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S&P Director: GOP’s Balanced Budget Amendment Would Hurt America’s Creditworthiness



By Marie Diamond on Aug 9, 2011 at 5:00 pm

After the first round of the contentious debt limit fight, congressional Republicans are redoubling their efforts [ http://www.nytimes.com/2011/08/05/us/politics/05budget.html ] 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 [id.]. Republicans have even suggested [ http://www.star-telegram.com/2011/08/08/3277547/burgess-meets-with-unhappy-tea.html ] 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 [ http://www.washingtonpost.com/blogs/2chambers/post/sandps-chambers-balanced-budget-amendment-would-do-more-harm-than-good/2011/08/09/gIQAElip4I_blog.html ] 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.

Watch it [ http://www.youtube.com/watch?v=dbzhn6HueR4 (embedded)]:

Chambers also said it could take as long as a decade for the U.S. to regain its AAA rating, spurning GOP suggestions [ http://thehill.com/blogs/blog-briefing-room/news/175995-bachmann-says-shed-call-congress-back-from-recess ] 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 [ http://www.washingtonpost.com/blogs/2chambers/post/sandps-chambers-balanced-budget-amendment-would-do-more-harm-than-good/2011/08/09/gIQAElip4I_blog.html ] 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 [ http://thinkprogress.org/economy/2011/07/27/280911/mccain-to-foolish-republicans-who-want-a-balanced-budget-amendment-its-unfair-its-bizarro/ ] America’s already weak economy — which is why five Nobel Prize-winning economists have denounced [ http://thinkprogress.org/economy/2011/07/19/273197/five-nobel-prize-winning-economists-tell-obama-congress-to-oppose-the-balanced-budget-amendment/ ] the idea.

© 2011 Center for American Progress Action Fund (emphasis in original)

http://thinkprogress.org/justice/2011/08/09/292008/sp-director-gops-balanced-budget-amendment-would-hurt-americas-creditworthiness/ [with comments]