Let's look at this in detail.
The Pledge demands that unless there are substantial cuts to the deficit and a Balanced Budget Amendment is passed, then conservatives should refuse to raise the debt ceiling. Sounds great, right?
First, let's look at what happens if the debt ceiling is not raised. Luckily, the Bipartisan Policy Center (as reported by The Hill) just released a giant report that tells us.
1. "The Department of Treasury would need to implement an immediate 44% cut in federal spending."
2. "The daily inflows of revenue and outflows of obligations are 'lumpy' and it would be difficult for Treasury to prioritize 80 million different payments. For the month of August, the deficit from Aug. 3 to Aug. 31 would be $134 billion."
3. "In one scenario, if the administration tries to protect Social Security, Medicare, Medicaid, defense contracts and unemployment insurance, then no military pay, tax refunds, federal civilian pay or welfare payments could be made that month."
4. "Protecting the social safety net, including Pell Grants and welfare, along with the big entitlement programs, still means that no federal workers would be paid in August and no tax refunds would be issued.
In both scenarios, the entire budgets of the Justice, Labor, Energy, Interior, Health and Human Services and Commerce departments are zeroed out, as are the budgets of NASA, Environmental Protection Agency, Federal Transit Administration and Federal Highway Administration."
It will also cause another recession:
Moody’s chief economist, and former McCain economic adviser Mark Zandi is forecasting GDP growth of 4 percent by the end of the year and into next. But in response to a question from TPM, he told reporters at a breakfast meeting hosted by the Christian Science Monitor that his forecast would be “blown out of the water,” if Congress fails to “reasonably gracefully” raise the national borrowing limit.
If Congress fails to raise the national debt limit by early August, the Obama Treasury Department will have to choose between defaulting on obligations to the country’s creditors — triggering higher interest rates and perhaps damaging the country’s credit rating for months and years to come — or freezing outlays to contractors, entitlement beneficiaries and others who are also expecting prompt payment as well. In either case, the macroeconomic impact will be staggering, according to Zandi.
“I think we go into recession and my forecast would be blown out of the water,” he said. “I think if we get to August 2nd and there is no debt ceiling [increase] and there has to be significant spending cuts, I think even if Congress and the administration reverse themselves days later, I think the damage will have been serious and we’ll probably be thrown into a recession.”
Additionally, Zandi noted, “The cost to taxpayers would be enormous, because we would nail tax revenue and spending would increase because of the automatic stabilizers in the budget. So it would be just the wrong thing for the economy and the wrong thing for trying to address our long-term fiscal issues.”This is the path that DeMint (and now Romney) would gladly lead us down. Of course, the Pledge offers a way out of this abyss. A balanced budget amendment. Let's assume for one moment that such an amendment would pass both Houses of Congress and garner 3/4ths state approval. It won't, which is why Romney's pledge is so scary. But let's assume that it does. What are the implications of such an amendment?
Well, they are too many to even summarize here, so let me give you a few links and quotes. Each one of these links has a detailed discussion about the balanced budget amendment.
The Center on Budget and Policy Priorties
"The economic problems are the most serious, and they would pertain to any version of a constitutional balanced budget amendment. By requiring a balanced budget every year, no matter the state of the economy, such an amendment would raise serious risks of tipping weak economies into recession and making recessions longer and deeper, causing very large job losses. That’s because the amendment would force policymakers to cut spending, raise taxes, or both just when the economy is weak or already in recession — the exact opposite of what good economic policy would advise."Norman Orstein, American Enterprise Institute
"I am not against balanced budgets. But a constitutional requirement to balance the federal budget is a virtual guarantee that we will have economic catastrophes that will make the Great Depression look like a picnic. Here is the problem, which should be evident to anybody who has taken Econ 101. When the economy sags, the initial remedy is what we call countercyclical policy--counter the downturn with a jump-start via economic stimulus. Every major country acted in 2008 to do just that, and by consensus avoided a global disaster far more serious than we got.Bruce Bartlett, former Reagan adviser
In the U.S., unlike many other major economies, the need for stimulus at the federal level is even greater because of the deep fiscal drag caused in a downturn by the requirement in nearly all of our states to balance their budgets--which means, in times of adversity, raising taxes and/or cutting spending. This is the equivalent of the medieval practice of bleeding to cure any ailment, including those where the patient was severely anemic. The fiscal drag from the states amounted to roughly $800 billion in 2009. Thus, a stimulus from Washington of $800 billion barely countered the states’ fiscal drag--it merely replaced the blood lost by the state-level bleeding.
Now imagine that instead of a stimulus, which would be blocked by a BBA, we were required to bleed longer and deeper. That is what a BBA would do."
It’s doubtful that BBA supporters really understand the composition of federal spending. In fiscal year 2009, we would have had to abolish every discretionary spending program, including national defense, to balance the budget and that still wouldn’t have been enough without higher revenues. We would have had to cut more than $300 billion out of Medicare and Social Security as well.
A BBA would force the federal government to make economic recessions worse. Since federal revenues fall and spending rises automatically in economic downturns, it would force spending cuts and tax increases at precisely the point when the economy is reeling, potentially turning a modest downturn into a depression.
So in summary, the Tea Party wing of the Republican Party is willing to risk another recession and possible default of American loans just so that they can implement a policy gimmick that would lead to more economic trouble in the future. And this gimmick is designed strictly and solely to make it look like the proponents of said gimmick are fighting the Democrats on federal spending.
Now, Romney has signed on.