With the House planning to vote next week on a constitutional balanced budget amendment (BBA), we’ve issued a brief paper highlighting a scathing analysis of a BBA from Macroeconomic Advisers, a leading private economic forecasting firm.
“[R]ecessions would be deeper and longer” under a BBA, the analysis warns, and uncertainty would be cast over the economy that could retard economic growth even in normal economic times.
Below are some excerpts from the Macroeconomic Advisers analysis:
If the 2012 budget were balanced through spending cuts, those cuts would total about $1.5 trillion in 2012 alone, the analysis estimates. Those cuts would throw about 15 million more people out of work, double the unemployment rate from 9 percent to approximately 18 percent, and cause the economy to shrink by about 17 percent instead of growing by an expected 2 percent.
Our own reports have described the economic damage and other problems that a BBA could cause and outlined the massive spending cuts required under a particularly extreme version of the BBA, which would cap federal spending at 18 percent of gross domestic product.
We’ll write more about the BBA in the coming days.