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Discussion: (27 comments)

  1. Jim. I am a big fan of your work. I was disappointed by the article though. I think it’s great that we are championing bills like this. If the economics don’t work in said bill why not try to figure out ways to make them work. You have a far better grasp on our economics than most. I would love to see a group try and help steer the Rs in the right direction. There are legions of people who would love to help get a balanced budget amendment to a place where it would be passed.

    1. Or, we just have the discipline to not raise the debt ceiling! That forces a balanced budget — we spend no more than the $2.6 trillion we collect in receipts. It’s simple math, but if we don’t have the resolve to adhere to the current debt limit ceiling we don’t stand a chance of ever amending the constitution to require a balanced budget.

  2. GDP as a metric is terrible and almost guaranteed to continue the polarization about how much to spend on what.

    the better metric is what percent of available revenues – and live with it.

    pick a number for defense and national security – and apply it to your available revenues – and live with it.

    whatever is left over from DOD/NS – allocate it to govt programs and entitlements – and live with it.

    but I doubt seriously that the GOP is truly serious about a balanced budget amendment if we focus on available revenues.

    they’l bail out of that discussion once they realize the reality of the real numbers.

    regardless of GDP – we currently have available about 1.5 trillion in revenues. This is the reality.

    How would you allocate that ?

    No one who is really serious is going to say that every penny of that has to go to DOD and ND but I’m willing to listen… to those who say they have a plan – as long as they deal with the realities and not phony GDP metrics.

      1. The CBO report is believable but should be compared to the OMB also but the AEI “report” on Head Start is just more anti-govt blather.

        I do not dispute the CBO projections about entitlements into the future. There is no question they will have to change and perhaps in dramatic ways but I also do not take the balanced budget folks seriously if they want to talk about percent of GDP rather than the DOD percent of available revenues – that ARE laid out in the CBO projections.

        Can’t have it both ways. You cannot just pretend that DOD can spent as a percent of GDP while at the same time talking about actual dollars of entitlements.

        Let’s talk dollars for both – as a percent of available revenues to spend rather than some cockamamie GDP percentage that is disconnected from fiscal realities.

        1. Pfft. More nonsense from the inane and fact-proof Larry Gross. You wish to move the goalposts and redefine the way that the economy has been measured historically? Fine. Go fetch yourself an education (although I surmise that you are ineducable and you are certainly innumerate) and publish some peer-reviewed research that convinces everyone else to adopt your retarded ideas. Good luck with that, you moron.

          1. more name calling from the intellectual elite here on AEI, eh?

            if doing budgets by GDP worked so well, how come we are now 16 trillion in debt and STILL talking about spending as a percent of GDP?

            Again – how many companies budget according to their productivity? How about zero?

  3. Michael P Stein

    There’s another aspect to a BBA that seldom if ever gets talked about. If the budget is balanced in good years – i.e., there is no meaningful surplus – then a recession guarantees that there will either be a deficit or spending cuts. To avoid that, reasonable surpluses need to be baked into the budget in good years (as orthodox Keynesians would agree should be done in order to balance the deficit spending used to prop up demand in a recession). Under Clinton, we were actually doing it.

    Just as Democrats are continually tempted to spend all available money and then some, Republicans seem continually tempted to cut taxes to eliminate any available surplus – and then some. In order to make a BBA work, not only do Democrats need to resist the urge to spend all money available, but Republicans need to resist the urge to cut taxes to refund all surpluses available in good years. Otherwise, we’ll see the same fighting over what to do the first time a recession hits.

    This also makes me wonder that if we do adopt some sort of budgeting amendment, perhaps the best target would be on the range of percentage of total debt to GDP – the longer term trend – rather than a single year’s revenue and/or spending to GDP. If the total debt to GDP ratio is acceptably low, the BBA would not kick in immediately. (Granted, we’re not going to get there any time soon.)

    1. @Michael

      agree… but how about this.

      In good years of surplus – everyone gets their share back on the tax refunds…

      with the understanding that it’s understood in bad years, they get extra taxes to pay?

      but you are right about the GOP – the cut taxes then when revenues fall short -we get a deficit and the GOP then refuses to raise taxes to make it up and insists that we cut spending even further..

  4. Not only does the fiscal math not work, Marron posits that there is a major drafting error.

    1. the GOP is simply not serious. They seem to want to talk bout anything and everything except the actual dollars available for spending.

      1. “the GOP is simply not serious. ”

        Your hero Obama proposed 29 new government programs in his SOTU on Tuesday. He’s run up more debt in 4 yrs than Bush ran up in 8. He spent much of last yr pimping for another half trillion in failed “stimulus” spending. Also, contrary to your repeated assurances, he is fighting the sequester cuts.

        But it’s the GOP who isn’t serious. You’re a pathetic partisan hack, Larry.

        1. re: Obama’s spending. The POTUS cannot authorize spending – only Congress can.

          re: spending as a percent of GDP… do you mean regardless of what your actual available revenues are?

          why would you establish a budget based on GDP rather than your actual revenues? what sense does that make?

          1. I can’t tell here whether Larry’s stupidity or dishonesty is at work here. Perhaps it’s a mixture of both.

            How’s Obama’s rock-solid support of the sequester coming along, Larry?

          2. What the POTUS can do:

            1. – he/she can advocate for spending or for cuts
            2. – he/she can ask a member of Congress to sponsor a bill

            What the POTUS cannot do:

            1. – he/she cannot spend a thin dime unless approved by a majority of both houses of Congress.

            ALL the spending that has occurred since Obama became POTUS – WAS APPROVED by a MAJORITY of of Congress.

            here read it:

            http://www.redstate.com/2012/09/14/only-70-republicans-vote-against-disastrous-cr/

        2. Even you don’t believe your own bullshit, Larry. Why did Boehner bother to negotiate with Obama if he’s merely a chair warmer who signs the checks? Why were you bragging about how Obama kicked the GOP’s ass in the fiscal cliff standoff if he’s so powerless?

          Your dishonesty is repulsive. It’s all about who will guarantee your monthly checks, ain’t it?

          1. ” Even you don’t believe your own bullshit, Larry. Why did Boehner bother to negotiate with Obama if he’s merely a chair warmer who signs the checks? Why were you bragging about how Obama kicked the GOP’s ass in the fiscal cliff standoff if he’s so powerless?”

            don’t know that I bragged. What I probably said was that it was dumb for the GOP to engage in the fiscal cliff tactics because ultimately Obama does not do the budget, the Congress does and about all Obama can do is sign or veto whatever Congress sends to him.

            It is ludicrous for the GOP to say that it’s up to Obama to make the cuts because most of the current budget came from the Congress before Obama was elected (with the exception of the stimulus).

            So the GOP doubled the National Defense spending and added the Medicare Part D subsidy then cut taxes and a deficit resulted – and the deficit exploded when the economy tanked and tax revenues plummeted – and still have not recovered.

            so the GOP says we have a “spending” problem and we need cuts – but the GOP refuses to name the cuts and insists that Obama name them.

            Now how dumb is that? If the GOP thinks we need cuts, do they have the backbone to say what cuts need to be done? If they had any backbone at all… they’d stand by the principles and tell it like it is.

            Instead back in Sept 2012… they folded like a deck of cheap cards and voted to continue spending via the CR.

            And if that wasn’t bad enough, they threatened to not extend the debt – which was pre-ordained when they voted in favor of the CR in Sept.

            “Your dishonesty is repulsive. It’s all about who will guarantee your monthly checks, ain’t it?”

            My checks come no matter who is POTUS – and courtesy of the GOPs massive defense spending…so thank the GOP Paul. They just love spending money as long as it is for DOD.

  5. Yeah, it’s hard to balance the budget. So I guess we may as well embrace our debt-laden doom instead.

  6. That should be easy enough. Reagan average spending at 22.4% and revenues at 18.2% of GDP. But the debt to GDP level would still rise. It would be helpful if the price of oil dropped in half and stabilized at that level. Can’t Saudi America reduce the price of oil? :-)

  7. If GDP actually tracked, or could predict with some accuracy – the anticipated tax revenues, perhaps it would be an acceptable ADDITIONAL method for budgeting.

    I’ve never seen a chart that shows tax revenues vs a percent of GDP but I’m sure such charts exist but WHY do we continue to use this as a primary metric?

    Individuals don’t do it. States don’t do it. Businesses don’t do it. Localities don’t do it.

    so why do we do this ?

    it seems to be a guaranteed way to ensure budget disasters ESPECIALLY when taxes are cut and available revenues plummet even as the economy is supposedly benefiting?

    It seems even a dumber way to underlie baseline balanced budget processes.

    No business would dare plan their short-term much less their long-term business plans solely on their productivity without also paying strict attention to their net revenues.

    How can the folks who say they want a balanced budget act be considered serious when their only “plan” to operate the budget is via a percent of GDP?

    this is totally bizarre and virtually invites fiscal disaster.

    it’s like the idea is to actually drive the car by disconnecting the steering wheel from the tires.

    Until the balanced budget folks actually produce a serious plan – this is just more sound-bite kabuki theater.

  8. James,
    The Senate RINOs and Rubio, a new neocon drone, will do nothing but what they do best, be sheepish.
    Once I thought a “haircut” was only for European countries.
    It looks like it will soon cross the pond.
    Another downgrade or two and… panic.
    Just remember that good ol’ OLY mentioned this back when, unless:
    1. The US goes back to 2008 base budget
    2. Reduce by 5% per year the next 10 budgets
    3. Pass and implement a 15% flat tax
    4. Set a 2 year moratorium (freeze) on ALL “benefits”
    5. Dismantle immediately the FED, EPA and DOE for starts

    Ok, now start looking towards the west to see the sun rise…

    America, as we knew it, is FINISHED!
    The compassionate looters are now way more than the working Americans.

    1. I would assert that as long as you don’t deal with real numbers – for available revenues and continue to frame the discussion as spending as a percent of GDP and vague, non-specific numbers with respect to actual categorical spending for entitlements and DOD/National Defense that we simple are not serious about the issue.

      you cannot reach a balanced budget by arguing percent of GDP.

      At some point – you have to deal with real numbers.

      1. “you cannot reach a balanced budget by arguing percent of GDP.”

        WTF are you talking about? Limiting spending to 18% of GDP is about the historical average for revenues, and would be a damn sight better proposal than anything your boyfriend Obama has ever offered up.

  9. perhaps an even better question – how would you decide how much to spend and how much to cut by looking at GDP?

    how do you decide spending when the GDP number is not a firm one especially with respect to your actual tax revenues?

    that’s why I do not understand.

    how can you budget using something other than actual revenues?

    seems like a recipe for fiscal disaster.

    oh wait…….

    1. What’s your boyfriend’s counter-proposal?

      Oh that’s right, more ruinous spending.

  10. It is probably true that the U.S. is headed for default, and/or a currency crisis of some kind. It could come as financial repression policies such a capital controls are kicked in by Washington. However, as long as the dollar remains the world reserve currency, there probably will not be a wholesale collapse of the dollar, as it is measured against other global fiat currencies. At some point, there will be some type of default. As to when it will come, or how it will come, no one knows. Any attempts by Congress to get this under control won’t happen as long as the Dems control the Senate and Obama is still in office. This will get us closer to the event horizon so to speak. Any way we look at this, it won’t be pretty.

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