Balanced Budget Amendment - Pros and Cons in Budgeting

The balanced budget amendment is a proposal introduced in Congress almost every two years, without success, that would limit the federal governments spending to no more than it generates in revenue from taxes in any fiscal year. While almost every state is prohibit from running deficits, federal lawmakers have never gotten  a balanced budget amendment to the U.S. Constitution signed by the president, and the government continues to run deficits in the hundreds of billions and trillions of dollars every year.   One of the milestones in the modern debate over the balanced budget amendment came in 1995, when the House of Representatives led by Speaker Newt Gingrich passed legislation that would have banned the federal government from running deficits as part of the Republican Partys Contract With America. It truly has been, I think, an historic moment for the country. We kept our promise. We worked hard. We produced a real change, Gingrich said at the time. But the victory was short-lived, and the balanced budget amendment championed by Gingrich and fiscal conservatives who had been swept into power was defeated  in the Senate by two votes. The same battle has been waged for decades and the concept is often raised during congressional and presidential campaigns because the notion of keep a balanced budget is popular among voters, particularly conservative Republicans.   What Is the Balanced Budget Amendment? Most years, the federal government spends more money than it takes in through taxes. That’s why there is a budget deficit. The government borrows the additional money it needs. That’s why the national  debt is near $20 trillion. The balanced budget amendment would prohibit the federal government from spending more than it takes in each year unless Congress specifically authorizes the additional spending through a three-fifths or two-thirds vote. It would require the president to submit a balanced budget each year. And it would allow Congress to waive the balanced budget requirement when there is a declaration of war. Amending the Constitution is more complicated than simply passing a law. Passing an amendment to the Constitution requires a two-thirds vote in each House. It is not submitted to the President for his signature. Instead, three-fourths of the state legislatures must approve it to be added to the Constitution. The only other way to amend the Constitution is to convene a Constitutional Convention at the request of two-thirds of the states. The convention method has never been used to amend the Constitution. Arguments for the Balanced Budget Amendment Advocates of a balanced budget amendment say  the federal government spends too much every year. They say that Congress has been unable to control spending without some kind of restraint and that, if spending is not controlled, our economy will suffer and our standard of living will drop. The federal government will continue to borrow until investors no longer will purchase bonds. The federal government will default and our economy will collapse. If Congress is required to balance the budget, it would figure out what programs are wasteful and would spend money more wisely, advocates say. â€Å"It’s simple math: The federal government should not be spending more taxpayer money that it brings in,† said Republican U.S. Sen. Grassley of Iowa, a longtime supporter of a balanced budget amendment.  Ã¢â‚¬Å"Almost every state has adopted some form of a balanced budget requirement, and it’s past time that the federal government follows suit.† Republican U.S. Sen. Mike Lee of Utah, a cosponsor with Grassley on a balanced budget amendment, added: Hardworking Americans have been forced to bear the burden of Congress’ inability and unwillingness to control federal overspending. As our federal debt continues to rise at an alarming rate, the least we can do is require the federal government to not spend more money than it has at its disposal.† Arguments Against a Balanced Budget Amendment Those opposed to a constitutional amendment say that it is too simplistic. Even with the amendment, balancing the budget will have to be done each year by legislation. This would require Congress to coordinate a large number of pieces of legislation – twelve appropriation bills, tax legislation, and any supplemental appropriations to name just a few of them. To balance the budget right now, Congress would have to eliminate many programs. In addition, when there is an economic downturn, the amount of taxes the federal government takes in usually drops. Spending often must be increased during those times or the economy can get worse. Under the balanced budget amendment, Congress would be unable to increase the needed spending. This is not a problem for states because they don’t control fiscal policy, but Congress needs the ability to stimulate the economy. By requiring a balanced budget every year, no matter the state of the economy, such an amendment would raise serious risks of tipping weak economies into recession and making recessions longer and deeper, causing very large job losses. That’s because the amendment would force policymakers to cut spending, raise taxes, or both just when the economy is weak or already in recession — the exact opposite of what good economic policy would advise, wrote Richard Kogan of the Center on Budget and Policy Priorities. Outlook Amending the Constitution is a rare and daunting task. It takes a great deal of time to adopt an amendment. The House may pass the constitutional amendment, but the outlook is much more uncertain in the Senate. If it passes there, it still needs to be ratified by three-fourths of the states. Because of the legitimate opposition to a balanced budget amendment among some economists and policymakers, Congress is unlikely to undertake the cumbersome process of even considering the amendment barring a significant debt crisis.