I was listening to former Senator Bob Bennett from Utah a couple weeks ago and he made a salient point regarding the recent push in Congress for a Balanced Budget Amendment. Truth be told, he’s been making more and more sense ever since he lost his bid for reelection, but that’s another topic. About the BBA (Balanced Budget Amendment) he said he would not be in favor of the current form being pushed in the House of Representatives (he did not elaborate on what form he would have supported). The reason he was against it was interesting. For starters, among economists there is no precise agreement as to what the budget actually is. Sure, there is agreement about the general size and scope of the economy and what the budget looks like, but when it gets to exact dollar and penny amounts … not so much. Many people find this puzzling, and say things like, “Well I know exactly how much money I have and balance my family’s budget regularly.” This is a fallacious analogy for many reasons, the main being that when we talk about the economy (specifically, GDP, which is what many of our assumptions are based on) we’re not talking about exactly how much money the treasury has produced, collected, or destroyed (those specific numbers are recorded and serial numbers are on all printed money). When we talk about the amount of money in the economy we’re talking about what is being circulated from day to day, and it is to this point that only an approximation can ever be given (perhaps someday that will change with more complex currency and computers).
Since a budget is based on the economy and the actual money moving around, we can only speak loosely about what a balanced budget would actually be. Where this gets problematic for Senator Bennett, and I agree with him, is that any budget would inevitably be challenged in a court of law by an opposing party, special interest groups, perhaps even foreign countries, and, hence, the Power of the Purse, which is given to the House according the Constitution as part of the separation of powers, would ultimately end up in the hands of the Justices, negating the inherent purpose of those separations.
So while the conservatives in Congress believe they are protecting the fiscal viability of our nation, and the reducing the size of government to protect liberty and the Constitution, they are unwittingly doing the opposite.