Any citizen who doubts the proposed Balanced Budget Amendment would phony-up the Constitution should contemplate the fiscal schemes of the House Republican leadership. Speaker-to-be Newt Gingrich advocates "dynamic budgeting," which can best be defined as Reaganomics run wild. It would allow lawmakers to calculate willy-nilly that tax cuts would raise rather than lower revenues, thus reducing pressures for offsetting spending cuts. And the end result could be a 1980s-style run-up in deficits and the national debt.
Fortunately, some real conservatives among Senate Republicans may put the brakes on Gingrichism. Sen. Phil Gramm of Texas says, "I'm not looking for an excuse not to cut government spending." He told Congressional Quarterly that dynamic accounting could be viewed as dodging the bullet on deficit reduction. He would prefer the traditional "static" budget scoring on tax cuts: Only if added revenues result could they be counted in budget-making.
The link between dynamic budgeting and the Balanced Budget Amendment has solidified since the GOP victory in November. Mr. Gingrich seeks to pass the amendment, which would require a "balanced budget" by 2002, as his first order of business. Next on his agenda would be a GOP re-make of President Clinton's coming budget that would feature, among other things, a 50 percent reduction in the capital gains tax.
The question then would become how that tax cut would impact the 1996 fiscal deficit, and other deficits on the road to 2002. The congressional Joint Tax Committee, figuring only the revenue flow of a capital gains reduction, says the Treasury would lose $56 billion over five years. But Gary and Aldona Robbins, two Reagan administration alumni much relied on by House Republicans, calculate such a tax cut would so energize the economy that revenues would increase $89 billion.
That's a $145 billion difference! And because federal budgets are nothing more than guesstimates a year or two into the future, many economists are skeptical about just what constitutes a "balanced budget." If there can be a $145 billion difference on just one item -- a capital gains tax -- think how easy it will be for Congress to plunge into all kinds of gimmickry to comply with a constitutional amendment. The whole exercise could result in having the courts decide on fiscal matters that are really Congress' responsibility.
This nation does not need a repeat of 1981, when Democrats and Republicans indulged in a bidding war on tax cuts but did not make commensurate reductions in federal spending. Yet dynamic budgeting, as pushed by Mr. Gingrich, could encourage just that kind of malfeasance. Note President Clinton's new enthusiasm for a middle class tax cut. Congress needs to hold down spending and make budget assumptions that realistically calculate the revenue and macro-economic impacts of the various tax cuts coming down the line.