Sounds clever, but is deficit reduction the only thing important for Congress to do? Are there not other priorities which may outweigh deficit reduction? What if the US is threatened and has to go to war? In every major war for 150 years or more, the federal government ran higher deficits than this cap, in order to meet the expenditures required by the war. Do we say that we can’t afford the war – even if we are attacked? Admittedly that would have kept us out of Iraq, which arguably might have been a good thing.
What happens when you hit an economic recession, like we had at the end of the Bush administration? You force Congress to be counter-cyclical and slash budgets at the time when the country needs deficits to turn the economy around. We have a consumer based economy. When people lose their jobs, they lose their ability to spend. If enough people lose their jobs, there is not enough demand to put people back to work quickly. As it was, in the last recession the small stimulus only barely changed the direction of the economy, and it took far longer to get things moving again than it should have. This proposal would force the austerity that has kept much of Europe still in an economic slowdown.
Congress has no guts and also only wants to keep their jobs. If they lose their jobs any time the deficit exceeds a certain percentage, they will not exceed that percentage. The problem is that sometimes the country needs higher deficit spending, which it can pay back as things turn around. The idea seems clever, but in truth is profoundly stupid. It can be bad for the economy and bad for the country.
There is no doubt that at times Congress has run up the deficit recklessly and needlessly. To me, the Bush tax cuts are one example. Put that on top of the Afghanistan and Iraq war expenditures, and we build a huge hulking deficit. Throw in an unfunded Medicare Part D, and it becomes outrageous. The issue will not be solved by this sort of simplistic solution however.
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