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'Balanced budget' act a wolf in sheep's clothing

By Jared Bernstein, Special to CNN
  • Jared Bernstein: Cut, Cap and Balance Act is backdoor way to cut Medicare, other programs
  • He says budget that meets act would cut 70% in spending for education, job training and more
  • Bernstein: Economy couldn't withstand immediate loss of 1% of gross domestic product
  • Dangerous "act" is political posturing and misleading, he says, a "cut and run" plan

Editor's note: Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities. From 2009 to 2011, he was the chief economist and economic adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class and a member of President Barack Obama's economic team. He has been a senior economist and the director of the Living Standards Program at the Economic Policy Institute in Washington and held the post of deputy chief economist at the U.S. Department of Labor.

(CNN) -- The Cut, Cap and Balance Act that the House Republicans passed is just that -- an "act" at a time when legislators need to stop acting and start helping this country get back on track.

The act cannot pass the Senate, which is a good thing. As I will explain, it is a threatening piece of legislation to both our economy and our society.

But it also represents something else that is perhaps even more troubling. It is yet another example of a policy by which legislators abrogate their responsibility to legislate. Absent the courage of their convictions, it's another backdoor way, like the Grover Norquist pledge or the Mitch McConnell debt ceiling scheme, to accomplish their goals without constituents knowing what they're up to.

In this case, it's worse. They can cloak their actions in the soothing words of "budget balance," a phrase that polls through the roof.

But if folks knew the wolf in this sheep's clothing, many would feel differently. Let's look at the impact of this bill.

• Beginning in October, the bill would cut more than $100 billion in federal spending. Now, all the budget plans under discussion contain large spending cuts, but none of them start right away, because even the most aggressive budget cutters recognize that this economy cannot sustain the withdrawal of close to 1% of gross domestic product without going from bad to worse.

• By dint of its annual spending caps, it would take away the ability of the federal government to respond to recessions through policies that offset the contraction of private-sector demand. Unemployment insurance, medical coverage, nutritional programs -- none of these would be able to expand to offset the downturn.

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• This is a particular problem because states already must balance their budgets, even in recession, so we need a higher level of government to be unbound by this restriction. Think of a recession as being in a boat that's taking on water where only one person -- but a person with a very big bucket -- can bail, while 50 others just sit there without any buckets at all. A balanced-budget amendment takes away the big guy's bucket, too. Which sinks the boat.

• Ultimately, this act would enforce deep cuts that would undermine the ability of the federal government to play the role we need it to in coming years. The only budget we've seen that would meet the required caps, one crafted by the Republican Study Committee, would eliminate 70% of nondefense discretionary spending, a category that funds education, transportation, medical research, housing, child care, worker training and more.

• It would cut Medicare deeper than Rep. Paul Ryan's budget, and cut Medicaid, nutritional assistance and income support for the elderly and disabled by more than half by the end of the decade.

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• It holds the debt ceiling increase hostage, requiring a balanced-budget amendment to the Constitution before the ceiling can be raised.

• Congress would be required to cut spending to stay under the caps, and it would be able to do so with simple majorities. But if members wanted to raise revenues through the tax code to take some of the pressure off those spending cuts, they would need two-thirds majorities in both chambers, an insurmountable burden.

Ultimately, the bill would cap spending at 18% of the value of our economy, or GDP. The last time federal outlays were 18% of GDP was in the 1960s. Since then, life expectancy is up, as is the median age of the population and, most important, the share of people over 65.

Demographics alone belie the notion that we could provide any semblance of retirement security under such a cap. And of course fast-rising health costs amplify this demographic challenge.

All of which leads to my final point. Of course, we have to deal with these pressures. My critiques of this "cut and run" plan should not at all be taken to imply that the status quo is sustainable. It is not.

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But to do so takes hard work. Legislators must legislate. They cannot mandate away demographic realities. They must find ways either to pay for the retirement security to which seniors believe they are entitled or explain to them why those expectations are wrong.

Neither can they ignore the fragile economy, either in the short run with aggressive spending cuts that start right away, or in the longer run through disinvestment in education, innovation and infrastructure.

If they do not believe the guaranteed security of Medicare is affordable in the future, they must say so. And they must recognize that shifting costs is not saving costs.

But if not -- if they want to preserve this much valued program -- then they must figure out ways to pay for it, ways that will involve spending cuts, new revenues, and just as crucial, savings generated by evaluating the cost effectiveness of medical treatments.

It takes hard work. You can't get there by mandating a totally unrealistic spending cap.

Legislating requires thought. It requires analysis. When you take a thoughtless pledge that precludes any tax increase, no matter what, you violate that requirement.

And legislating requires courage. It means you don't craft convoluted plans to keep your fingerprints off the debt ceiling increase.

It means you stop acting, stop posturing and start figuring out how to help this great nation remain great.

The opinions in this commentary are solely those of Jared Bernstein.