In Februrary 2003, House members introduced a balanced budget amendment to the US Constitution. The amendment was introduced by Rep. Ernest Istook, R-Oklahoma, who told a Capitol Hill news conference, "It's hypocritical to say you oppose the deficit but don't support the balanced budget amendment."

The White House said Bush supports a balanced budget amendment but that it should include exceptions for war, national emergency and economic recession. Istook's amendment had an exception for declared war or national emergency but not for recessions.

The top Democrat on the House Budget Committee, Rep. John Spratt of South Carolina, then stated, "A constitutional amendment does nothing to resolve the re-emergence of deficits because it lays down no plan of action and will not take effect for six years at the earliest."

The last time a balanced budget amendment came up for a vote, in 1997, it came one vote short in the Senate. It passed the House in 1995.

Arguments For

Arguments Against

Questions for Debate:
Does Congress have the discipline to balance the budget on its own?

Should Congress pass a balanced budget amendment to the US Constitution?

What flaws do you see with such an amendment?

I wish there was one other choice- yes, including declared war, unless there is a national referendum with 70% majority of registered voters supporting the war. This would allow such events as WW2 to circumvent deficit spending, while making Iraq stay within the budget.

I think we do not have enough checks and balances in our war powers at this time for our politicians- in fact, I see this as the main reason why we haven't been able to be the good guy in foriegn conflicts since Korea- we have politicians with vested interests in killing our soldiers for thier private gain.

I would like the defense budget to be voted on nationally, direct elections, with at least 2/3s majority, with the exception of military payroll. Want a star wars non-working dream system that really is just a pork project for your state? Take it to the voters!

There are generally three ways to balance a budget-- cut spending, raise taxes, or some combination of both.

In the old days, all things being equal, you might have been able to expect a Republican-controlled government to cut spending without raising taxes, a Democrat-controlled government to raise taxes without cutting spending, and a split government (different parties controlling white house, Senate or House of Reps) to do some combination of both.

But it seems that both parties love pork barrel politics so much they never significantly cut spending, instead always spending a little more than they tax, then raising taxes rates to compensate.

So no, I'm not sure Congress can be trusted to balance the budget in any reasonable way.



I haven't seen one I like. I think to ensure fiscal responsibility, any balanced budget amendment would have to place caps on taxation rates to prevent the country from sliding into de facto socialism (tax rates more than 50% or so). If there was a "freedom from excessive taxation" clause that would take excessive tax increases off the table, I might be able to support an amendment forcing a balanced budget. Without capping taxation, forcing a balanced budget allows Congress to write blank checks out of my wallet-- no likey.



Even if the amendment does not specifically prescribe an automatic balanced budget based on across-the-board spending cuts, across-the-board tax increases, or some combination-- the amendment would force one of those options to be chosen, which would ultimately be left to Congress, who could then blame the Constitution for either decimating vital programs or taking more and more money out of the economy through taxes, keeping more of the money earned by individuals.

Then there is always the messy issue of breaking budget deadlocks as during the Clinton administration. If you have a simple amendment like "Congress may pass no budget unless it is balanced," then Congress is left to iron out the process on its own, and we would probably get into stalemate after stalemate when different parties control the White House and Congress. Any automatic remedy is too controversial to pass (raise taxes or cut spending without Congressional debate? not likely).

Maybe the issues involved are just too complex to solve with an amendment, and as messy as it is, maybe the system we have is as good as we can do for now. Ideally, the budget is balanced in the voting booth-- responsible citizens voting out irresponsible incumbents.

I think the question is a bit deeper than it would seem on the surface, but I support the idea of requiring balanced budgets.

Against:
In time of economic doldrums, government deficits can boost economic activity.
Eventually, the world market for the dollar acts to keep us honest, we're seeing this now.
Eliminating our debt would eliminate our money supply, as all of our money is 'backed' by treasury debt-certificates.

For:
We would not be able to mortgage our future for present problems.
Government deficit spending does not correct the underlying cause of economic depressions.
It is absoulutely not necessary for our money to backed by debt certificates: why back paper with more paper? We can issue scrip (real high class scrip, though) and as long as it's accepted by the USG as payment for taxes due, it will circulate. Since the Treasury would have control of the presses, it could control scrip's relative value (inflation / deflation) by how fast it prints.

Conclusion:
I would be for a balanced budget act that allowed for surpluses and deficits, which, is to say, doesn't require the budget to be balanced by revenue. I would prefer to see a good, old fashioned treasury, to hold surpluses in boom years, and pay deficits in lean years. It could be filled with gold, oil, foreign currency, US currency, whatever.

The trip to this point would have to take us by several interesting points:
1) we'd have to change how we create money, we did it a couple of times last century, and everyone got by.
2) we'd have to eliminate the national debt, eventually. I'm not sure it makes much sense to have significant value stored in the treasury when the country still owes a massive debt.
3) we'd have to learn to live within our means, as a country.

I think it is important, in terms of this debate, to understand what really has us in the current situation. Running deficits isn't really the problem...there are times when our government will need to spend more in a current year than it takes in. In those cases, borrowing the money to cover the shortfall is justified. Where the problem comes in, is that no plan is created to ever pay the money back. That is what is really required...not balanced budgets, but zero net debt. What the amendment should require, IMHO, is that any time the government does run a deficit and borrow money, that it doesn't do so without a concrete plan on how to pay it back. With that in place, I think the exceptions would take care of themselves...most situations wouldn't justify the repayment plan, and therefore wouldn't pass. True needs would still be satisfied, without having to create a specific list of what those would be. Lack of repayment requirement is how we got where we are...how many of us wouldn't be in the same situation if we could consistently outspend our income without ever having to pay the difference back?

There are economists who say carrying this debt is inconsequential. Those economists are idiots. Take a look at how much of our federal budget is devoted to paying interest on our debt (hint...its the governments biggest expenditure, and that's with today's low interest rates). You don't need to go any further than that to see the problem with carrying such a debt.

Does Congress have the discipline to balance the budget on its own?

I think they have proven over the past several decades that they don't, regardless of what party you are talking about. We currently have the highest deficit in history and it doesn't look like there is any end in sight to it.

The following is a graph of our historical national debt as a precent of GDP. It also lists our current debt which happens to be $7.7 Trillion at the moment.

Bush has consistently talked about paying down the debt, balancing the budget and the like but his actions have been different.


Generally increasing spending and cutting taxes at the same time isn't a good idea. The cost of the Iraq and Afghanistan wars is estimated at around $200 Billion by most and Bush has recently asked for about $82 billion more outside of the regular budget process just to get us through December 2005. That doesn't include all of the Iraq and War on Terror line items which will be in the actual budget Congress will soon be voting on.

Finally, this so-called crisis with Social Security is laregly due to the fact that Congress is collecting a tax to be used for a specific program and then they rob a good portion of that revenue for other programs. And they wonder why it is "in crisis."

The Republicans used to be the party that talked about being fiscally responsible, but they have clearly abandoned that portion of their platform and have decided to move in the other direction. We usually hear the words "fiscally responsible" coming now from Democrats, but I'm not sure I believe them either.

Should Congress pass a balanced budget amendment to the US Constitution?

I suppose it depends on what the amendment says, but I think they should. I am tired of tax cuts being handed out as the modern "bread and circuses" to sate the masses and gather votes when it doesn't make sense from a financial perspective. "Here have $600 back on your taxes, nevermind we are engaged in an epensive war and have the largest deficit in history - just remember who allowed you to buy that new DVD player in November!"

I'm tired of politicians getting us involved in wars and programs that we can't afford in the first place.

A balanced budget amendment seems to make complete sense to me as it would to any person managing their own financial situation. Everyone knows the dangers of running up debt to have what they want. It is high time that the federal government start being held accountable for their spending.

Such an amendment would also force taxes to be realistic. If you want to go start a 1/2 Trillion dollar war then you better be prepared to pay higher taxes for it. If you think you are paying too much in taxes then perhaps you should vote for some politicians that will require efficient government programs or perhaps you'll realize that spending several hundred million on ineffective programs like absitence only education isn't such a good idea afterall.

A balanced budget makes the government behave responsibly, will probably prompt increased efficiency and it eliminates pork at the same time. I really can't see anything wrong with it.

I think there should be a provision in such an amendment that we can unbalance the budget in time of national emergency or war (only when formally declared by congress). However, a plan to re-balance the budget after the crisis has passed must be put in place.

I'd actually like to see us have de facto socialist level taxes because it would finally wake people up a little and force them to take back the country from all of these politicians that spend money like a gambling addict on payday.

I agree, those economists are idiots. Fortunately, there are macroeconomic forces that correct this. Unfortunately, this hurts 90% of Americans.

From the 2006 Budget Request
Social Security, $540B
Department of Defense, Military $424B
Medicare, $340B
Interest, $211B

Total Deficit $390B



What do you mean a 'socialist level tax'?
If you're talking about having everybody pay the same rate, I'm fine with that. But you'd have to make it progressive by either exempting an amount or by giving a universal rebate.

I was referring to a previous comment by Jack22 here:


Sorry for the ambiguous statement. What I meant was, I would actually like to see people paying ridiculous tax rates if it would finally wake them up and make them realize there was a problem. The American electorate tends not to pay attention to much of anything but social issues unless you figuratively hit them over the head with a 2x4 and get their attention.

It looks like I am the lone vote against a Balanced Budget Amendment here (so far).

The balanced budget requirements in the EU cripple those governments' ability to react to market conditions. Recessions simply cripple the European economy because they have limited mechanisms to do anything about it.

Another reason not to have such an Amendment is the fluctuating nature of the tax revenue. There is simply no way to predict, with any degree of certainty, the amount of revenue the federal government will collect next year. Budgets are currently passed based upon projections, and we all know how accurate government projects are.

If such an Amendment were to pass, I can only predict how woefully over-predictive the revenue numbers will be year in and year out.

Fair enough Amlord, but what is your solution to having congress actually be fiscally responsible? Surely that has to concern you just a little bit. I imagine that other "exceptions" could be built into a balanced budget amendment, it doesn't have to be abssolute. It would just be important to make sure those exceptions can't be exploited to defeat the purpose of the amendment.

Nah, Amlord, I voted against it, and agree with your statement despite not stating it that way. I just want the surpluses and deficits to be paid into and out of stored assets, rather than incurred debt and future taxation. I think that political pressures would keep the assets of the Treasury from become too large (why are we paying so much in taxes if we've got X in the Treasury) or too small (we're almost bankrupt).

While such an idea would limit the fiscal means of dealing with the business cycle, and a balanced budget would severely limit the fiscal means, monetary solutions can also exist.

There are analysists who believe that the business cycle is due to land / real-estate / natural resources speculation: Landowners hold out for higher and higher prices, land buyers offer higher and higher bids due to speculation that rents & prices will go higher, until some shock stops this, and land prices tumble back to more realistic levels. The change in book value affects credit availability and purchasing power, which deters investment and demand, which leads to a recession or depression. Governments combat this with monetary means like raising and lowering the interest rates, and by deficit spending or government surpluses, each of which raises or lowers the amount of money in circulation. However, each has an effect on the value of the dollar, putting too much in too quickly will cause inflation.

edit typo

No! Congress is too spend-hungry and has been for as long as I can remember. Government programs/departments need to be liquidated. We need to cut welfare, deport illegal immigrants and cut the Pork in Congress. I'll hold my breath until that happens .

Absolutely. How can we allow a government to spend more of OUR money than they actually have? How? In addition, forcing Congress to balance the budget will inherently weed out unnecessary spending.

CP

The only problem that I can find is enforcement. Lets say Congress passes the balanced budget amendment and then overspends it's boundaries anyway. What happens? Everything gets cut an equal percentage? The courts pick out all of the pork? The courts issue an order to lock Congress in their chambers until they get under budget?

Amlord, not reacting to a serious recession due to amendment restrictions can be avoided by simply adding a proposal that allows for a two-thirds majority vote to implement deficit spending. That way, proper media attention and public debate could occur on why deficit spending is needed.

I'm assuming that you are not in favor of a the current deficit system. It hurts businesses through higher interest rates and having less money available for investment. It slows the economy long term, hurting the living standards of future generations for the benefit of today's generation. Do you like the other options like the line-item veto or PAYGO?