Fox Continues To Ignore Economists To Push For Cut, Cap, And Balance

››› ››› CHELSEA RUDMAN

Fox continues to push for a budget deal that would include a "balanced budget amendment," like the bill recently passed by the House -- but economists agree that a balanced budget amendment would make recessions worse and damage the economy.

Fox Continues To Push For Balanced Budget Amendment

Doocy Asks Sen. McCaskill Why It Is "Not Realistic To Balance The Budget And Have An Amendment To That Effect." During the July 22 edition of Fox News' Fox & Friends, after guest Sen. Claire McCaskill (D-MO) called the House bill that included the balanced budget amendment "not realistic," co-host Steve Doocy responded by asking, "It's not realistic to balance the budget and have an amendment to that effect?" [Fox News, Fox & Friends, 7/22/11 via Media Matters]

Fox's Camerota Declares GOP's Balanced Budget Amendment "Makes Perfect Sense." On the July 19 broadcast of Fox News' Fox & Friends, guest co-host Alisyn Camerota stated that the balanced budget amendment "makes perfect sense" and that Congressional Democrats and President Obama oppose it "maybe because it's a Republican idea, or maybe because they think that it would tie their hands, and they wouldn't be able to have the latitude in spending." [Fox News, Fox & Friends, 7/19/11 via Media Matters]

Hannity On CCB Vote: "I Love What the House Did Today." On the July 19 edition of his Fox News show, host Sean Hannity said, "I love what the House did today. Cut, cap and balance because you have kids, kids, kids. ... It makes the most sense to me." [Fox News, Hannity, 7/19/11 via Nexis]

Hannity: "Why Would Liberals Oppose Cut, Cap, And Balance? Tell Me Why It's Not Good For The Country." On the July 18 edition of his show, Hannity hyped the House bill to "cut, cap and balance" government spending and asked Democratic strategist Bob Beckel, "Why would liberals oppose cut, cap and balance? Tell me why it's not good for the country." From the broadcast:

HANNITY: OK. Now, how important is it Republicans not go along with the McConnell deal? Because I think this is it.

NOELLE NIKPOUR, REPUBLICAN STATEGIST: I've got to tell you, taxes did not get us into this trouble. It's government spending. Spending got us into trouble.

HANNITY: Exactly. Cut, cap and balance works for you?

NIKPOUR: You know, this goes beyond this. This isn't just this just one little thing. We need to think of a solution to pay our debt long term.

HANNITY: Cut, cap and balance do it?

NIKPOUR: Absolutely it can do it.

CHARLES GASPARINO, FBN CORRESPONDENT: It could do it. He's going to wring my neck when I say this. We are not going to default, even if we don't raise the debt cap. That is the bottom line. We have enough on hand to pay debt service and that's all the markets care about.

Despite all that nonsense from Moody's and S & P, Treasury bond prices are going up. Yields are going down. I'm telling you, we have enough money to pay that, we have enough money to pay Medicare, maybe social security. Do we have enough to keep government going forever the size of it right now? No. And that's what the American people should be dealing with; we should be having an argument about the size of government.

BECKEL: You have lost your mind.

HANNITY: Will you get rid of that liberal side of you for just a minute, because you are a smart analyst. I want to ask you a serious question. Why would liberals oppose cut, cap and balance? Tell me why it's not good for the country.

BECKEL: Because the balanced budget amendment is something we have always opposed, because it would force you into making drastic cuts you don't need. Can I just go back to what you said? First of all, it won't pass because it requires 2/3 vote. It will get through the House, probably, but it will not get through the Senate. [Fox News, Hannity, 7/18/11 via Nexis]

But Economic Experts On Both Sides Agree A Balanced Budget Amendment Would Make Recessions Worse And Harm The Economy...

CBPP: "A Group Of Leading Economists, Including Five Nobel Laureates" Released Public Letter To Obama And Congress "Opposing A Constitutional Balanced Budget Amendment." On July 19, according to the Center on Budget and Policy Priorities (CBPP), a group of seven leading economists, including five Noble Laureates in economics, "publicly released a letter to President Obama and Congress opposing a constitutional balanced budget amendment." From the letter:

We, the undersigned economists, urge the rejection of proposals to add a balanced-budget amendment to the U.S. Constitution. While the nation faces significant fiscal problems that need to be addressed through measures that start to take effect after the economy is strong enough to absorb them, writing a requirement into the Constitution that the budget be balanced each year would represent very unsound policy. Adding additional restrictions, as some balanced budget amendment proposals would do, such as an arbitrary cap on total federal expenditures, would make the balanced budget amendment even worse.

1. A balanced budget amendment would mandate perverse actions in the face of recessions. In economic downturns, tax revenues fall and some outlays, such as unemployment benefits, rise. These so-called built-in stabilizers increase the deficit but limit declines of after-tax income and purchasing power. To keep the budget balanced every year would aggravate recessions.

[...]

5. An overall spending cap, which is part of some proposed amendments, would further limit Congress's ability to fight recessions through either the built-in automatic stabilizers or deliberate changes in fiscal policy. Even during expansions, a binding spending cap could harm economic growth because increases in high-return investments -- even those fully paid for with additional revenue -- would be deemed unconstitutional if not offset by other spending reductions. A binding spending cap also would mean that emergency spending (for example on natural disasters) would necessitate reductions elsewhere, leading to increased volatility in the funding for non-emergency programs.

[...]

7. It is dangerous to try to balance the budget too quickly in today's economy. The large spending cuts and/or tax increases that would be needed to do so would greatly damage an already-weak recovery. [Center for Budget and Policy Priorities, 7/19/11]

Yale Law Professor Schuck: "Even The Most Hidebound Conservative [Should] Strongly Oppose The BBA." From a July 22 op-ed in The Wall Street Journal by Yale law professor Peter Schuck:

Nevertheless, many sound objections to a BBA exist, which the current version--indeed, any version--cannot adequately address. Many of these objections, such as the need for deficit spending in a recession, are hoary Keynesian pieties and will resonate only with liberals and moderates. But one objection, largely absent from the debate so far, should convince even the most hidebound conservative to strongly oppose the BBA.

I can think of no other law that would empower judges to exercise more political and policy-making discretion than a balanced budget amendment. It would quickly realize every conservative's fears of an "imperial judiciary" that "legislates from the bench"--even if the courts simply did their job and did not grasp for that power.

First, the courts would be swamped with challenges to every governmental decision with significant budgetary implications, which means almost all important decisions. As federal Judge Ralph Winter pointed out long ago, the judges would have to decide who, if anyone, would have standing to sue and who the proper defendant would be. If they ruled that no one had standing, then the amendment would be legally unenforceable, a dead letter. If the judges found standing, however, a host of exceptionally controversial legal-interpretation issues would arise. [Wall Street Journal, 7/22/11]

Former George H.W. Bush Treasury Official: Amendment "Would Force The Federal Government To Make Economic Recessions Worse." Bruce Bartlett wrote in a Fiscal Times column that a balanced budget amendment "would force the federal government to make economic recessions worse. Since federal revenues fall and spending rises automatically in economic downturns, it would force spending cuts and tax increases at precisely the point when the economy is reeling, potentially turning a modest downturn into a depression." [The Fiscal Times, 8/27/10]

AEI's Ornstein: Balanced Budget Amendment Is "About The Most Irresponsible Action Imaginable." CNN.com reported:

Striving to achieve a balanced budget by way of a constitutional amendment would be "irresponsible," according to one seasoned congressional observer.

"It is about the most irresponsible action imaginable," said Norman Ornstein, a resident scholar at the conservative American Enterprise Institute. "It would virtually ensure that an economic downturn would end up as a deep depression, by erasing any real ability of the government to pursue countercyclical fiscal policies and in fact demanding the opposite, at the worst possible time." [CNNMoney, 3/29/11]

EPI: If Balanced Budget Amendment Was Already In Effect, It "Would Depress Our Nascent Recovery." From a briefing paper prepared by the Economic Policy Institute (EPI):

While a BBA would force budget balance, it would have negative economic effects in both the short and the long run. Indeed, as with concerns about a global spending cap, one of the most troubling aspects of a BBA is the constraint imposed on countercyclical fiscal policy at times of economic downturn. During economic downturns, revenues fall while public expenditures automatically rise. A BBA would require the federal government to reduce its spending to match reduced revenues, or impose tax hikes in the midst of a recession, forcing a fiscal policy that would exacerbate the recession. Indeed, premature fiscal retrenchment was tried in 1937, causing a double dip in the Great Depression.

If previously in effect or if implemented today, a BBA would depress our nascent recovery. This policy would deprive government of the ability to step in and act during a recession, that is, at a time of exceedingly low consumer and business demand. The policy would in fact force the opposite--a pullback in federal demand for goods and services. With 14 million people still unemployed, a return to prerecession unemployment rates by 2016 is unlikely absent policies that work to fill the gap in private-sector demand for goods and services. The most promising policy lever to fill this gap in the near term is expansionary fiscal policy (Bivens 2011). A BBA would restrict the government's capacity to pursue expansionary fiscal policies in times of economic crisis, and derail any recovery: For example, closing the current trillion dollar budget deficit projected for next year through any combination of spending cuts or tax increases would devastate the economic recovery. [Economic Policy Institute, "Why Spending Caps Are Poor Policy", 6/22/11]

CBO Director Elmendorf: Balanced Budget Amendment "Risks Making The Economy Less Stable, Risks Exacerbating The Swings In Business Cycles." During his January 2011 testimony to the Senate Budget Committee, Congressional Budget Office (CBO) Director Douglas Elmendorf said of a balanced budget amendment:

Amending the Constitution to require this sort of balance raises risks that you're aware of. The -- the automatic stabilizers that the government has, the federal government has, the fact that taxes fall when the economy weakens and that spending and benefit programs increases when the economy weakens, in an automatic way, under existing law, is an important stabilizing force for the aggregate economy; the fact that state governments need to work, as you said, against those effects in their own budget, need to -- need to take action to raise taxes or cut spending in recessions undoes the automatic stabilizers, essentially, at the state level.

Taking those away at the federal level risks making the economy less stable, risks exacerbating the swings in business cycles. [CQ Transcriptions, 1/27/11, via Nexis]

CBPP: Amendment "Would Threaten Significant Economic Harm." The CBPP explained on June 6 why a balanced budget amendment "would be a highly ill-advised way to address the nation's long-term fiscal problems":

It would threaten significant economic harm while raising a host of problems for the operation of Social Security and other vital federal functions.

The economic problems are the most serious, and they would pertain to any version of a constitutional balanced budget amendment. By requiring a balanced budget every year, no matter the state of the economy, such an amendment would raise serious risks of tipping weak economies into recession and making recessions longer and deeper, causing very large job losses. That's because the amendment would force policymakers to cut spending, raise taxes, or both just when the economy is weak or already in recession -- the exact opposite of what good economic policy would advise.

When the economy slows, federal revenues decline or grow more slowly and spending on unemployment insurance and other social programs increases, causing deficits to rise. Rather than allowing the "automatic stabilizers" of lower tax collections and higher unemployment and other benefits to cushion a weak economy, the amendment would force policymakers to cut spending, raise taxes, or both. That would launch a vicious spiral of bad economic and fiscal policy: a weak economy would lead to higher deficits, which would force policymakers to cut spending or raise taxes more, which would weaken the economy further.

The fact that states must balance their budgets every year -- no matter how the economy is performing - makes it even more important that the federal government not also face this requirement and thus further impair a faltering economy. [Center on Budget and Policy Priorities, 6/6/11]

OMB Watch: Balanced Budget Amendment "Could Impede Economic Recoveries." According to OMB Watch, a nonprofit organization dedicated to government transparency and accountability:

Over the past 30 fiscal years, the federal government has run a surplus only three times. In the past three years, the government has seen deficits totaling almost $3.5 trillion, and the Congressional Budget Office's (CBO) baseline prediction shows deficits for at least the next decade. With such a history and with the recent rise of the Tea Party and its fiscally conservative contingent in Congress, it is unsurprising that balanced budget amendments to the Constitution are once again finding their way to the national agenda. While forcing Congress to balance the books through a constitutional mandate may be appealing to many fiscal hawks, a balanced budget amendment could impede economic recoveries following Wall Street meltdowns and other calamities. [OMB Watch, 1/25/11]

Klein: Balanced Budget Amendment Would "Make Future Recessions Worse." On April 1, Washington Post columnist Ezra Klein wrote:

Another problem: In a recession, tax revenue plummets and GDP stops growing, but spending has to be sustained, or even increased, to a) give people unemployment insurance and Medicaid and other services they need and b) keep the economy from contracting violently. This amendments includes no provisions for recessions, meaning that when the economy contracted, the government would have to contract as well. That is to say, we're still not out of one of the deepest recessions in American history, and every Senate Republican has co-sponsored a constitutional amendment to make future recessions worse. It's just breathtaking. [The Washington Post, 4/1/11]

Progressive And Good Government Organizations: Balanced Budget Amendment "Would Damage The Economy." A letter co-signed by 247 progressive and good government organizations sent to Congress stated:

A balanced budget constitutional amendment would damage the economy, not strengthen it. Demanding that policymakers cut spending and/or raise taxes, even when the economy slows, is the opposite of what is needed to stabilize a weak economy and avert recessions. Such steps would risk tipping a faltering economy into recession or worsening an ongoing downturn, costing large numbers of jobs while blocking worthy investments to stimulate jobs and growth and address the nation's urgent needs in infrastructure and other areas.

[...]

In short, this amendment is a recipe for making recessions more frequent, longer, and deeper, while requiring severe cuts that would harshly affect seniors, children, veterans, people with disabilities, homeland security activities, public safety, environmental protection, education and medical research. [Mother Jones, 7/13/11]

...And A Balanced Budget Amendment Would Force Drastic Cuts To Major Government Programs

Bartlett: If Already In Force, Balanced Budget Amendment Would Have Cut More Than $300 Billion From Social Security And Medicare in 2009. Bruce Bartlett, former George H.W. Bush Treasury official and Reagan domestic policy advisor, wrote in a Fiscal Times column [[that]]: "It's doubtful that BBA supporters really understand the composition of federal spending. In fiscal year 2009, we would have had to abolish every discretionary spending program, including national defense, to balance the budget and that still wouldn't have been enough without higher revenues. We would have had to cut more than $300 billion out of Medicare and Social Security as well." [The Fiscal Times, 8/27/10]

CBPP: A Balanced Budget Amendment "Would Inexorably Subject Social Security And Medicare To Deep Reductions." From the Center on Budget and Policy Priorities:

The measure does not cut Social Security or Medicare in 2012. And it does not subject them to automatic cuts if its global spending caps are missed. It is inconceivable, however, that policymakers would meet the bill's severe annual spending caps through automatic across-the-board cuts year after year; if they did, key government functions would be crippled.

Policymakers would have little alternative but to institute deep cuts in specific programs. And as noted elsewhere in this statement, before the debt limit could be raised, Congress would have to approve a constitutional balanced budget amendment that essentially requires cuts even deeper than those in the Ryan budget. Reaching and maintaining a balanced budget in the decade ahead while barring any tax increases would necessitate deep cuts in Social Security, Medicare, and Medicaid. After all, by 2021, total expenditures for these three programs will be nearly 45 percent greater than expenditures for all other programs (except interest payments) combined. Big cuts in these programs would be inevitable. [Center on Budget and Policy Priorities, 7/16/11]

EPI: "Not Even Eviscerating Medicare, Medicaid, And Social Security" Would Meet Goals Of A Balanced Budget Amendment And Spending Cap. The Economic Policy Institute (EPI) analyzed a plan to cap spending and institute a balanced budget amendment:

In short, not even eviscerating Medicare, Medicaid, and Social Security would generate adequate savings to meet the balanced budget amendment global spending cap within 50 years.

Put differently, the balanced budget amendment would require more than twice the deficit reduction proposed in the Bowles-Simpson Fiscal Commission report, but over a considerably shorter time horizon and with all deficit reduction placed on spending cuts. (The Bowles-Simpson report was widely criticized at the time for cutting roughly $2 in spending for every $1 in revenue raised). Again, this cap is a political non-starter. [Economic Policy Institute, 3/31/11]

Klein: Entire Reagan, Bush Administrations Would Have Violated Amendment's Spending Cap. Post columnist Klein noted:

Not a single year of the Bush administration would qualify as constitutional under this amendment. Nor would a single year of the Reagan administration. The Clinton administration would've had exactly two years in which it wasn't in violation.

Read that again: Every single Senate Republican has endorsed a constitutional amendment that would've made Ronald Reagan's fiscal policy unconstitutional. [The Washington Post, 4/1/11]

Fox Has Repeatedly Hyped Balanced Budget Amendment

Fox Has Repeatedly Cheered For Balanced Budget Amendment Throughout Talks Over Default Crisis. As Congressional leaders and President Obama have been working on a deal to raise the debt ceiling and avert a default crisis, Fox News has repeatedly hyped the balanced budget amendment. For example, on June 23, America's Newsroom co-host Heather Nauert said while interviewing Rep. Jim Jordan (R-OH), "We would definitely love for [the balanced budget amendment] to happen." Furthermore, during the July 13 edition of The O'Reilly Factor, Fox News contributor Dick Morris said the GOP is "on exactly the right track" by proposing the amendment. [Media Matters, 7/18/11]

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