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Balanced budget amendment would weigh heavy on cities.

The nation's cities and towns would realize a devastating blow if Congress and the President actually were to implement spending cuts sufficient to balance the federal budget under a constitutional balanced budget amendment expected to be voted upon in the House as early as next week according to a study released last week by the House Budget Committee.

The study reported that the amendment would require spending cuts and tax increases far greater than any ever attempted in U.S. history, while sharply curtailing federal flexibility to respond to economic, natural, and social crises and disasters.

The report noted that the impact on state and local governments-and especially on public infrastructure-would be staggering. It indicated the administration and Congress would be likely to accelerate the imposition of unfunded mandates on local governments to meet federal goals and objectives.

Unlike city and town, as well as corporate budgets, none of the constitutional balanced budgets up for consideration in the House or Senate make any distinction between federal capital and operating expenditures. Thus, implementation of the amendment would produce far greater disinvestment in public infra-structure-where the U.S. is already ranked 55th in the world, virtually guaranteeing not only significant job losses in communities across the nation, but also further inability for American communities to compete in the global economy.

The House Budget Committee report is similar to a report issued earlier this month by Wharton Econometrics Forecasting Associates projecting passage would bring severe economic distress to all 50 states, but especially severe job losses to California, Texas, Virginia, Pennsylvania, New York, Delaware, and Montana.

The reports came as leaders in both the House and Senate have worked on developing an enforcement mechanism. Such efforts have been strongly opposed by the White House and proponents of the balanced budget amendments in the House and Senate.

The pending proposals simply would set in the U.S. Constitution that the federal budget must be balanced, but they provide no procedures to actually reduce the deficit. Instead, they would make it more difficult for Congress to adopt a budget, and far more difficult for the federal government to respond to a crisis-such as assisting citizens of Los Angeles recover from the riot, or after the hurricane in South Carolina or the earthquake in northern California.

Under the House proposal, Congress would be prohibited from raising the national debt without a three-fifths majority.

House Budget Committee Chairman Leon Panetta (D-Calif.) has proposed three different options as well as specific enforcement mechanisms to achieve a balanced budget. The options include: one relying solely on spending cuts, one relying two-thirds on spending cuts and one third on tax increases, and a third option split evenly between tax increases and spending cuts. All would require deep cuts in Social Security, Medicare, and defense-all areas which the White House and other proponents of the amendment have vowed would not be affected. Panetta would also include automatic across-the-board cuts and tax increases in the event Congress and the White House failed to balance the budget in any year.

Robert Reischauer, the director of the nonpartisan Congressional Budget Office testified before Congress that passage of a proposed Constitutional amendment on a balanced budget without any enforcement plan and procedure would be a "cruel hoax" on American taxpayers that would do more to cover up than reduce record breaking federal deficits:

"In this election year, it would be a cruel hoax to suggest to the American public that one more procedural promise in the form of a Constitutional amendment is going to get the job done. The deficit cannot be brought down without making painful decisions to cut specific programs and raise particular taxes."

Because the proposed amendments provide no procedure nor mechanism to reduce the deficit, nor any enforcement plan, Reischauer warned that it would lead to a new proliferation of budget gimmickry and wholesale impositions of enormous, unfunded mandates on state and local governments:

He said the amendment is "little more than an empty promise, one that further erodes public confidence in our political institutions."

Testifying at the same hearing, President Bush's budget director, Richard Darman, stated the administration's strong support for such an amendment, but strong opposition to adding any enforcement mechanisms or to any tax increases to comply.

Rep. Charles Stenholm (D-Tex.) succeeded in obtaining enough signatures on a petition from his colleagues to bypass the House Rules Committee and bring his version of the amendment directly to the House floor, where it is currently scheduled for consideration next week. House Speaker Tom Foley (D-Wash.) is working with Panetta and Stenholm to see if some enforcement mechanism legislation could be paired with the amendment.

The Senate measure would require a three-fifths majority of Congress to override the balanced budget requirement in any year. It does not provide any enforcement mechanism nor any means to reduce the record federal deficits.
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Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Jun 1, 1992
Previous Article:Key municipal tax programs up for extension shortly.
Next Article:Action surrounds key city programs in Washington.

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