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Debate: Balanced budget amendment to US Constitution

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Should the US government be required to balance its budget annually?

Background and context

Many US states have balanced budget amendments to their state constitutions. At the federal level, many have proposed an amendment to the US Constitution that would require the country to balance its budgets every year, preventing it from running deficits and debts year-to-year.
During the contentious debates surrounding whether the US should raise its debt ceiling in 2011 to pay for debts already incurred, many Republicans and some Democrats re-invigorated their drive for a balanced budget amendment (some even demanding a BBA in exchange for voting to raise the debt ceiling).[1] They argue it will help solve the deficit crisis faced by the nation and provide assurances of limited government and lower taxes. Democrats argue that it overly constrains the federal governments ability to respond to recessions, crises, or war with temporary increases in govt spending, borrowing, and debt. Democrats also ask why an extraordinary amendment to the Constitution is necessary, when legislative action can do the trick. The organizations like Americans for a Balanced Budget Amendment fighting hard and convincing Republicans such as Speaker John Boehner of their cause, the debate seems set to continue for months and years. The pros and cons are consider below.
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Deficit: Will balanced budget help solve debt/deficit?

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Pro

  • Amend needed to address systemic, runaway spending. Dr. Jim Garlow Chairman, Renewing American Leadership Action. Statement before the House Judiciary Committee Subcommittee on the Constitution. May 13, 2011: "Rather than treasuring and celebrating the limited government our founders willed to us, since the Progressive era our governing establishment has been moving toward an all-encompassing State that intends to dominate our lives. And the way they have been doing it is through runaway spending. According to the Heritage Foundation’s 2011 Chart Book, since 1970 federal spending has grown more than ten times faster than the median income of Americans. The annual federal budget did not reach $1 trillion until 1987, but exceeded $2 trillion in 2002 and $3 trillion in 2009. This rate of growth was unsustainable at the time, but that was before the recession led to an explosion of irresponsible federal spending that now stretches for as far as the fiscal eye can see. President Obama’s latest budget plans to spend more than $46 trillion over the next decade, without even a gesture in the direction of solving our long-term fiscal crisis. According the Congressional Budget Office, if Congress enacts President Obama’s 2012 budget, interest payments on accumulated deficits will total $931 billion in 2021 alone. That would consume 20% of all tax revenues. When we then add the cost of mandatory programs like Social Security, Medicare, and Medicaid, 95% of all tax receipts would be spent before Congress can begin to fund national defense or any other essential function of government. This is simply unsustainable. As Richard Nixon’s Chief Economist Herbert Stein famously said: 'That which cannot continue, won't.'"
  • Politicians can't make hard choices; BBA necessary Senate Minority Leader Mitch McConnell: “The time has come for a balanced budget amendment that forces Washington to balance its books. If these debt negotiations have convinced us of anything, it’s that we can’t leave it to politicians in Washington to make the difficult decisions that they need to get our fiscal house in order. The balanced budget amendment will do that for them. Now is the moment. No more games. No more gimmicks. The Constitution must be amended to keep the government in check. We’ve tried persuasion. We’ve tried negotiations. We’re tried elections. Nothing has worked."[2]
  • Plenty of wasteful spending to cut with BBA Dr. Jim Garlow Chairman, Renewing American Leadership Action. Statement before the House Judiciary Committee Subcommittee on the Constitution. May 13, 2011: "GAO Finds Hundreds of Billions in Duplication and Waste. And just how carefully have our stewards in Washington been spending all our tax dollars during this explosion of federal spending? According to the Government Accountability Office, it’s a scandal of epic proportions. A new law, attached to the last debt limit increase by Senator Tom Coburn (R-OK), mandated that the GAO begin analyzing federal programs for duplication and waste. On March 1 of this year the GAO published its first annual “Report on Opportunities to Reduce Potential Duplication,” which covered slightly more than one third of all federal spending. The auditors uncovered significant duplication in 33 areas, including: Twenty agencies operating 56 programs dedicated to financial literacy. GAO and agencies can’t even estimatewhat they cost. Highways programs have not been rebooted since 1956. The Department of Transportation (DOT) spends $58 billion on 100 separate programs run by five DOT agencies with 6,000 employees. GAO says the programs have 'not evolved to reflect current priorities in transportation planning.' In 2007, the U.S. Agriculture Department paid $1.1 billion in farm subsidies to 170,000 dead people. Fifteen federal agencies now oversee 30 food laws, and at least four departments compete to administer 80 economic development programs."
  • General statements in favor of balanced budget amendment. Missouri’s U.S. senators, Democrat Claire McCaskill: “This is a responsible, commonsense plan that would hold Congress accountable, get the country’s fiscal house in order and make sure everybody has some skin in the game, all while protecting Social Security and not forcing an end to Medicare as we know it."[3]


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Con

  • Balanced budget amendment undervalues loans and debt Kathy White. "Guest Commentary: A federal balanced budget amendment would hurt the economy." Denver Post. July 24th, 2011: "Traveling back in time is no way to prepare for the future. You meet the future by making investments that will pay off. Families take long term loans to buy homes and pay for college. Businesses borrow to take advantage of modern technologies and more efficient facilities. State and local governments borrow to build and maintain roads, dams, schools and prisons. Denying the United States government that same basic tool would jeopardize generations of progress. Indeed, a balanced budget amendment would be like forcing a family to pay the entire cost of a house up front, or making a college student pay a year's tuition entirely with money earned that same year. At the federal level, unless exempted as Senator Udall's proposal does, it could mean that the Social Security Trust Fund could pay out to current retirees only what it took in through taxes on current workers. Too bad if there are more retirees than workers."
  • Constitution gives govt power to run-up deficits. Doug Kendall and Dahlia Lithwick. "Off Balance The Balanced Budget Amendment would make the Framers weep." Slate. July 15th, 2011: "It's fairly certain that George Washington and the other Founders gathered in Philadelphia in 1787 would be appalled by the Lee amendment. It is not an accident that the first two enumerated powers the Constitution vests in Congress are the power "to lay and collect Taxes … to pay the Debts and provide for the common Defense and general Welfare of the United States" and "to borrow money on the credit of the United States." The Constitution's broad textual grant of power was a direct response to the Articles of Confederation, which had imposed crippling restrictions on Congress's power to borrow and tax. These restrictions plagued the Revolutionary War effort and made a deep and lasting impression on Washington and other war veterans. Lee and the other proponents of shrinking the federal government to restore freedom misapprehend that the Constitution recognized there would be no freedom without a strong federal government to promote it."
  • Balanced budget Amend violates intended flexibility of Const. Davis Merritt. "Balanced-budget amendment is unworkable." The Wichita Eagle. August 2nd, 2011: "Our Constitution outlines in the broadest terms how the federal system works. It contains few numbers, is by design remarkably flexible, and assumes that underlying comity and good intentions will prevail despite strong partisan passions. Amending it is a complex process for good reason, and we should do it precisely and with foresight and caution. A balanced-budget amendment violates those criteria."
  • Amend would create Const. crisis, court battle w/ each budget. Davis Merritt. "Balanced-budget amendment is unworkable." The Wichita Eagle. August 2nd, 2011: "Since arguments over whether a budget is truly and honestly balanced are endless, a constitutional requirement of balance would make resolving the argument the province of the federal court system, raising two critical problems. Timing: The president proposes a budget to Congress around Feb. 1 to take effect Oct. 1. At any point in that process, lawsuits could be filed by members of Congress and other citizens and interest groups. Typically it takes two or three years to get a case to the U.S. Supreme Court, and there likely would be thousands of cases annually, many frivolous. Thus we could never be sure that any budget actually met the constitutional requirement until it was far too late. Power: In resolving the conflict, federal judges would have the unwanted power to decide how to balance it — what to cut and what revenues to raise. As lifetime appointees, they would be beyond the reach of citizens or Congress if their decisions were unacceptable or inadequate. The primary power of the legislative branch — the purse — and the primary power of citizens — the vote — would be nullified."
  • 18% spending rule would not fit w/ other timeless Amendments. Doug Kendall and Dahlia Lithwick. "Off Balance The Balanced Budget Amendment would make the Framers weep." Slate. July 15th, 2011: "in a Constitution filled with broad principles of governance, the amendment's arbitrary spending limit of 18 percent of GDP—an awkward and unworkable figure—would stick out like a sore thumb. Contrary to Chief Justice John Marshall's warning in the landmark decision of McCulloch v. Maryland (1819), Lee's arbitrary spending limit 'partake[s] of the prolixity of a legal code,' and would be out of place in a document that is designed to 'to endure for ages to come … to be adapted to the various crises of human affairs.' We face a high duty when amending the Constitution: to match the Framers' maturity and foresight. By every measure that would have mattered to the Founders, Lee's proposed amendment easily flunks this test."


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Economy: Is balanced budget amendment good for economy?

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Pro

  • Balanced budget could allow for debt during recession/war. Edward Glaeser. Balanced Budget Suddenly Looks More Appealing." Bloomberg. Aug 1st, 2011: "Any federal balanced-budget amendment should allow the government to spend more than it collects in taxes during wars and recessions, with the understanding that it will spend less during peaceful times of plenty. If the budget is to be balanced, it should be balanced over the business cycle, not year by year."
  • Reducing spending w/ BBA frees-up money for job-creation. Dr. Jim Garlow Chairman, Renewing American Leadership Action. "The Case for a Balanced Budget Amendment Now." Statement before the House Judiciary Committee Subcommittee on the Constitution. May 13, 2011: "For some reason we have developed a huge blind spot in our public policy discourse that blocks out the fact that every single dollar that government spends has first been extracted from the private sector. The truth is that the government has NO money of its own. The only revenue the government generates has come out of the pockets of the private sector. The truth is the only way there is a net “stimulus” to the overall economy from government spending is if the goods and services the government buys somehow manage to generate more jobs and more economic activity than the people in the private sector would have generated if they had been allowed to keep their own dollars. We know that doesn’t happen. Government 'stimulus' is a dangerous fallacy; based on deliberately ignoring the investment opportunities that the private sector is prevented from pursuing, and the jobs those opportunities would have created. We continue living with the single entry delusion that government spending is free. But the debits we have been generating are still accumulating, and our books are eventually going to be balanced one way or the other. How much better it will be if we change course voluntarily and avoid a collapse. Reducing federal spending significantly would provide America’s productive private economy with enormous additional resources to generate jobs and economic security for all Americans. H.J.Res. 1 provides an important tool to make that happen. Reducing federal spending significantly would provide America’s productive private economy with enormous additional resources to generate jobs and economic security for all Americans. H.J.Res. 1 provides an important tool to make that happen."
  • Spending limits creates certainty for job creation. Ohio Republican John Boehner said that adoption of a balanced budget amendment would help ensure "that spending restraints are set in stone, and the certainty it provides will help create a better environment for job creation across the country. The House bill that we’ll consider would require the government to spend only what it takes in, and would include limitations on our government’s ability to raise taxes and to increase spending. I voted for a Balanced Budget Amendment in the past and I'll support it again now."[4]
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Con

  • Balanced budget Amend makes fighting recession harder Kathy White. "Guest Commentary: A federal balanced budget amendment would hurt the economy." Denver Post. July 24th, 2011: "Requiring a balanced federal budget every year, no matter how the economy is doing, would force big cuts in services, increases in taxes - or both. That's because when the economy slows, federal revenues go down and spending on unemployment insurance and other programs needed to spur recovery go up. If the government can't run a deficit, even temporarily, many Americans have nothing to cushion their fall. If a balanced federal budget were compulsory, we'd suffer a vicious spiral of bad policy that would push weak economies into recession and make recessions last longer, potentially costing millions of jobs. The last time a balanced budget amendment was proposed, in 1997, more than 1,000 economists, including 11 Nobel laureates, condemned the idea as "unsound and unnecessary." They called it "a proposal that mandates perverse actions in the face of recessions."
  • Formulaic balanced budget amend ignores circumstances. Kathy White. "Guest Commentary: A federal balanced budget amendment would hurt the economy." Denver Post. July 24th, 2011: "Some of the balanced budget amendment proposals don't just ban the federal government from ever spending more than it takes in. Most also require that if taxes ever are raised it would take a two-thirds vote of Congress rather than a majority. And they cap total spending at some arbitrary level even if revenues exceed that amount. It's government by formula. It ignores emerging needs or crises that can arise at any time. It would ratchet down spending to levels not seen in 50 years, even though our needs have grown tremendously since then."
  • Balanced budget takes/diminishes important programs from people. Kathy White. "Guest Commentary: A federal balanced budget amendment would hurt the economy." Denver Post. July 24th, 2011: "And there's another reason why a constitutional amendment is unwise: people. Contrary to trending tweets, the federal government actually provides a lot to average folks from every walk of life. Pregnant women learn good nutrition through the Women Infants and Children program. Young children hit school ready to learn through Head Start. College is affordable to many because of federal Pell Grants. Social Security and Medicare keep older Americans from poverty. The list goes on and on. If you can't think of something that benefits you, think again. Whatever it is, you stand a good chance of losing it under a balanced budget amendment."
  • Politicians will favor corporate interests w/ balanced budget. Jack Lohman: "If your politician’s choice is to 'balance the budget' by either (a) cutting entitlement or social spending, or (b) cutting spending on projects or contracts for the corporate interests that fund his elections, which way do you think the vote will go? If your politician’s choice is to raise taxes on the top 3 percent, or not, would you expect him to do that if those top 3 percent are the funders of his campaign? Or would he instead cut entitlements to protect his funders?"[5]
  • Congress shouldn't make Amend if it can't make good fiscal leg. "On a balanced-budget amendment." The Economist. Aug 2nd, 2011: "I see the argument for a well-designed, over-the-business-cycle balanced-budget amendment. But the idea of enshrining this Congress' pathologies into the constitution is terrifying. Let's see Congress design some quality fiscal rules using the normal legislative process first, and then we can talk about adding those to the constitution."


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States: If states have it, should the fed govt?

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Pro

  • States have balanced budget amendments, why not US govt? Republican Roy Blunt: “A majority of states, including Missouri, already operate under a balanced budget requirement. Why shouldn’t Washington be forced to do the same thing?”[6]
  • Balanced budget will bring fed spending in line with states'. Edward Glaeser. Balanced Budget Suddenly Looks More Appealing." Bloomberg. Aug 1st, 2011: "Another reason to favor more federal fiscal restraint is that we could use a better balance between state and federal spending. Over the past 50 years, the federal government has become heavily involved in financing infrastructure, even when those projects overwhelmingly serve in-state users and could be funded with user fees. Why is it so obvious that the federal government has a role in funding rail between Tampa and Orlando, or a big tunnel in Boston? Washington’s prominence is explained primarily by the federal government’s ability to borrow, and not by any inherent edge it has in infrastructure development. Federalizing expenditures breaks the connection between the projects’ funders and the projects’ users. Any instance when we’re spending other people’s money is an invitation for waste. States and localities saddled with balanced-budget rules are relatively parsimonious and spend a fair amount of time debating even relatively modest public investments. That’s far more desirable than the federal government’s freedom to distribute billions without imposing taxes on voters."


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Con

  • States need fed to be able to run deficit to back-them up. If states have a balanced budget amendment, they often fall victim to a number of circumstances which makes it necessary for them to seek Federal backing (in which case it is important for the fed to be able to borrow in order to support them). These circumstances can be natural disasters, epidemics, or just demographic shifts that cause a number of years of poor revenues and too much spending. In such cases, it can be very important for the Fed to step in to help-out funding certain critical programs or in lending general emergency support. Without the ability of the fed to run a deficit during bad times, this important supporting relationship with the states would be significantly damaged. This is bad for the republic.
  • Balanced budget amend in states is often a bad thing. The fact that some states have balanced budget amendments often means that, during hard times when tax revenues are low, states have to dramatically cut spending. This can damage or even fully close many programs that deserve to exist and are sustainable during good, or even just average, times. If they were able to run a short or medium term deficit during bad times, they wouldn't have to do this. So, it is very arguable whether states should have balanced budget amendments. This undermines the argument, "if states can do it, so can the federal govt." Just because some states have done it, doesn't mean it's a good idea for them, nor a good idea for the US government.
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2/3 approval: Is supermajority rule for approving deficits wise?

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Pro

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Con

  • Supermajority approval creates dangerous minority rule. Davis Merritt. "Balanced-budget amendment is unworkable." The Wichita Eagle. August 2nd, 2011: "It would leave the most crucial fiscal decisions in the hands of congressional minorities, a profoundly undemocratic idea. Even if, miraculously, no lawsuits arose, the nation could be impotent to deal with emergencies. If, for instance, a worldwide recession cut into revenues or costs soared, such as in a Katrina-like disaster, operating out of balance would require approval by a supermajority of each house, such as two-thirds, meaning a minority of one-third plus one could stop anything. If you think that wouldn't be a problem because people in Congress surely would act responsibly and not out of ideology or ignorance in an obvious crisis, you weren't paying attention last week as less than 15 percent of the House of Representatives paralyzed that body while the nation hurtled toward default and collapse."


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