Washington: Less Red Ink

An argument that the balanced-budget amendment would be a rare merging of public and private interests.

Our elected representatives in Congress have been voting larger expenditures year after year—larger not only in dollars but as a fraction of the national income. Tax revenue has been rising as well, but nothing like so rapidly. As a result, deficits have grown and grown.

At the same time, the public has demonstrated increasing resistance to higher spending, higher taxes, and higher deficits. Every survey of public opinion shows a large majority that believes that government is spending too much money, and that the government budget should be balanced.

How is it that a government of the majority produces results that the majority opposes?

The paradox reflects a defect in our political structure. We are ruled by a majority—but it is a majority composed of a coalition of minorities representing special interests. A particular minority may lose more from programs benefiting other minorities than it gains from programs benefiting itself. It might be willing to give up its own programs as part of a package deal eliminating all programs—but, currently, there is no way it can express that preference.

Similarly, it is not in the interest of a legislator to vote against a particular appropriation bill if that vote would create strong enemies while a vote in its favor would alienate few supporters. That is why simply electing the right people is not a solution. Each of us will be favorably inclined toward a legislator who has voted for a bill that confers a large benefit on us, as we perceive it. Yet who among us will oppose a legislator because he has voted for a measure that, while requiring a large expenditure, will increase the taxes on each of us by a few cents or a few dollars? When we are among the few who benefit, it pays us to keep track of the vote. When we are among the many who bear the cost, it does not pay us even to read about it.

The result is a major defect in the legislative procedure whereby a budget is enacted: each measure is considered separately, and the final budget is the sum of the separate items, limited by no effective, overriding total. That defect will not be remedied by Congress itself—as the failure of one attempt after another at reforming the budget process has demonstrated. It simply is not in the self-interest of legislators to remedy it—at least not as they have perceived their self-interest.

Dissatisfaction with ever-increasing spending and taxes first took the form of pressure on legislators to discipline themselves. When it became clear that they could not or would not do so, the dissatisfaction took the form of a drive for constitutional amendments at both the state and the federal levels. The drive captured national attention when Proposition 13, reducing property taxes, was passed in California; it has held public attention since, scoring successes in state after state. The constitutional route remains the only one by which the general interest of the public can be expressed, by which package deals, as it were, can be realized.

Two national organizations have led this drive: the National Tax Limitation Committee (NTLC), founded in 1975 as a single-issue, nonpartisan organization to serve as a clearinghouse for information on attempts to limit taxes at a local, state, or federal level, and to assist such attempts; and the National Taxpayers Union (NTU), which led the drive to persuade state legislatures to pass resolutions calling for a constitutional convention to enact an amendment requiring the federal government to balance its budget. Thirty-one states have already passed resolutions calling for a convention. If three more pass similar resolutions, the Constitution requires Congress to call such a convention—a major reason Congress has been active in producing its own amendment.

The amendment that was passed by the Senate last August 4, by a vote of 69 to 31 (two more than the two thirds required for approval of a constitutional amendment), had its origin in 1973 in a California proposition that failed at the time but passed in 1979 in improved form (not Proposition 13). A drafting committee organized by the NTLC produced a draft amendment applicable to the federal government in late 1978. The NTU contributed its own version. The Senate Judiciary Committee approved a final version on May 19, 1981, after lengthy hearings and with the cooperation of all the major contributors to the earlier work. In my opinion, the committee's final version was better than any earlier draft. That version was adopted by the Senate except for the addition of section 6, proposed by Senator William Armstrong, of Colorado, a Republican. Approval by the Senate, like the sponsorship of the amendment, was bipartisan: forty-seven Republicans, twenty-one Democrats, and one Independent voted for the amendment.

The House Democratic leadership tried to prevent a vote on the amendment in the House before last November's elections. However, a discharge petition forced a vote on it on October 1, the last full day of the regular session. The amendment was approved by a majority (236 to 187), but not by the necessary two thirds. Again, the majority was bipartisan: 167 Republicans, 69 Democrats. In view of its near passage and the widespread public support for it, the amendment is sure to be reintroduced in the current session of Congress. Hence it remains a very live issue.

The amendment as adopted by the Senate would achieve two related objectives: first, it would increase the likelihood that the federal budget would be brought into balance, not by prohibiting an unbalanced budget but by making it more difficult to enact a budget calling for a deficit; second, it would check the growth of government spending—again, not by prohibiting such growth but by making it more difficult.

Presented by

Milton Friedman received the Nobel Prize in economics in 1976. He is the Paul Snowden Russell Distinguished Service Professor Emeritus of Economics at the University of Chicago and a senior research fellow at the Hoover Institution at Stanford University.

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