide to Presidents Ronald Reagan and George H. W. Bush, wrote in 2011 that "the idea of mandating a balanced budget through the Constitution is dreadful."
Bartlett argues that the proponents of the modern balanced-budget amendment subscribe to a "starve the beast" theory of fiscal management that holds lower taxes will inevitably yield lower spending and thus smaller, more efficient government. The problem, he says, is that experience teaches differently. Spending fell as a percentage of gross domestic product when Bill Clinton and George H. W. Bush raised taxes, and it rose again after George W. Bush cut taxes. But, as Bartlett notes, it's not really about making sure taxes keep up with spending; it's about, as anti-tax activist Grover Norquist once colorfully put it, shrinking the government to the size that it can be drowned in the bathtub.
"Today, most conservatives support a constitutional requirement that will only restrain spending but make tax increases effectively impossible, while continuing to permit tax cuts regardless of the deficit," Bartlett wrote.
The balanced-budget amendment is such a popular idea that at least half a dozen House members have introduced versions of it (some identical to one another), and Orrin Hatch (R-UT) has introduced one in the Senate.
The consensus among amendment proponents is to write into the Constitution provisions that require a three-fifths majority in each house of Congress to spend more than the government raises in a year and to spend more than 20 percent of GDP. For 2014, according to CBO and the White House Office of Management and Budget, the spending-to-GDP ratio was 20.3 percent.
Henry Aaron — the Brookings Institution expert, not the home run king — argues it makes little sense to put a number in the Constitution because the most desirable percentage could change. But, like the amendment under discussion, it would take two-thirds of both chambers of Congress and three-quarters of the states to ratify an alteration.
Deficits can be good
Huckabee's premise is that it's bad for governments to be in the red. But is it?
The largest nominal-dollar deficit in American history came in fiscal 2009 (from October 1, 2008, through September 30, 2009), after President George W. Bush's financial-sector bailout and President Barack Obama's stimulus package. It was a little over $1.4 trillion.
Without those "extraordinary" expenditures, along with quantitative easing by the Fed and other fiscal policies, the recession of the last decade would have turned into a cataclysmic second Great Depression, according to economists Alan Blinder and Mark Zandi. They made projections for several different possible policy paths, including the government choosing to stand pat. Not only would the economy have fallen faster and farther, but annual deficits would have skyrocketed.
In the scenario that excludes all the extraordinary policies, the downturn continues into 2011. Real GDP falls a stunning 7.4% in 2009 and another 3.7% in 2010. The peak-to-trough decline in GDP is therefore close to 12%, compared to an actual decline of about 4%. By the time employment hits bottom, some 16.6 million jobs are lost in this scenario—about twice as many as actually were lost. The unemployment rate peaks at 16.5%, and although not determined in this analysis, it would not be surprising if the underemployment rate approached one-fourth of the labor force. The federal budget deficit surges to over $2 trillion in fiscal year 2010, $2.6 trillion in fiscal year 2011, and $2.25 trillion in FY 2012.
Now imagine that it took a three-fifths majority of each chamber to pay for the stimulus and the TARP bailout. TARP failed outright on its first trip to the House floor, before passing with just over three-fifths of the House on a second go-round. The stimulus law, which passed with only Democratic support in the House, garnered 244 votes, well short of three-fifths of the chamber.
The US deficit has shrunk dramatically, both in nominal terms and as a percentage of GDP, since the throes of the Great Recession. It's simply not the problem that those who would like to shrink government make it out to be.
The US deficit places it in the middle of the world in the ratio of deficit to GDP, according to figures compiled for the CIA's World Factbook. Germany's in surplus, while Britain's deficit-to-GDP ratio is higher than ours. And the US ratio is in line with its historical level over the past several decades.
The goal isn't even that great
So, leaving aside the idea of a constitutional amendment for the moment, even the goal of balancing the federal budget in any given year is of questionable merit. On the micro level, Huckabee and others are just plain wrong about Americans and businesses balancing their own budgets from year to year.
Private debt in the US is 156 percent of GDP, according to Richard Vague, author of the book The Next Economic Disaster, who argues that private debt is more of a sign of economic instability than public debt. Boosted by auto and student loans, consumer borrowing hit an all-time high in February. And anybody who is paying off a mortgage understands that it's okay to go into debt — or even to run a deficit in any given year — if it's done responsibly.