Jeffrey Bartash — And now for something different: Democrats call for balanced-budget amendment

A bevy of lawmakers in Congress alarmed by soaring deficits are calling yet again for a constitutional amendment to balance the federal budget — but this time it’s Democrats.

The so-called Blue Dog Coalition of moderate Democrats on Tuesday endorsed an amendment that would require Washington to balance the budget except in case of war or recession....

Are they for the return of the gold standard, too?

Market Watch
And now for something different: Democrats call for balanced-budget amendment
Jeffrey Bartash

Hunter Blair — A balanced budget amendment would be extraordinarily dangerous for the economy

The House is set to take up a balanced budget amendment this week, which would limit federal spending in each fiscal year to federal receipts in that year.

Like the push toward war isn't crazy enough for the crazies.

This is like playing Russian roulette with all the chambers loaded.

Republicans currently control both houses of Congress and the presidency. They could balance the budget if they wanted to. Instead, they have shown themselves more interested in cutting taxes for the rich. Likewise, any future Congress that wants to has the power necessary to balance the budget. It is deeply strange to think a constitutional amendment is required to do so. This is clearly a political stunt. It may be unlikely to become the law of the land, but the damage it would do if it did become law is large enough that we should be awfully worried that this week’s vote is even going to happen.

EPI
A balanced budget amendment would be extraordinarily dangerous for the economy

Hunter Blair

See also

House Judiciary Committee Chair Bob Goodlatte’s proposed constitutional amendment requiring a balanced budget, which the House will vote on tomorrow, has many serious drawbacks:

Center on Budget and Policy Priorities
5 Reasons Why the House Balanced Budget Amendment Is a Bad Idea

Richard Kogan

Alan R. Knight — We don't need a balanced budget amendment

Mentions MMT and Stephanie Kelton.

Charleston Gazette-Mail
Alan R. Knight: We don't need a balanced budget amendment
Alan R. Knight. retired editor of New England Farmer newspaper and formerly associate editor of American Agriculturist magazine, where he also wrote “The Uncommon Market,” an award-winning column that explored both the local and global marketplace into which farmers sell their products.

Ellis Winningham — Balanced Budget Amendment Idiocy – An Economic Suicide Pact

The Balanced Budget Amendment Task Force, better known as “Task Force Stupid”, is once again living up to their name. The tile of their thoroughly idiotic petition that you can ignore here says: “Email the Idaho Legislature in Support of a U.S. Balanced Budget Amendment! Destroy the U.S. Economy!” What follows is the technical reason why the Balanced Budget Amendment Task Force is run by complete morons.

Ellis Winningham — MMT and Modern Macroeconomics
Balanced Budget Amendment Idiocy – An Economic Suicide PactEllis Winningham

Richard Kogan And Cecile Murray — Senate Proposal for Balanced Budget Amendment Would Require Extreme Budget Cuts

… the proposed amendment — introduced by Senate President Pro Tem Orrin Hatch (R-UT) and cosponsored by every Republican senator — would enshrine in the Constitution a severe cap on total federal spending set at 18 percent of gross domestic product in the prior completed calendar year.

This cap would compel policymakers to cut all programs by an average of more than one-fourth when it takes effect — we are assuming 2023. The total amount of cuts required would amount to $8 trillion over the next decade; starting in 2023, the cuts would be about half a trillion dollars a year deeper than those that would be made under the severe budget plan the House Budget Committee’s Republican majority passed earlier this year.

Latest from the loony bin. GOP Senators explore la-la land, doubling down on GOP House.

Center on Budget and Policy Priorities
Senate Proposal for Balanced Budget Amendment Would Require Extreme Budget Cuts
Richard Kogan And Cecile Murray

John T. Harvey — Five Reasons Why A National Balanced Budget Amendment Is Lunacy

A constitutional amendment to require a balanced federal budget is once again in the news:

Constitutional convention sparking buzz, but odds still long

As an economist, the only thing I find slightly encouraging about this is the part of the title that reads, “odds still long.” Requiring a balanced federal budget is sheer lunacy and a recipe for disaster. We must do everything in our power to stop these well-intentioned but ill-informed individuals from pushing us down this road to ruin.

There are so many reasons why this is a bad idea, but I’ll limit myself to five. Here’s a summary of why we don’t need a balanced-budget amendment….

John knocks it out of the park. Let's see what the comments look like over there.

Forbes — Pragmatic Economics

Five Reasons Why A National Balanced Budget Amendment Is Lunacy
John T. Harvey | Professor of Economics, Texas Christian University

If Greece falls apart and the markets collapse...

If Greece falls apart and the markets collapse, you are going to see the entire political focus here in the United States turn to, reining in our debt.

That's right.

Our idiot leaders and those currently running for president (maybe with the exception of Bernie Sanders), will unhesitatingly conflate the Greek situation with our own national debt "problem." The comparison is bullshit we know that, but they don't.

So, you will hear intensified calls for a "Balanced Budget Amendment" and the public will stand strongly behind this idea as they, too, are clueless about the real nature of our debt. A Balanced Budget Amendment will eventually get passed, I predict, and that will accelerate us on the path to "Full Europe."

If Greece goes then mark my words, what I have just described to you is going to happen

You heard it here first.

Bill Mitchell — The Balanced Budget silly season is upon us again

"Again" in the post title  refers to the US in 1936 when FDR was persuaded by Treasury Secretary Henry Morgentau to adopt a policy of fiscal conservatism after years of fiscal liberalism on the advice of Fed chair Marriner Eccles. While the policy recommended by Eccles had been working, its reversal was soon followed by a reversal in the economy, too, in the recession of 1937. Bill catches us up on the history to show why the supposed medicine of fiscal discipline is actually poison for the economy.

Bill Mitchell – billy blog
The Balanced Budget silly season is upon us again
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Austral

Paul Ryan ascendant, proposes additional $5 trillion in cuts

Nothing left to say about this guy other than he's a very dangerous quack.

Rep. Paul Ryan (R-Wis.) on Tuesday unveiled a budget that proposes to cut $5.1 trillion over a decade in a bid to erase the federal deficit, while calling once again for dramatic changes to Medicare, Medicaid and the tax code. Read more. 

Now he's about to become even more powerful as he ascends to the role of Chairman of the House Ways and Means Committee as Dave Camp (R-Mich) just announced his retirement.

And throw in the fact that the Balanced Budget Convention is gaining steam. Europe, here we come!

Emma Roller and David Weigel — Give Me Amendments or Give Me Death

Inside the secretive campaign by state legislators to pass conservative amendments in 34 states and rewrite the Constitution.

Slate
Give Me Amendments or Give Me Death
Emma Roller and David Weigel
(h/t Charles Hayden on FB)

Given that the number of red states exceeds the number of blue states and the criterion is not the popular vote but the vote of state legislatures — two-thirds are required, this has a good chance of being successful. Of course, it would spell the end of US global hegemony unless the military was put off budget. Conservatives know this, of course, so they would create an exclusion. It would also limit federal subsidies to private enterprise, so that would be put off budget, too.

Whose pushing this? ALEC.

John Celoc — Balanced Budget Advocates Seek Article V Constitutional Convention

Advocates for a balanced budget amendment to the U.S. Constitution have pinned their hopes on state legislatures calling for a new constitutional convention to get the amendment included.

The Balanced Budget Amendment Task Force, a Virginia-based group, has been pushing for states to use Article V of the Constitution, which allows Congress to call for a convention if petitioned by two-thirds of the states, or 34 states.Currently, 17 states have submitted petitions calling for a convention in order to add a balanced budget amendment.

"Our founders really, truly believed -- and if you read Hamilton and Madison in the Federalist Papers the intent was clear -- that if the central government went beyond its bounds, the states have the way to close the divide peacefully," David Biddulph, the co-founder of the Balanced Budget Amendment Task Force, told The Huffington Post.

An Article V convention has never been called, even though 49 states have submitted at least one petition calling for such a convention. Currently, at least three states are considering petitions: Georgia for the balanced budget amendment, Indiana to balance the power between the states and the federal government, and Kansas to move certain powers solely to the states.

The Huffington Post
Balanced Budget Advocates Seek Article V Constitutional Convention
John Celoc
(h/t Charles Hayden on FB)

I guess these folks want to cede the future to the BRICs.

Bruce Bartlett — Mismeasurement of Federal Spending, Investment and Saving

One solution to this problem [of cutting government investment in deficit reduction] would be to have a capital budget that segregates government investment spending from consumption spending. Virtually all the states do this already. Conservatives who routinely defend a balanced-budget amendment to the Constitution, on the grounds that the states must balance their budgets annually, appear to be unaware that such requirements apply only to operating budgets, excluding capital outlays. 

If households were required to balance their budgets the way balanced-budget amendment supporters want the federal government to operate, they would almost never be able to buy homes or cars. Such outlays almost always exceed their annual incomes over and above consumption and would thus constitute deficit spending.

Of course, families could draw down savings to buy homes and cars. But that’s an option not available to the government because it has no savings, only a large debt. Treating it and private individuals the same way, as balanced-budget supporters propose, would require the entire national debt to be paid off and a surplus accumulated before it would be permitted to make new investments in roads, bridges, buildings and other long-lived assets.

The New York Times — Economix
Mismeasurement of Federal Spending, Investment and Saving
Bruce Bartlett

Another silly thing about the government as big household or firm analogy is debt to GDP (national income) ratio compared with corporate debt to firm income ratio, which is often much higher.

While the analogy fails on the currency issuer v. user basis, it also fails on the basis of actual operations and financial ratios.

News from the front — civil war front, that is.

Liberalism has returned in force, Senate Minority Leader Mitch McConnell (R-Ky.) said on Tuesday, reviewing the president's Inaugural Address.

"One thing is clear from the president's speech: The era of liberalism is back. His unabashedly far-left-of-center inaugural speech certainly brings back memories of the Democratic Party in ages past," he said. "If the president pursued that kind of agenda, obviously it's not designed to bring us together, and certainly not designed to deal with the transcendent issue of our era, which is deficits and debt."

The Huffington Post
Mitch McConnell On Obama Inauguration Speech: 'The Era Of Liberalism Is Back'
Ryan Grim

******************

At a Ways and Means Committee hearing on Tuesday, Rep. Jim McDermott (D-WA) blasted Republicans for refusing to raising the federal debt ceiling unless Democrats agreed to budget cuts.“I have to tell you, listening to this hearing is like we are living in Alice in Wonderland,” McDermott said. “Here we are hearing from witnesses telling us how to use default creatively or use it to get some leverage or something — and the simple talking about it here is destructive.

“The whole world is watching this hearing. It is the first hearing on this issue. The whole point of a society is to create and run a government to make order for people. People don’t like chaos and this hearing is about how to create chaos to get what you can’t get politically with votes....

“They want everyone who is lucky and doing well to just do well,” McDermott continued. “And if you aren’t doing well, well you’ve got to deal with it, it’s your problem. It is social Darwinism. It is survival of the fittest put into public policy.”

The Raw Story
Rep. McDermott slams GOP for using debt ceiling to push ‘social Darwinism’ 
Eric W. Dolan

******************

Are Governors Scott Walker, Rick Scott, Jan Brewer, John Kasich, Rick Perry, Rick Snyder, Nikki Haley and others conspiring to hijack our Constitution on July 4th, 2013? The conservative think-tank, Goldwater Institute, is moving lobbyists into position to mobilize legislatures throughout our nation with a Compact for America devised by their lead attorney Nick Dranias.

The Compact for America has set a timetable to convene a single issue constitutional convention this summer using Article V of the US Constitution to railroad the revised Balanced Budget Amendment in to the Constitution.

Article V of the Constitution allows states to assemble and propose amendments. It takes 34 states to request an Article V convention. The proposals that pass are then sent through Congress for a majority support. Then the amendment or amendments are sent out to the states for ratification. If 38 states agree, the amendment becomes part of the Constitution.

The Compact for America guarantees that the process will exclude the input of the other states and restricts the delegates to the Balanced Budget Amendment discussion under threat of pre-written instructions to state Attorney Generals.

The Compact for America defines that the states will choose the governor of that state as the only delegate to the convention. The number of red states gives the Goldwater Institute a much easier path to victory. There is no election or presidential action that will stop this effort. The campaign relies on the cooperation of state legislatures and governors, not popular support. Popular opposition will have little effect as well. There is no way to stop the governors and other delegates from passing the amendment. The Compact for America makes sure they collectively use their power to impose their will on the Constitution without debate of any other issue or consideration of any language changes in the amendment itself. It is all rigged in advance.

FireDogLake
Is THIS Grounds for Revolution?
Daniel Marks

Nick Dranias responds to Daniel Marks piece in the comments at FDL. When I posted a link to Compact for American previously here at MNE, Nick also came by and the record is in the comments there. He is polite, articulate, persistent, and presents his case well, but he is wrong when it comes to the monetary economics and understanding of public finance. We disagreed about the economic implications of a balanced budget approach in comparison with a sectoral balance approach to the appropriate fiscal stance and functional finance approach to fiscal policy.

References:
Fiscal Policy in a Stock-Flow Consistent (SFC) Model by Wynne Godley and Marc Lavoie (Levy Institute, April 2007)

Functional Finance and the Federal Debt by Abba P.Lerner (Social Research,  Vol. 10, No. 1, February 1943)

The Seven Deadly Innocent Frauds of Monetary Policy by Warren Mosler (2010)

Soft Currency Economics II by Warren Mosler (1994, 2012)

Understanding Modern Money: The Key to Full Employment and Price Stability by L. Randall Wray (1999)

Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems by L. Randall Wray (2012)

Alarm — Compact for America (actually contract on America)

The latest astroturf movement. Be aware, or be square.

Compact for America
States coming together to stop the insanity
(with a balanced budget amendment)
(h/t Charles Hayden at FaceBook–MMT Deficit Owl USA Committee)

Bobby Jindal — Bold, New Republican Party Wants to Do....The Same Thing They've Wanted to Do Since Goldwater

Republican rising star Bobby Jindal has a quartet of bold, new ideas so fresh they'll practically moo if you try to eat them 

Check them out:

• A federal balanced budget amendment.
• Place a cap on discretionary and mandatory federal spending.
• A super majority to increase taxes.
• Term limits.

Mother Jones
Bold, New Republican Party Wants to Do....The Same Thing They've Wanted to Do Since Goldwater
Kevin Drum

Translation: GOP wants to create another global depression and tie the hands of government to address it. Brilliant strategy to banish the party from office for fifty years if successful.

Warren Mosler shows why fiscal austerity can't work

There’s a reason the hardcore budget balancer/deficit hawk does not last long under the microscope. Their numbers can’t add up, which leaves them with contradictory statements.

The Center of the Universe
Ryan the next Bachman?
Warren Mosler

Edward Harrison — Hoover on austerity to balance the budget and defend the dollar in 1932

Edward Harrison reminds us of "Hoover's folly" and how calls for balancing the budget are being now resounding again.

Read it at Credit Writedowns
Hoover on austerity to balance the budget and defend the dollar in 1932
by Edward Harrison

Warren Mosler posted a link today on how a majority of the American public believes that the US will become insolvent before but budget can be balanced.

John Carney — Balanced Budget Amendment Hoax

John evokes Murray Rothbard's explanation of why a balanced budget amendment is nothing but a hoax. The reason is simple. Politicians will never adopt wording that actually constrains them to balance the budget on a yearly basis. (Most of these folks are lawyers, right?)

Read it at CNBC NetNet
Balanced Budget Amendment Hoax
by John Carney | Senior Editor

Dave Weigel reports on what's up with the Tea Party

It’s easy to think that the Tea Party is on the wane. Its obituary has been written countless times in the past twelve months. And, in a couple of big, visible ways, it’s true....

 But this is the wrong way to look at the Tea Party. After 2010, the movement evolved. Activists got jobs with newly elected Republicans. Political organizations like Americans for Prosperity and FreedomWorks grew their staffs and budgets....

This new, professionalized Tea Party may not have the numbers to pack the National Mall with tricorne hats, but it has proved itself spectacularly adept at two other tasks: exacting promises and submission from presidential candidates; and setting the Republican policy agenda. And in a representative government, at a time when a languishing economy and anemic voter turnout may turn the odds against Democrats, truly—what else matters?

If, as is quite possible, the Republicans gain control of both the White House and Congress, the Tea Party will have gained a hugely disproportionate amount of control over the government through the use of these two mechanisms. One of them is playing out right now in the garish arena of the primary campaign. The other has been in rehearsals for the past year in the halls of Congress. Here’s a brief description of both.

Read it at The Washington Monthly
The Tea Party — Picking the candidates and writing the agenda.
By David Weigel

One agenda item is privatizing the commons.

We see a map of the United States with public lands marked in red.

“Dead capital is property that has no possibility of securing property rights on it,” says Edwards. “Folks, I submit to you that everything in red has no possibility of securing property rights on it.”

Of course, there is much more to the agenda of cutting government.

Oh, there are limits. In polls, the Tea Party’s membership reveals itself as naive about what costs what. There’s boundless enthusiasm for foreign aid cuts, but the same people who cheer for those budgets to be slashed will then boo in agreement whenever Romney denounces the Medicare cost reductions in “Obamacare.”

That’s where the full-time Tea Party agitators come in. That’s how the industry-funded groups find their opening to tell the base what it cares about. The Tea Party’s grassroots apparatus peaked in 2010. The think tanks funded by the energy industry or the banking sector are thriving, and they know what they want the base to work toward. Deregulation, scaled-back appropriations, sold-off public goods—if the Tea Party wins, it’ll be expected to provide the public pressure for all of it.

A GOP win in November is certain to have broad economic repercussions.

UPDATE: see also

The Huffington Post
The Fantastical Crackpot Cult of Ron Paul

by Bob Cesca

Since a GOP wins is not possible without the support of Ron Paul and his supporters, the Libertarian-Tea Party wing of the GOP will inevitably have a significant seat at the bargaining table when it comes to setting policy.

Warren Mosler — SO PLEASE DON’T TAKE AWAY OUR SAVINGS!

[Reposted from The Center of the Universe]

Comments welcome, and feel free to repost:

MMT to President Obama and Members of Congress:
Deficit Reduction Takes Away Our Savings

SO PLEASE DON’T TAKE AWAY OUR SAVINGS!

Yes, it’s called the national debt, but US Treasury securities are nothing more than savings accounts at the Federal Reserve Bank.

The Federal debt IS the world’s dollars savings- to the penny!

The US deficit clock is also the world dollar savings clock- to the penny!

And therefore, deficit reduction takes away our savings.

SO PLEASE DON’T TAKE AWAY OUR SAVINGS!

Furthermore:

There is NO SUCH THING as a long term Federal deficit problem.

The US Government CAN’T run out of dollars.

US Government spending is NOT dependent on foreign lenders.

The US Government can’t EVER have a funding crisis like Greece-
there is no such thing for ANY issuer of its own currency.

US Government interest rates are under the control of our Federal Reserve Bank, and not market forces.

The risk of too much spending when we get to full employment
is higher prices, and NOT insolvency or a funding crisis.

Therefore, given our sky high unemployment, and depressed economy,

An informed Congress would be in heated debate over whether to increase federal spending, or decrease taxes.