Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of the coming book “The Benefit and the Burden.”
Kevin Wolf/Associated PressRepresentative David Dreier, chairman of the House Rules Committee, was one of four Republicans to defy the House leadership and vote against a balanced budget amendment.
On Friday, the House of Representatives voted on a balanced budget amendment to the Constitution. At the last minute, the leadership substituted a straightforward version, H.J. Res. 2, in lieu of the spending limitation amendment reported by the House Judiciary Committee that I criticized last week.
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While I’d like to think that Republican leaders realized the folly of writing an inexact concept like gross domestic product into the Constitution, more likely the reason was that they hoped to attract the votes of “blue dog” Democrats by offering a less radical proposal.
In the end, the Republican ploy didn’t work, and the balanced budget amendment was unable to attract the necessary two-thirds vote. Only 25 Democrats joined almost every Republican in supporting the amendment.
Interestingly, four Republicans opposed the amendment, and one of them was Representative David Dreier of California, chairman of the powerful House Rules Committee. In this position, his job is to follow the dictates of the House leadership and ensure that the rules for debate are as favorable as possible to its wishes. In other words, Mr. Dreier is not a Republican dissident, but someone whose position requires that he be among the most loyal and dependable supporters of whatever his party favors.
For decades, virtually all Republicans have supported a balanced budget amendment. Indeed, Mr. Dreier himself long took that position and previously voted for a balanced budget amendment to the Constitution. So, it is remarkable that Mr. Dreier was among the “no” votes on the measure.
But on Thursday, Mr. Dreier told the House that he had changed his mind. Back in 1995, Mr. Dreier said he thought the budget would never be balanced without a constitutional requirement. But two years later, the budget was, in fact, balanced. As he explained:
I said at the outset that I believed when I cast that vote in January of 1995 in favor of a balanced budget amendment to the Constitution that it was the only way that we would be able to achieve a balanced budget. I was wrong. Two short years later, we balanced the federal budget, and that went on for several years. It went on until 2001.
Republicans seldom talk about the balanced budgets of fiscal years 1998 through 2001, because they happened on Bill Clinton’s watch. They either pretend they didn’t happen, imply they occurred through some sort of “immaculate conception” unconnected to Clinton’s policies or try to claim that the 1997 cut in the capital gains tax led to an outpouring of revenue that balanced the budget.
The truth is that the federal surpluses resulted from specific legislation enacted in 1990 and 1993 that virtually every Republican opposed. In particular, taxes were increased and tight budget controls were put in place that prevented taxes from being cut or spending increased unless offset by tax increases or spending cuts. These budget controls are commonly referred to as “paygo,” for pay-as-you-go.
What happened can be seen in Congressional Budget Office data. When the 1990 budget deal took effect in fiscal year 1991, federal spending was 22.3 percent of G.D.P. and revenue was 17.8 percent. The deficit was 4.5 percent of G.D.P. Revenue rose steadily to 19.9 percent of G.D.P. by fiscal year 1998 and spending fell to 19.1 percent, yielding a budget surplus of almost 1 percent of G.D.P.
Revenue continued to rise to 20.6 percent of G.D.P. in fiscal year 2000, and spending fell to 18.2 percent. The surplus reached 2.4 percent of G.D.P.
These results run 100 percent contrary to Republican dogma, which is that tax increases, especially on the rich, do not yield additional revenue because people will cease working and investing, and the economy will stagnate. Yet the hallmarks of the 1990 and 1993 budget deals were an increase in the top income tax rate; first to 31 percent from 28 percent, and then to 39.6 percent. Revenue clearly rose, as did the economy.
The hallmarks of the George W. Bush administration were large tax cuts almost annually. These were supposed to stimulate growth and lead to lower spending by “starving the beast.” Revenue fell more than 2 percent of G.D.P. by fiscal year 2007, which ended just before the recession began in December 2007. Spending rose to 19.6 percent of G.D.P. because of two unfunded wars, unchecked spending on earmarks by Republicans in Congress and creation of a new entitlement program, Medicare Part D. We went from a surplus of 2.4 percent of G.D.P. to a deficit of 1.2 percent.
In 2002, Republicans got rid of paygo so that they could cut taxes and increase spending without constraint.
Thus we have a perfect test of two economic theories: one that says raising taxes and imposing binding constraints on spending will balance the budget, which was successful, and another that says cutting taxes will starve the beast, which failed spectacularly.
And just for good measure, the former set of policies were far more stimulative to economic growth than the latter, as shown in the following table from the Congressional Research Service.
Congressional Research Service
In short, Representative Dreier was quite right to say that amending the Constitution was unnecessary to balance the budget; it required only the will to embrace tax increases. But this is anathema to Republicans, who preferred to allow the Joint Select Committee on Deficit Reduction to fail than to accede to any net increase in taxes.
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