On Dec. 14, the Senate voted on S.J. Res. 10, the proposed constitutional amendment requiring a balanced budget sponsored by Sens. Orrin Hatch and Mike Lee of Utah. All 47 Senate Republicans voted for this constitutional amendment. All 53 Democrats voted against it.
Romney took no stand.
Romney did sign a "Cut, Cap and Balance" pledge, vowing to support a balanced budget amendment that would include an unspecified "spending limitation." However, he did not specifically support the Hatch-Lee Amendment that would require balancing the budget while capping federal spending at 18 percent of gross domestic product.
Senate Republicans backed the 18-percent spending cap for a reason: 18 percent approximates the average percentage of GDP the federal government has been able to collect in taxes over many decades.
To balance the budget while capping federal spending at higher than 18 percent of GDP would require raising the persistent rate of federal taxation to an unprecedented level.
"Over the long haul, we have learned that our tax system is capable of generating a revenue stream equaling a little over 18 percent of all of the revenue that moves through the American economy every single year -- a little over 18 percent of our gross domestic product," Lee explained on the Senate floor the day before all his Republican colleagues backed his amendment.
"That percentage remains relatively constant," Lee said. "It has remained that way for many decades, going back to at least 1960. It averages out a little over 18 percent of gross domestic product. That remains true even when we go back 30 years or so when our top marginal income tax rates were approaching 90 percent."
Four days after Senate Republicans voted unanimously for a balanced budget amendment that would cap spending at 18 percent of GDP, Romney told Fox News about his own budget plan.
"Well, my plan is a responsible plan, and I have the specifics that show how I will cut $500 billion out of the federal budget and take federal spending from 25 percent of the GDP down to 20 percent of GDP," Romney told Fox.
"Which is, in my view, closer to the long range average and makes sense," Romney said. "I want to cut federal spending," Romney said. "I want to cap federal spending at 20 percent of the GDP and then lower it from there. And ultimately, I want to have a balanced budget amendment."
"Ultimately" he wants one. What does that mean?
In his 59-point economic plan, Romney made "Pursue a Balanced Budget Amendment' point No. 59. Point 57 says: "Cap federal spending at 20 percent of GDP."
In explaining Point 57, Romney's plan says: "One traditional yardstick for gauging whether government is living within its means is spending as a percentage of GDP. Since the 1950s, federal spending has hovered around 20 percent of GDP."
Yes, that explains why a government whose revenue averages 18 percent of GDP routinely runs deficits and steadily increases its debt.
"As president, Mitt Romney will immediately move to cut spending and cap it at 20 percent of GDP," Romney's plan goes on to say. "As spending comes under control, he will pursue further cuts that would allow caps to be set even lower so as to guarantee future fiscal stability."
What does Romney's mean when he says he will "immediately" cap spending at 20 percent of GDP? "Immediately" means four years from now.
"As president, Mitt's goal will be to bring federal spending below 20 percent of GDP by the end of his first term," says the "Spending" page on Romney's campaign website.
Since the end of World War II (in fiscal 1946), according to Office of Management and Budget data, there has been only one year -- 2000 -- when federal tax revenue reached as high as 20 percent of GDP. There have been 12 years when the federal government balanced its budget. The highest spending in any of those years the federal government managed to balance its budget was 19.4 percent. That was 1969 -- the last fiscal year started under President Lyndon Johnson, the big-spending author of the Great Society.
In a recent interview with Mark Halperin of Time Magazine, Romney argued that cutting federal spending too quickly could cause an economic disaster.
"Well, because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5 percent," said Romney. "That is by definition throwing us into recession or depression. So I'm not going to do that, of course. ... I don't want to have us go into a recession in order to balance the budget."
"I'd like to have us have high rates of growth at the same time we bring down federal spending, on, if you will, a ramp that's affordable, but that does not cause us to enter into an economic decline," said Romney. The issue here, in Romney's view, is what the government can "afford" to cut.
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