Balanced-budget amendment seen hurting Marylanders State would lose 99,000 jobs in 1995, income would drop 12.5%, study says.

May 21, 1992|By Carol Emert | Carol Emert,States News Service

WASHINGTON -- A new study says Maryland would lose 99,000 jobs in 1995 and personal income would drop 12.5 percent below projected levels if a balanced-budget amendment were enacted this year.

Legislation to add a balanced-budget amendment to the Constitution has become a perennial on Capitol Hill. Current bills in the House and Senate have been around for more than a year.

Lawmakers have shown renewed interest in the idea lately, and it is possible that the measure could be passed and sent to the states for ratification early this summer.

Although balancing the budget sounds like a good idea, such an amendment could be "disastrous" for the economy, according to a study released yesterday by the American Federation of State, County and Municipal Employees.

Gerald W. McEntee, president of the labor union, said many lawmakers are signing onto the bills as an election-year ploy.

"It is the height of political hypocrisy that they're talking about increasing aid to cities and simultaneously talking about legislation that, if it passes, would devastate the economy," Mr. McEntee said.

If such a measure were passed this year and a balanced budget achieved in 1995, the national unemployment rate would be 8.4 percent instead of the projected 5.7 percent in 1995, the study said.

Personal income taxes would increase 19.3 percent and corporate taxes would go up 15 percent above estimated levels, according to the study. Social Security taxes also would increase but payments would decrease. And state and local governments would be forced to cut services, the study said.

The study, commissioned by AFSCME, was conducted by Wharton Econometrics Forecasting Associates.

The study's conclusions were based on a theoretical effort to reduce the deficit through equally applied tax increases and spending cuts.

But not everyone agrees that a balanced-budget amendment would have disastrous consequences.

The Wharton study "is laughable. It's just ridiculous," said J. Marc Wheat, director of tax and budget policy at Citizens for a Sound Economy, a Washington think-tank. "That's the scary scenario they're trying to make people wring their hands over."

Mr. Wheat said the projected 1995 deadline is unrealistic, and fiscal goals could be met with a more moderate, longer-term approach than that posited by AFSCME. The deficit, currently about $400 billion, already is projected to fall to $350 billion in 1993 and $212 billion in 1994 due to cuts in defense and other areas, he said.

If Congress took the recommendations of the Congressional Budget Office -- which include additional defense cuts, lower cost of living adjustments, and other measures -- "that would easily get you to a balanced budget by 1998," Mr. Wheat said.

Rep. Helen Delich Bentley, R-2nd, is one of four Maryland lawmakers who have signed on as co-sponsors of balanced-budget legislation. "Somebody has to have some discipline," she said. "Deficit spending is destroying us economically."

"We'll have to tighten our belts for two or three years, or this country is going to be totally devoured economically," Mrs. Bentley said. "At the rate we're going, by the year 2004 all of our tax revenue will go toward paying interest on debt."

Maryland Reps. Beverly B. Byron, D-6th; Wayne Gilchrest, R-1st; and Rep. Tom McMillen, D-4th, are also co-sponsors of the bill.

Sen. Paul S. Sarbanes, D-Md., has been in the forefront of congressional opposition to a balanced-budget amendment.

"Tampering with the Constitution is no way to restore a sense of fiscal responsibility to our system," he testified before the House Budget Committee last week. "Instead, it is yet another device to put off hard decisions until some unspecified point in the future."

There is no guarantee that a constitutional amendment would force Congress to balance the budget, Mr. Sarbanes said, and if it did, it would prohibit the government from using fiscal policy to counteract economic downturns.

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