After the first round of the contentious debt limit fight, congressional Republicans are redoubling their efforts to push through a so-called Balanced Budget Amendment as a solution to the country’s financial woes. Last week, Speaker John Boehner (R-OH) told GOP House members that the best thing they could do during the August recess was to sell the BBA to their constituents. Republicans have even suggested that Standard & Poor’s recent downgrade of U.S. debt from its sterling AAA rating would not have happened, or could be reversed, if a Balanced Budget Amendment were passed.
This weekend the head of S&P;, John Chambers, publicly dismissed that idea as foolhardy when he said passage of a BBA would hurt, not help, America’s creditworthiness. Chambers, S&P;’s managing director, told CNN’s Wolf Blitzer that a balanced budget measure “would just reduce your flexibility in a crisis”:
BLITZER: Would it be important or not that important for Congress to pass a Balanced Budget Amendment to the Constitution?
CHAMBERS: In general, we think that fiscal rules like these just diminish the flexibility of the government to respond. Also, when Congress has a long track record of trying to bind itself with various rules…But when push comes to shove, they don’t bind very much. So even if you had a Balanced Budget Amendment, you’d have some questions about it’s credibility, and it would just reduce your flexibility in a crisis.
Chambers also said it could take as long as a decade for the U.S. to regain its AAA rating, spurning GOP suggestions that a hasty and drastic revision to the U.S. Constitution could automatically fix the downgrade. The Republican plan would require a balanced budget for each fiscal year and cap spending at 18 percent of GDP.
As Chambers said, a balanced budget amendment would tie government’s hands and render it unable to take corrective measures during a recession. By slashing spending and mandating “perverse actions in the face of recessions,” it would greatly damage America’s already weak economy — which is why five Nobel Prize-winning economists have denounced the idea.