On August 22, Spanish Prime Minister Jose Luis Zapatero announced that Spain would be the latest European country to adopt strict limits on budget deficits and debt. Zapatero, leader of Spain’s Socialist Party, quickly secured backing for the proposal from the opposition conservative People’s Party, which means the budget limits will likely pass through Spain’s parliament by a huge bipartisan margin.
Spain’s move comes in the wake of a wider European movement towards greater fiscal restraint spawned by Germany. In 2009, with a similar wide coalition of conservatives and leftists, the Germans passed the so-called “debt brake”– a constitutional amendment that prohibits a deficit greater than 0.35 percent of GDP (to put this in perspective, our deficit as a percentage of GDP has grown to nearly 25 times as large under President Obama).
Other European economies are now following Germany’s example. France and Italy, for instance, have also proposed similar ideas in recent weeks. With Greece just a short train ride away, these countries now understand the dangers of runaway deficits and debt.
It is about time we enacted something similar here in the United States. For free-spending Europe to be more aggressive on fiscal responsibility than us says less about how far Europe has come than how far we’ve fallen. Indeed, our fiscal position has become very dire. The federal government is now borrowing more than 40 cents of every dollar it spends. Our $14.6 trillion debt will continue to grow at a quickening pace and threaten our economy, our jobs, and the American way of life itself – unless we do something now to stop it.
I personally favor a mechanism to cap spending at a set percentage of GDP. Federal spending today is about 24 percent of GDP, well over the historical average and far more than we can afford as a nation. A more responsible level would be 18 percent. But there are other ways to get at this problem. For instance, as part of the legislation passed in early August to end the impasse over the debt ceiling, Republicans insisted on including a provision that will force Congress to vote on a balanced budget amendment by the end of the year. Congress should support it so that the states, through their legislatures, could vote on it.
In the 1990s, the balanced budget amendment came within one vote of the two-thirds margin necessary for passage. This year, Republicans in the Senate are unanimous in support of this common-sense idea, and some Democrats may support it as well.
Recent polling shows support for a federal balanced budget amendment hovering around 75 percent. It’s hard to think of another major policy issue with such broad support across political dividing lines.
At the same time, it’s unfortunate we even need such an amendment. Ideally, elected leaders should simply govern responsibly by making government live within its means. Yet, realistically, we know that will not always be the case.
To be sure, digging out of this fiscal crisis will be difficult – we cannot solve this with one cut, one bill, or even a constitutional amendment. It will take dedication and years of fiscal discipline, but we can get there.
Our European allies are showing us that traditional adversaries on the left and right can come together to enact sensible limits on deficits and debt. While every country will take its own way forward, some with better ideas than others, here in the U.S. it’s past time for us to act in a bipartisan way.
