Constitutional Convention Could Cripple Federal Capacity to Combat Recession

Sunday, February 2, 2014 at 5:06 PM by

Committee Votes Tuesday on Constitutional Convention for a Balanced Budget Amendment

An Assembly committee votes Tuesday on a proposal that could prevent Congress from taking actions during a recession to mitigate the economic damage.  The proposal, Assembly Joint Resolution 81, would call on Congress to convene a Constitutional Convention for the purpose of developing a Constitutional amendment relating to a balanced budget.  AJR 81 seems to be on a fast track in the Assembly, where it was introduced on January 21, 2014, and got a public hearing just two days later. 

A balanced budget amendment in the U.S. Constitution would result in much longer and deeper recessions and would cause unnecessary job losses.  When the economy goes into a dive and people are without jobs, the need for food stamps, health insurance and unemployment insurance rise sharply.  Since tax revenue typically falls as the need for those programs rises, a balanced budget would require cuts to these safety net programs and other areas of spending at the worst possible time.  That would not only take away vital help during a recession, but would also exacerbate the downturn by requiring program cuts and/or tax increases as the recession worsens.  

A highly respected economic forecasting firm, Macroeconomic Advisers, considered the effects of a balanced budget amendment during a period like the recent recession.  They described the impact on the economy of cutting spending at such a time as “catastrophic” – leading to depression-like conditions and millions of additional jobs lost.   

A balanced budget amendment is also likely to jeopardize Social Security and other earned assistance upon which retirees depend.  Though we don’t know the exact form the amendment would take (or what other issues areas the Constitutional Convention would decide to tackle), such amendments have often proposed limiting spending to money raised that year, which could preclude spending money saved up in the past, such as the Social Security Trust Fund.

The same problem could apply to other forms of insurance, such as Medicare hospital insurance and the federal deposit insurance that guarantees our deposits against bank failures. Reserves of that sort couldn’t be drawn down unless the rest of the budget was running offsetting surpluses in the same year.  

A balanced budget amendment would be especially problematic for state and local governments.  When revenue is tight, state cuts are more likely to be approved by Congress and the President than federal cuts.  As a result, there could be deep reductions in federal support for Wisconsin schools, health care programs, law enforcement, highways and much more.

One of the longstanding concerns among groups across the political spectrum is that no one knows what could come out of a Constitutional Convention, because there is no way to guarantee that such a convention wouldn’t make wide-ranging amendments to the Constitution.  With that in mind, the proponents of the Convention have also proposed a bill, AB-635, relating to the process for appointing Convention delegates.  The bill says delegates may not vote on other issues, and if they do it authorizes that delegate to be immediately dismissed “by the approval of a majority of the other delegates.”  Of course, even if that constrains Wisconsin delegates, which isn’t certain, it wouldn’t apply to those sent by other states.

The vote Tuesday is in the Assembly Committee on Campaigns and Elections.  If AJR 81 and AB 635 are approved there, I suspect they will be scheduled for votes on the Assembly floor early in the floorperiod that starts on February 11.   Convening a Constitutional Convention requires the passage of bills or resolutions in 34 states, and many have already approved such legislation.   

Jon Peacock

Categories: Blog, economy, FEDERAL BUDGET & TAXES, federal issues | Comments Off on Constitutional Convention Could Cripple Federal Capacity to Combat Recession

Comments are closed.