Balanced Budget Amendment Would Devastate Social Security, Medicare

2018-05-11T13:08:36+00:00March 30th, 2018|Budget, Congress|

The Balanced Budget Amendment (BBA) under consideration in the U.S. House is a colossally dangerous idea.  The BBA would mandate that government expenditures not exceed revenues in any given year.  Among other disastrous effects, it would result in devastating cuts to Social Security and Medicare.  The House Republican leadership intends to schedule a vote on the amendment to the U.S. Constitution sometime this Spring – perhaps as early as mid-April.  All current and future retirees should oppose it.

In order to balance the budget every year, Congress would be forced to make draconian cuts to Medicare Part B, Medicaid and other programs that seniors depend upon. Medicare and Medicaid cannot sustain cuts (other than common sense cost-saving measures) without hurting beneficiaries.  Period.  At a time when seniors’ out of pocket health care costs are rising, the BBA puts the health and financial security of Medicare’s 58.5 million beneficiaries and Medicaid’s 72.3 million at risk.

Equally serious is the BBA’s potential impact on Social Security.  Under the BBA, if federal expenditures exceed revenues, the government would be forbidden from paying benefits from the Social Security trust fund reserves – even though the trust fund is self-financed by workers’ payroll contributions and unrelated to general revenues. Ditto for reserves in the Medicare Part A trust fund.   Benefits would then have to be slashed in order to keep the federal budget in balance, something seniors on fixed incomes could ill afford.

Under the BBA, it would also be difficult to reverse tax cuts (including Trump and the Republicans’ $1.5 giveaway to the wealthy and big corporations) to close any revenue gaps.  This could cripple the government’s ability to respond to crises like recessions, natural disasters, and war. Without the ability to leverage taxes and deficit spending, the government cannot stimulate the economy when necessary. The BBA would also increase the chances of the United States defaulting on its debts, which would have dangerous consequences for everyone.

The last time Republicans tried to push through a Balanced Budget Amendment was in 2011. It failed by less than 40 votes in the House.  Had it passed, the overall economic consequences of the BBA would hurt all Americans – retired or not.  According to the Center for Budget and Policy Priorities(CBPP):

“If such an amendment had been ratified… the effect on the economy would have been catastrophic.  It would have caused the unemployment rate to double from 9 percent to 18 percent by throwing an additional 15 million people out of work.” – CBPP quoting a report from Macroeconomic Advisors, 3/16/18

Proponents of the BBA – mainly conservative House Republicans but also some Blue Dog Democrats – are hauling out tattered, old arguments to bolster their case.  States balance their budgets, they say.  Why can’t the federal government?  Families balance their budgets? Why not Congress?  While it’s true that some states have balanced budget amendments, many of those apply only to operating budgets, not capital expenditures for long-term projects.  Regardless, states do not have the sweeping responsibilities of the federal government, including national defense, federal disaster response, and Social Security or Medicare. As for families, many do strive to balance their household budgets, but still carry mortgages on their homes, auto loans, and sometimes, lines of credit.  In other words, like the federal government, states and families are leveraged to meet their vital needs.

The National Committee supports responsible government budgeting; however, we oppose a balanced budget amendment to the U.S. Constitution because the measure would significantly harm the economy, result in a government default, and force severe cuts in Social Security, Medicare, Medicaid, and other vital federal programs. – National Committee” Viewpoint,” 3/29/18

In sum, the BBA is a bumper sticker masquerading as sound public policy.  We expect that the BBA will fail this time around as it has in the past, since passage would require 2/3 majorities in the House and Senate – and ratification by at least 38 states.  But even bringing the amendment up for a vote in the House is playing with fire.  It’s important that Americans – especially retirees or anyone hoping to retire sometime in the future – recognize the incredibly high stakes of this irresponsible scheme.