Balance Budget Amendment

The 1990’s was a great decade that we remember nostalgically is also remembered for its booming economy, job availability, and comparative peace in the world – so opposite of now. In fact, the United States government was thriving so much that it finally ran a budget surplus in 1998 through 2000 – this was the first time this has happened since 1969.[1] But from a handful of tragic events such as the 9/11 attacks and natural disasters like Hurricane Katrina, any hope of seeing the OMB predicted $1.3 trillion surplus over the coming decade was shattered. And although the Bush administration never included the costs of the wars in Afghanistan and Iraq, the budget surplus was decimated and the government struggled and continued to struggle through the Great Recession.[2] Some experts believe the wars and events following 9/11 led to the Great Recession of 2007 when there after the deficit continued to grow exponentially to handle the financial crises.[3] [4] Since the extraordinary growth in the national debt, renewed calls for a balanced budget amendment are being heard, but is that the right solution for the country? It is easy to assert, as we have heard our parents yell at the news at night, that “if I have to live within my means, so should the government!”, but with the increase responsibilities of the national government, it has to be asked: is a balanced budget responsible.

Recent Attempts at a Balanced Budget

            If student debt makes students shake in their boots, the United States national debt, as of writing this, is $22,105,046,300,000 and counting.[5] This is an unimaginable number, a nightmare Thomas Jefferson once described as one of the “greatest dangers to be feared” – and it is still growing.[6] With enough dollar bills, one could build a border wall with the debt instead of increasing it. There has been some attempts, albeit weak attempts, to pass a balanced budget amendment in the past – all a predictable times. The 1985 Balanced Budget and Emergency Deficit Control Act was a bipartisan bill sponsored by Senator Phil Gramm, Senator Warren Rudman, and Senator Ernest Hollings and was signed into law by President Reagan in the winter of 1985 with the goal of decreasing deficit targets so that a balanced budget would be reached by fiscal year 1991.[7] The act was later ruled unconstitutional until reintroduced in the 1987 Balanced Budget and Emergency Deficit Control Reaffirmation Act which was passed with full Republican support and about half Democrat support[8] This bill was replaced by the Budget Enforcement Act of 1990 – which was the infamous bill that created the “pay as you go” system which was a rule that made any change to be either “deficit-neutral” or “deficit-reducing” meaning lawmakers would either have to reduce spending somewhere else or increase revenue by increasing taxes.[9] Of course, this resulted in increased taxes, making the Late George H.W. Bush regret bolding proclaiming in his 1989 inauguration, “they will try to raise taxes and I will say ‘no’, and they’ll push and I’ll say ‘no’, and they’ll push again and I’ll say to them – read my lips: no new taxes”.[10] Conservatives in the early 1990’s still attempted to assert a balanced budget was needed, but were largely silent after President Clinton and Republican Congress obtained a surplus in 1998.[11]

Since then, not much talk has happened regarding a national balanced budget amendment. In 2011, largely to please the Tea Party who were fuming at Obama’s stimulus at the time, House Speaker John Boehner introduced a balanced budget bill which fell short 23 votes effectively killing it.[12] If only Republican Congress had the same passion for a balanced budget now then perhaps the country would be more capable at avoiding government shutdowns.

Pros and Cons of a Balanced Budget Amendment

            The advantages of a Balanced Budget Amendment largely stem from principle and the benefits to the economy if the deficit was controlled. First, as all Americans are aware, the national debt is  huge problem. About 28% of the country’s debt is held by a foreign government, and 29% of that debt is held by China leaving some worried that those countries have some say over the U.S. – especially in a trade war.[13] [14] And besides the economic health, it is just good sense to live within one’s means, which is a slogan repeated by many Americans and movements such as the Tea Party.[15] But in the case of the national government, that may not be a good idea.

            The first concern with a Balanced Budget is that it may restrict the government in times of emergency.[16] Of course, there would be some ways of reacting to an emergency, but that would some effort in Congress that may not meet the speed required of an emergency. Second, because of the way a balance budget is typically submitted, the executive branch would have huge powers over what money is spent on. Surely, recent memories of Trump’s government shutdown comes to mind – just imagine a balanced budget with a wall (or steel slats) included!

The disadvantages of a federal balanced budget gets deep into complex and rather creative accounting really quickly – especially when considering where money will be cut, what will happen to programs like social security, tax implications, and political games like overstating revenues to fit everything in the budget.[17] [18]

State Balanced Budgets

            Most states have a balanced budget requirement of some kind – a handful of states like Vermont, Wyoming, Alaska, and North Dakota do not have a formal requirement.[19] Generally, states have some sort of requirement be it that the governor proposed budget must be balanced, the enacted budget must be balanced, or no deficit can be carried forward from one fiscal year into the next.[20] But in order to balance the budget, some states start adjust what is expected in their revenues and expenses and “there are uncertainties in both of those, and the estimates can be adjusted to be realistic or unrealistic”.[21] Additional, state and local governments are usually just balancing their operating budgets enabling them to “borrow to finance capital projects such as roads, schools or water treatment plants” – they can even build a reserve of money during good economic times  – which the federal government would not be able to do.[22] State and Local governments can more easily adjust revenues and expenses like they do with property taxes to quickly balance the budget.[23] In short the state methods of keeping a balanced budget is completely removed from the way a federal balanced budget would work.

Conclusion

            The very understandable desire for the United States government to keep a balanced budget is one that has been grasped at for years but never secured for long. After the national and natural emergencies that plagued the 2000’s, the Great Recession and it’s recovery effort, a balanced budget is even more unattainable. And though it is tempting to borrow state methods of balancing their budget, this is largely implausible and unlikely due to the nature of budgeting and federal obligations. One day the United States may learn from past attempts of getting a Balanced Budget Amendment, but the troubles and complications will only begin as loopholes, obligations, stipulations, and emergencies emerge to challenge the effort.

Word Count: 1210


[1] Robert D. Lee, Ronald W. Johnson, and Philip G. Joyce, Public Budgeting Systems, 9th ed. (Burlington: Jones & Bartlett Learning), 321.

[2] Ibid., 238.

[3] Henry Farrell , “Did the Iraq war Cause the Great Recession?” Washington Monthly, March 26, 2013, Accessed March 4, 2019 from https://washingtonmonthly.com/2013/03/26/did-the-iraq-war-cause-the-great-recession/.

[4] Kimberly Amadeo, “US Budget Deficit by President” The Balance, Last updated February 19, 2019, https://www.thebalance.com/deficit-by-president-what-budget-deficits-hide-3306151.

[5] US National Debt Clock Retrieved March 4, 2019 from http://www.usdebtclock.org/.

[6] Thomas Jefferson, “Thomas Jefferson to William Plumer, 21 July 1816” National Archives, accessed March 4, 2019 from https://founders.archives.gov/documents/Jefferson/03-10-02-0152.

[7] University of California Berkeley, “1985 Balanced Budget and Emergency Deficit Control Act” The Bancroft Library, accessed March 4, 2019 from http://bancroft.berkeley.edu/ROHO/projects/debt/1985grammrudmanhollings.html.

[8] University of California Berkeley, “1987 Balanced Budget and Emergency Deficit Control Reaffirmation Act” The Bancroft Library, accessed March 4 2019 from http://bancroft.berkeley.edu/ROHO/projects/debt/1987grammrudmanhollings.html.

[9] University of California Berkeley, “1990 Budget Enforcement Act” The Bancroft Library, accessed March 4, 2019 from http://bancroft.berkeley.edu/ROHO/projects/debt/budgetenforcementact.html.

[10] George H.W. Bush, “The Story Behind George H.W. Bush’s Famous ‘Read my Lips, No New Taxes’ Promise” Time Magazine, December 1, 2018, http://time.com/3649511/george-hw-bush-quote-read-my-lips/.

[11] Daniel Mitchel “Why America Needs a Balanced Budget Amendment” Heritage Foundation, October 15, 1994. Accessed March 4, 2018 from https://www.heritage.org/budget-and-spending/report/why-america-needs-balanced-budget-amendment.

[12] Eyder Peralta, “To Appease Tea Party, Boehner adds Balanced-Budget Amendment to Bill” National Public Radio, July 29, 2011. https://www.npr.org/sections/thetwo-way/2011/07/29/138820004/to-appease-tea-party-boehner-adds-balanced-budget-amendment-to-bill.

[13] Kimberly Amadeo, “Who Owns the US National Debt? The Biggest Owner is You!” The Balance, last updated February 25, 2019. https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124.

[14] Bryan Borykowski, “China’s $1.2 Trillion Weapon that could be used in a Trade War with the US”, CNBC News, last updated April 6, 2018. https://www.cnbc.com/2018/04/05/chinas-1-point-2-trillion-weapon-that-could-be-used-in-a-us-trade-war.html.

[15] Chris Littleton “From the Tea Party with Love”, The Hill, July 21, 2011. Accessed March 4, 2019 from https://thehill.com/blogs/congress-blog/politics/172821-from-the-tea-party-with-love.

[16] Robert D. Lee, Ronald W. Johnson, and Philip G. Joyce, Public Budgeting Systems, 9th ed. (Burlington: Jones & Bartlett Learning), 330.

[17] Peter G. Peterson “Balanced Budget Amendment: Pros and Cons” Peter G. Peterson Foundation, November 27, 2018. Accessed March 4, 2019 from https://www.pgpf.org/budget-basics/balanced-budget-amendment-pros-and-cons

[18] Lee, Johnson, and Joyce, Public Budgeting Systems, 330 – 331.

[19] National Conference of State Legislators, “NCSL Fiscal Brief: State Balanced Budget Provisions” NCSL, October 2010. http://www.ncsl.org/documents/fiscal/StateBalancedBudgetProvisions2010.pdf, 2.

[20] Ibid., NCSL, 2.

[21] Katherine Barrett and Richard Greene, “Do States Really Balance Their Budgets?” Governing, October, 2011. Accessed March 4, 2019 from http://www.governing.com/columns/smart-mgmt/do-states-really-balance-their-budgets.html.

[22] Richard Kogan, “5 Reasons Why the House Balanced Budget Amendment is a Bad Idea” Center on Budget Policy and Priorities, April 11, 2018. Accessed March 4, 2019 from https://www.cbpp.org/blog/5-reasons-why-the-house-balanced-budget-amendment-is-a-bad-idea.

[23] Robert L Bland, A Budgeting Guide for Local Government, 3rd ed. (Washington D.C.: ICMA), 72.

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