Balanced Budget Amendment

17 March 2006
The Balanced Budget Amendment would amend the United States Constitution by requiring -- through law -- that Congress pass a federal budget that balances projected revenues and expenditures, with certain exceptions (notably, a time of war). Republicans have historically been the drivers of such an amendment.

According to Article V of the US Constitution,

  • The Congress, whenever two-thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution ... which ... shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three-fourths of the several States.

    The President has no formal role in the amendment process.

    The Constitution has been amended 27 times, including the original Bill of Rights. Subseuqent amendments abolished slavery; gave Congress the power to tax; implemented and then repealed Prohibition; and gave women the right to vote. The most recent constitutional amendment prohibits a congressional pay raise from taking effect during the Congress in which it was adopted.

    Latest Developments

    On 16 March 2006, Congress approved raising the debt ceiling to $9 trillion. When President Bush assumed office in January 2001, the national debt was $5.6 trillion. Today's debt, at $8.2 trillion, is equivalent to about $26,000 for every citizen.

    What's all the Fuss About?

    For our first 200 years, Congress balanced the books, within reason, except for times of war and recession. Deficits rose dramatically in the 1980s, due to the trifecta of a recession (a Depression in many parts of the heartland), President Reagan's tax cuts, and record peacetime military spending.



    Although calls for a balanced budget amendment began during the Depression, the modern movement dates to 1980. However, Congress has failed, on many occasions, to pass an amendment in both Houses.

    From 1986 to 1996, in part to the Gramm-Rudman-Hollings Act, Congress reduced the deficit by 70 percent, from 5.1 percent of the Gross Domestic Product in 1986 to 1.4 percent in 1996.



    However, that action has had little impact on the overall debt burden. The federal debt, as a percentage of Gross Domestic Product, has increased from at 33% when Reagan took office to 64% in 2005.

    On 17 March, the total debt of the US federal government was $8,273,989,918,621.73. That's $27,690.88 for each adult and child in this country (estimated population: 298,798,379). Since the fiscal year began on 1 October 2005, debt has grown $2.03 billion per day.

    Pros

    Many state governments require their legislatures to offer balanced budgets each fiscal year. One common argument for a balanced budget amendment is based on the observation that Congress cannot be trusted to discipline itself.

    Other proponents of amending the Constitution to require Congress to balance the budget are explicitly concerned about the mounting US debt. Federal budget deficits under President Bush are the largest in history in nominal dollars (but in constant dollars Reagan budgets remain the leader).

    Year-to-year deficits contribute to rising US debt.

    Cons

    The Federal government massages the money supply. Keynsian economics calls for deficit government spending during a recession, to minimize the valley; it also calls for paying back the borrowed funds during a boom, which the US Congress has not done.

    In addition, the Federal government has the power (and responsiblity) to engage in war. War efforts invariably lead to deficit spending (borrowing money). Along this line of thinking, some argue that an amendment increase the risk having our government go into default.

    The Ludwig von Mises Institute criticizes the emphasis on balancing a "future estimated budget" rather than "the actual budget at the end of a given fiscal year." The Institute also believes that "balancing the budget by increasing taxes is like curing influenza by shooting the patient; the cure is worse than the disease."

    Others note that as a percentage of gross national product, the current deficits and debt are within historic norms.



    Finally, strict Constitutionalists argue against a balanced budget amendment because it would "alter the balance of powers that that has served our nation for more than 200 years."

    Where It Stands