OpenCongress Blog

Blog Feed Comments Feed More RSS Feeds

Tea Party Senators Leveraging Debt Ceiling for a Balanced Budget Amendment

April 26, 2011 - by Donny Shaw

The upcoming debt ceiling increase is pretty much the ultimate must-pass bill. If Congress doesn’t pass it, it’s not just that some programs would be put on hold or that some federal workers would be furloughed; the entire economy would collapse much more deeply than in 2008, and we would have no chance of recovery since our international credit worthiness, our principle financial asset, would be permanently ruined. Of course, every member of Congress knows that the debt ceiling increase has to be passed. That’s why they’re hoping to use it as a means to pass other legislation that they know cannot stand on its own.

Fox News reports that Senate Republicans are planning to filibuster the debt ceiling increase unless the Senate passes a constitutional balanced budget amendment:

Guided by their belief that the nation is headed for a long-term fiscal calamity, Republicans are promising a fight — one that may make the battle earlier this spring over government funding resolutions look small in comparison.

Sen. Jim DeMint, R-S.C., vows to “tie the Senate in knots” unless it passes a balanced budget amendment. And while he and Senate Republicans may lack the votes for passage, they wield some leverage — Democrats need some Republican support to raise the debt ceiling.

[…]

All 47 Senate Republicans have signed a pledge to vote for it, and there are indications that as many as nine or 10 Senate Democrats may be leaning towards yes votes, too.

The last time a balanced budget amendment was introduced in the Senate, in 1997, it failed by just one vote.

Proponents believe the public pressure for such an amendment has grown enormously since those years.

The Republicans’ balanced budget amendment is S.J.Res.10.

Besides requiring budgets to spend no more than they bring in in revenues, it would cap federal spending at 18% of GDP, which you can see in the graph at right is a level not seen since the early 1930s. It would also make it more difficult to balance the budget by raising taxes or closing tax loopholes by requiring a 2/3rds majority vote in both chambers for “any bill that imposes a new tax or increases the statutory rate of any tax.”

As difficult as it is to pass a constitutional amendment (both chambers must pass it with 2/3rds majority), the Republicans have the advantage here. It only takes two or three senators working together to filibuster a bill to death. The balanced budget amendment has the support of 47 Republicans, so DeMint can likely get help from othe Tea Party members, like Sen. Rand Paul [R, KY] and Sen. Mike Lee [R, UT], or Sen. Orrin Hatch [R, UT], the amendment’s chief sponsor. And note that DeMint doesn’t just want a vote on the amendment; he is threatening a filibuster unless the amendment actually passes.

QUICK UPDATE: Sen. Lee has already pledged to filibuster the debt ceiling vote unless a balanced budget amendment passes. Game on.

Sens. DeMint and Paul are pictured above, pledging their allegiace to the flag, at a Tea Party Caucus meeting.

Like this post? Stay in touch by following us on Twitter, joining us on Facebook, or by Subscribing with RSS.
 

Comments

Displaying 1-30 of 40 total comments.

jlohman 04/27/2011 8:30am

Congress does not want a balanced budget amendment because it will hamper their giveaways to the Fat Cats that fund their elections.

Absolutely NOTHING will fix our system without getting to the root: political corruption. Politicians sharing in the booty by taking campaign bribes, and then rolling over to the industry that wants in the taxpayer’s pockets.

Our problem is NOT government, and it is not R’s or D’s. It IS that government is owned by CEOs and corporate interests that want in the taxpayer’s pockets. The 2010 elections were funded by just 1% of Americans, when they should be financed by 100% of taxpayers. And at $5 per taxpayer it would be a bargain. Even at 100 times that.

If politicians are going to be beholden to their funders, those funders should be the taxpayers. We MUST demand that our senators and representative pass the bill at: http://fairelectionsnow.org/about-bill

Jack Lohman …
http://MoneyedPoliticians.net

fakk2 04/26/2011 1:28pm

AWESOME! There’s no good reason NOT to have a balanced budget amendment, other than to buy votes. At least no good reason I can think of. We haven’t had this amendment, and look where it’s gotten us. I will be sadly disappointed if they (the House) cave on this one for “the greater good” instead of sticking to their guns. This is a fight we NEED to have.

luminous 04/26/2011 2:58pm

2/3rd vote requirements on taxes don’t lead to balanced budgets(See: California).

A real balanced budget amendment would take the tax rate setting authority away from congress and have it set by the IRS on a yearly adjusted schedule, with congress providing the IRS with an equation to use to set the rate.

The problem isn’t spending, its the politicisation of the tax code. To many get off scott free, their are to many loopholes, and its to hard to make occasional reasonable adjustments to the rate for changes in governmental needs as demographics change over time.

The republican solution is to institutionalise the politicisation of the tax, it is not the right path.

luminous 04/26/2011 6:56pm

Every year will turn into one of these special cases, the only difference is that you will have to effectively buy more votes by handing out benefits to the campaign contributors of an even larger set of congresses critters special interests(what has happened in CA).

This won’t balance the budget, not even close.

"Wouldn’t it just be better to abolish the IRS and have everyone pay a minimum tax of 15%? If you have a SSN, you pay 15%, period. "

And how does this handle the needed industrial/agricultural/social policy needs that are currently addressed via the tax system?

How does this handle the international tax book switcharoo game played by the mega wealthy and corporations?

“You want them to have full autonomy over setting the tax rates?”

I suggest the rate be set via function of law not really set by some PHB in the IRS. but either way someone has got to collect taxes and nobody will ever like them !!!

eth111 04/27/2011 7:42am

First, on the proposed amendment; Sections 6 and 7 need to be dropped. Any time Congress has an out clause, they use it. Sections 1 & 2 already have 2/3 override clauses. With a formal declaration of war (which there hasn’t been since 1941), it would be easy to get 2/3 and we should not have the US Military running around being the NATO police force anyways.

What fakk2 is proposing (flat 15%) should extend to corporate income tax as well. Everyone pays the same percentage, no outs, no breaks. That gets rid of your concern about the ever ominous mega corporations.

It also will result in growth of GDP as it will lower the overall burden on those companies. Those mega corporations play the international game because the US the second highest corporate tax rates in the industrialized world. That is why companies move operations overseas.

eth111 04/28/2011 7:41am

Luminous, It would appear that you are a strong proponent in the benevolent dictatorship model of government, or at least that is how your comments come across. The primary issue here is the government. If the government takes $10 dollars out of your paycheck and then hands you $8 two weeks later, you are not $8 richer, you are $2 poorer as a result of the transactions.

Has GE gamed the system (bought favors as Jack points out above), yes. Are they paying significantly less in taxes that most other companies, yes. Did the major Wall Street players (who birth all of the Fed Chairmen) game the system and create the financial disaster in 2008, yes. Does that make ALL corporations evil and bad, NO.

We need to start making sure that we are identifying corporations and companies that are doing business without the benefit of government favors and giving them our business, not the ones on the government teat. GE is one of the biggest teat suckers in America today.

brianlarsen45 04/26/2011 5:25pm

You can’t borrow your way out of debt.

BIGMOUTHMOM 04/27/2011 11:19pm

I will keep this simple, without a balanced budget our country economically is going to cease to exist, at least according to the GAO, I believe it was 2024 or 2027. Other economics experts agree with this some may differ as to how much time we have before the ultimate collapse. Those who are worried about subsidies for the “greater good of society” do not seem to grasp the urgency of this countries financial problem. Let us use our common sense and come together on this issue to save the next generation from living in a third world country.

fakk2 04/26/2011 5:59pm

Luminous, I’m confused by your comment. This amendment states total outlays must equal total receipts (except for receipts derived from borrowing and all outlays except those for repayment of debt principal). Only in a year which a declaration of war against a nation-state is in effect, or which the United States is engaged in a military conflict that causes an imminent and serious military threat to national security and is so declared by three-fifths of the duly chosen and sworn Members of each House of Congress by a roll call vote, can that provision be waived.

The IRS, the most notorious collection agency in the world. The one collection agency which doesn’t have to follow the law as all other agencies have to follow. You want them to have full autonomy over setting the tax rates? Wouldn’t it just be better to abolish the IRS and have everyone pay a minimum tax of 15%? If you have a SSN, you pay 15%, period. Wouldn’t that be easier and increase revenues?

eth111 04/27/2011 10:30am

Jack, I agree generally with your statement, but disagree with the root cause.

What we are seeing today is the result of a positive feedback loop that has existed for too long. The root of the problem is that the government has given itself the ability to hand out (read sell) favors. The original intent of the Constitution was to “put chains on government”.

They have managed, through the 14th (turn natural rights into priveleges), 16th (income tax), and 17th (remove senate responsibility to the states) to break most of the chains that were put in place.

The really sick part is that the warnings exist from Aristotle, Cicero, Hobbes, Locke, Monroe, Madison, Jefferson, Spooner, Bastiat, Mises, Hayek, and Rand just to name a few covering ~25 centuries.

We are not seeing anything new, this is how all republics throughout history have self destructed. Too bad we couldn’t learn from the past.

fakk2 04/27/2011 2:57pm

Wow, I should’ve responded sooner because now almost all of my talking points are taken ;P But yes, I should’ve included “SSN or Tax ID” because it wouldn’t make much sense to not tax corporations.

The only good reason to fight taxation is to pay less than what you normally would. If someone earns $10M a year, and is taxed at 35%, they should pay $3.5M in taxes. But if they spend $1M hiring a team of accountants/lawyers to reduce the tax burden to 16%, then they save $400k, and do not break the law. 400 thousand dollars is a lot of incentive to fight taxation.

fakk2 04/27/2011 3:17pm

Ummm, luminous, GE earned money from the US last year by selling goods/services, no? Erasing the tax code means getting rid of the ability to have money in offshore accounts which can’t be taxed, or so I believe. So, if it’s a US company that does business in the US, it pays taxes. That’s the law we should have, and as far as I can tell, that’s what everyone agrees on. Now, the question is, what rate should we set the minimum tax. If it’s set too low, it doesn’t exterminate the cost savings of fighting taxation. If it’s too high, it causes an unnecessary burden on a majority of Americans and is bad for business. Personally, I’m up for 15%, which is low enough businesses should have a problem paying it, and high enough even the poor can afford it. GE was able to pay 0% last year due to the current law, not a theoretical “flat tax” law. If the current law is abolished, and replaced with a “Must Pay X” law, then GE will not have the luxury of paying 0%.

luminous 04/27/2011 3:27pm

You don’t need a million dollar accountant team on a $10 million a year income, with software aids a CPA is more then enough to handle such a paltry account.

Anyway the issue isn’t small time Millionaires, if anything the small time Millionaires get a bit screwed because they can’t exploit the system like the internationals can.

Really the key to exploiting the tax system in disgusting ways is by own subsidiary corporations in multiple tax jurisdictions that don’t share information about filings.

Spam Comment

luminous 04/27/2011 3:36pm

Say you have 3 nations, Nation A charges 40%, Nation B charges 20%, and Nation C charges 5%. You want to open a sandwich shop which Nation do you pick?

The conservative will tell you Nation C, The Liberal will tell you Nation A because of the benefits provided. In fact both are wrong answers. The correct answer is all 3, Their is no shortage of investment capital and all 3 countries will provide more then enough profit.

The really smart business guy however will figure out that Nation A and C don’t share tax book info, So he sets up a scheme where it looks like the shop in A bought all of their ingredients from the shop in C at a lose and hands that book to A’s IRS, Then in C he writes up books that show they bought all of their ingredients from A at a lose and hands that book to C’s IRS.

At the end of the day all of his businesses on paper are operating at a lose, in reality he is screwing everybody.

luminous 04/27/2011 4:00pm

“If we take that away, then they start paying taxes.”

That is a fiction, any rate above 0% will be fought. Hell their are many corps they will fight any rate that doesn’t end up paying them.

“How does this translate into people losing health care or retirement?”

Their access to those benefits is contingent on the tax benefits that go to corporations for providing them. Until how those benefits are delivered is reformed that will be the result.

Pass single payer health care, increase SS to double its current payout rate, Use part of SS to fund a National sovereign wealth fund to buy businesses and keep them in the USA, and finely a BIG fund and then we can have a flat tax. Util such time as these items are politically possible a flat tax is simply a national suicide pact.

luminous 04/27/2011 4:09pm

I should have included trade reform, and tax info sharing in free trade agreements =).

fakk2 04/28/2011 9:45pm

You know Luminous, considering you haven’t producing any evidence to the contrary of my assertions, I’m going to assume you can’t. The CATO institute is a respected research institute. If you don’t want to believe them, or provide any research to the contrary, that’s fine. It just means you have a weak point.

And I am SO SORRY that the world’s unfair, and some businesses can take advantage of things that others can’t. We shouldn’t let evil nasty capitalism play a role in US Exceptionalism, all businesses should be owned by the government so there’s no trickery anywhere.

They have cheaper health care, yes, but what is their life expectancy, and considering all nations don’t report accurate numbers, or provide false data depending on what’s being counted, it’s hard to say Cuba’s health care is better than ours.

We should all lay down any notion of doing what we want to do and have government control EVERYTHING! It’s a socialistic utopia after all. YAY!!!

gag

fakk2 04/28/2011 1:07am

Luminous, you’re saying dropping tax rates won’t increase tax revenue. Can you prove this? Can you provide something to back up your claims that having a small minimum tax will not increase revenue? Can you provide anything which substantiates your claim that multinationals are cooking their books and lying to our IRS? Can you provide anything that says we’d be worse off with a minimum tax and balanced budget versus where we are now? Any proof of any corps that will fight any tax rate that doesn’t pay them? Personally I don’t think you’re giving enough credit to corporations doing good things for their employees or customers just because they can. I’m not saying corporations are mother theresa, but I don’t think all employee benefits will disappear if we take the tax incentive away. No way to prove that unfortunately.

@Patriot1789, I would LOVE a fair tax, but I will settle with a flat tax, or at least a minimum and maximum progressive tax, at least for now until the budget is balance

fakk2 04/28/2011 2:46am

Dropping tax rates will increase revenue: Cato Institute T&B Bulletin 2003

Problems with 100% LEGAL transfer pricing for multinationals: Tax.com ‘Transfer Pricing: A Love Story’ April 2011

All I can find is multinationals are following the law to reduce their income tax liability, not lying cheating or breaking the law, maybe you can point me into something that shows different.

Analysis of Minimum Tax: CBO Report ‘BACKGROUND ANALYSIS OF CORPORATE MINIMUM TAX ISSUES’ July 1985

Our system is broken, we need to fix it. Balance the budget, underspend, everyone pays taxes in the US (from giant multinationals to those on welfare, they should all pay something), and stop raising the darn debt ceiling if we don’t get back on track.

Abaratarrr 04/28/2011 4:10am

a balanced budget amendment would increase the value of the dollar immediately, prices for everything would come down. It would slow down if not reverse the decline the the value of US dollars (which has lost what, 40% of there value in the last 8 or so years?).

prices for gas and food would drop, the stock market would go down but but only because the value of the dollar would increase as compared to the value of stocks. It would be a huge blessing for those on fixed incomes, they would be able to get more food, hard goods and better housing for the same dollars they currently receive. The rest of us would be able to eat a little better

It won’t be so great for big banks, defense contractors and the military industrial complex which makes me think that this amendment has a snowballs chance in hell of passing

Imagine our government only demanding 18% of our labor allowing the rest of your labor to go towards your own interest like putting a kid through collage or retirement

eth111 04/28/2011 7:27am

Jack, Important distinction is that the moneyed interests are attracted by the government functionary having the ability to sell favors. I agree that it has spun way out of control, which is why I mentioned that it is a positive feedback loop.

That being said, since the American public has become apathetic until just recently, the election process doesn’t serve its inherent term limit function. Therefore, what is needed is a 12 year limit on “service” in Fedzilla. Break it down however you want, but you only get 12 years as part of the machine.

luminous 04/28/2011 5:24pm

Fakk2,

Funny how CATO’s study their ends in 1928, nothing major happened in 1929 that would ruin that studies conclusions did it? *cough*great depression*cough*, increases in revenue prior to the great depression where caused by an explosion in profits from speculation in an unregulated stock market, not from lowering taxes.

I never said transfer pricing was illegal, It is unfair to corporations that can’t engage in the practice. We really should pass more rules on this practice not further enable it or ignore it. Also I am not entirely opposed to partly replacing the corporate income tax with a combination of VAT, carbon, and financial market exchange taxes.

Reagan, Bush Sr, Clinton, and Bush Jr all increased the debt. Clinton did have the Debt going in the right direction at the end of his term, But notice HE RAISED TAXES, Every time our debt increases it is after a TAX CUT, every time it goes down its after a tax increase. I really don’t see where this is hard to understand

fakk2 04/28/2011 10:58pm

BTW, feeling generous, here’s a link to a study on Reagan tax cuts, with a side note to Clinton increases. It states the wealthy paid a higher burden, the poor paid a lower burden, and revenue increased under Reagan. They even point to the tax cuts studied by the CATO Institute, saying the Reagan cuts, much like Mellon cuts of the 20s, and the Kennedy cuts of the 60’s:

increased tax payments by “the rich,” also increasing their share of total individual income taxes paid. Unfortunately, estimates of ERTA by the Democrat-controlled CBO continued to show falling tax payment by upper income taxpayers, even after actual IRS data had become available showing a surge of income tax payments by affluent taxpayers.

fakk2 04/28/2011 11:02pm

Luminous, fundamentally I believe both you and I want the best for America. Specific policies is where we differ. I believe in a return to isolationism, as hard and painful and horrible it will be, I believe if we can move back to a large degree of isolationism, for 10 or 20 years, then we will be better off and in a more strategic bargaining position with other countries. What I gather from your comments is you believe we have to beat them at their own game, which would include becoming like them. I don’t like the idea of imitating what they’re doing, especially because they’re not in a very good position themselves if we’re only looking at their country or union. Who wants to live like China/Japan? Who wants to be fractured monetarily like the EU? Or so PC like Great Britain we can’t wear crosses around our neck? Who wants to ferry citizens across the border to get MRI’s because it’s quicker like Canada does? Why should we imitate that when it’s not working?

fakk2 04/29/2011 12:51am

You understand their system pays for those right?, those trips are not out of pocket!…I don’t see anything odd about some Medical tourism

Yes, but if I remember correctly, you said on 1/23/11: Nor do I think anyone should be required to go on an international excursion to get supplies, services, or drugs

About France, lots of conflicting information, and since I hadn’t considered imitating their policies before, I will need to research it a bit more (the initial information does look promising though. So as far as their health care system goes, for anyone reading this, I’ll list some references:

fakk2 04/29/2011 12:52am

Good Health Care
2002 AJPHA Study don’t see anything odd about some Medical tourism
9/11/09 NYT Interview on France’s Health Care System

Bad Health Care
8/7/09 WSJ Article on France’s High Health Care Costs
11/6/07 CMAJ Article on Facing Hard Choices

Neutral
6/8/09 Medical News Today overview of France’s Health Care System
4/14/08 Healthcare Economist overview of France’s Health Care System

fakk2 04/29/2011 12:53am

Oops, should’ve checked all the copy/pasting, here’s the missing first link:

2002 APHA Study

eth111 04/27/2011 7:51am

@luminous; As for the industrial/agricultural/social policy; are you talking about subsidies? They should cease to exist, plain and simple. There are proper functions of government and income redistribution is not one of them.

There need to be local programs to deal with “social” policy, not national ones.

The problem is spending, not revenue. Many organizations have published the data that regardless of highest marginal rate, revenue consistently runs at ~19%. Capping spending at 18% (section 2) recognizes that.

A group of unelected bureaucrats making the rules resulted in a tax code that is almost 72,000 pages long. The proposal from fakk2 is 129 characters. Those 72000 pages are where all of the loopholes created in back room deals reside.

The IRS is the largest private army in the world. They have the power to legislate, arrest, confiscate, and incarcerate. In short, they are allowed to make the rules and then be judge, jury, and executioner.

luminous 04/27/2011 12:53pm

I am talking all deductions, credits, writeoff’s, subsidies, etc. I won’t argue that our system isn’t corrupt as hell(it is) but the fact of the matter is all of those tax goodies do things.

Remember that with a tax rate of 36% every dollar saved via deduction represents about 3 dollars in total spending.

The $450 billion(as of 2007) in health care related deductions only represents about a quarter or a third of the spending created via that deduction, meaning about $1.2-1.5 TRILLION dollars.

Similarly the $100 billion in retirement investment deductions equates to $300 billion or so.

GE paid 0% last year(actually we paid them $1.5 billion), I am sorry but 0% is still less then 15%, the “flat” tax won’t bring a dime back into the US from the off shore tax heavens.

This flat tax idea is simply the plan under which 150 million Americans lose their access to health care, lose the ability to retire, and still have their job replaced by robots, and China.

Due to the archiving of this blog, comment posting has been disabled.