Does the United States Need a Balanced Budget Amendment? >
Dangers of a Balanced Budget Amendment
Political gimmick has potentially disastrous consequences for the nation
November 23, 2011
A balanced budget amendment—a version of which was recently voted down by the House of Representatives—is a terrible idea. Although it sounds good in theory, requiring Congress to balance the budget each year would eliminate one of the most effective means we have of ensuring that the economy works as effectively as possible and thereby it would lower growth, increase unemployment, and cause greater levels of poverty and inequality.
[See a collection of political cartoons on the budget and deficit.]
The main problem with a balanced budget amendment is that it assumes that the country will never experience a recession. Whenever the economy slows down, tax revenues decrease, spending on things like unemployment insurance goes up, and the budget deficit grows. Although people tend to think that large deficits are a cause of a bad economy, high levels of government spending are needed to ensure that a weakened economy does not contract even more. This was the major lesson of the Great Depression, and it remains true today. A balanced budget amendment would take away the government's ability to use tried-and-true forms of "countercyclical" fiscal policy and force spending cuts just when stimulus is needed most. Recessions would be longer and more severe, and our long-term growth prospects would be worse.
[Read: GOP Frosh Slam "Hypocrisy" from Democrats on Balanced Budget Bill.]
As if this were not enough, a balanced budget amendment would be a national security disaster. Wars cost money and, absent significant tax increases, the government must run deficits to pay for them. The largest deficits in American history were caused by government spending during World War II, and it would be foolish to pass a law that would prevent the government from engaging in similar behavior in the future.
Members of Congress know that a balanced budget amendment is entirely unworkable, and many lent their support to the most recent bill only because it makes them appear fiscally responsible. Such actions represent the height of cynicism given that measures like letting the Bush tax cuts expire would reduce the deficit more effectively and sustainably than the radical step of amending the Constitution.
- Read about how the super committee failure will affect you.
- See a collection of political cartoons on the economy.
- Read Robert Schlesinger on the upside down 2012 politics of the economy and the deficit.
- Other Arguments
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#16530
Yes — A well-designed constitutional amendment would prevent overspending, and worse
DAVID PRIMO, Senior Scholar at George Mason University's Mercatus Center
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#24326
Yes — Spending controls would force Washington to act responsibly
ORRIN HATCH, Senior U.S. Senator from Utah
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#34143
No — Don't blame the Consitution for the incompetence of politicians
SCOTT LILLY, Senior Fellow at the Center for American Progress
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#41936
No — The Constitution restricts federal spending already
TAD DEHAVEN, Budget Analyst on Federal and State Budget Issues for the Cato Institute
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#61347
No — Limits would sabotage the government's ability to pull the nationout of an economic downturn
STEVE WAMHOFF, Policy Analyst for ITEP and the Legislative Director of Citizens for Tax Justice
