Balanced budget amendment

The Balanced Budget Amendment is any one of various proposed amendments to the United States Constitution which would require a balance in the projected revenues and expenditures of the United States government. Most such proposals contain a supermajority exception allowed for times of war or national emergency.

Text

There is no one proposed Amendment to which all proponents have agreed. Here, for example, is the text of the version presented to the Senate and to the House of Representatives which (after revision) was approved by the Senate (by a vote of 69 to 31) on August 4, 1982, but supported by an inadequate majority of the House of Representatives (with a vote of 236 to 187) on October 1, 1982:

Section 1. Prior to each fiscal year, the Congress shall adopt a statement of receipts and outlays for that year in which total outlays are no greater than total receipts. The Congress may amend such statement provided revised outlays are not greater than revised receipts. Whenever three-fifths of the whole number of both Houses shall deem it necessary, Congress in such statement may provide for a specific excess of outlays over receipts by a vote directly to that subject. The Congress and the President shall ensure that actual outlays do not exceed the outlays set forth in such statement.

Section 2. Total receipts for any fiscal year set forth in the statement adopted pursuant to this article shall not increase by a rate greater than the rate of increase in national income in the last calendar year ending before such fiscal year, unless a majority of the whole number of both Houses of Congress shall have passed a bill directed solely to approving specific additional receipts and such bill has become law.

Section 3. The Congress may waive the provisions of this article for any fiscal year in which a declaration of war is in effect.

Section 4. The Congress may not require that the states engage in additional activities without compensation equal to the additional costs.

Section 5. Total receipts shall include all receipts of the United States except those derived from borrowing and total outlays shall include all outlays of the United States except those for repayment of debt principal.

Section 6. This article shall take effect for the second fiscal year beginning after its ratification.

Here is a version introduced into the House of Representatives with 160 sponsors on January 7, 1997:

Section 1. Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless three-fifths of the whole number of each House of Congress shall provide by law for a specific excess of outlays over receipts by a rollcall vote.

Section 2. The limit on the debt of the United States held by the public shall not be increased, unless three-fifths of the whole number of each House shall provide by law for such an increase by a rollcall vote.

Section 3. Prior to each fiscal year, the President shall transmit to the Congress a proposed budget for the United States Government for that fiscal year in which total outlays do not exceed total receipts.

Section 4. No bill to increase revenue shall become law unless approved by a majority of the whole number of each House by a rollcall vote.

Section 5. The Congress may waive the provisions of this article for any fiscal year in which a declaration of war is in effect. The provisions of this article may be waived for any fiscal year in which the United States is engaged in military conflict which causes an imminent and serious military threat to national security and is so declared by a joint resolution, adopted by a majority of the whole number of each House, which becomes law.

Section 6. The Congress shall enforce and implement this article by appropriate legislation, which may rely on estimates of outlays and receipts.

Section 7. Total receipts shall include all receipts of the United States Government except those derived from borrowing. Total outlays shall include all outlays of the United States Government except for those for repayment of debt principal. The receipts (including attributable interest) and outlays of the Federal Old-Age and Survivors Insurance and the Federal Disability Insurance Trust Funds (as and if modified to preserve the solvency of the Funds) used to provide old age, survivors, and disabilities benefits shall not be counted as receipts or outlays for purposes of this article.

Section 8. This article shall take effect beginning with fiscal year 2002 or with the second fiscal year beginning after its ratification, whichever is later.

And on February 17, 2005, a similar measure to that of January 7, 1997 was introduced with 24 sponsors, differing in these sections:

Section 6. The Congress shall enforce and implement this article by appropriate legislation, which may rely on estimates of outlays and receipts. The appropriate committees of the House of Representatives and the Senate shall report to their respective Houses implementing legislation to achieve a balanced budget without increasing the receipts or reducing the disbursements of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund to achieve that goal.

Section 7. Total receipts shall include all receipts of the United States Government except those derived from borrowing. Total outlays shall include all outlays of the United States Government except for those for repayment of debt principal.

Section 8. This article shall take effect beginning with the later of the second fiscal year beginning after its ratification or the first fiscal year beginning after December 31, 2009.

And on July 13, 2005, with 123 sponsors, a version whose first five sections were as those of the previous two above, but which continued thus:

Section 6. The Congress shall enforce and implement this article by appropriate legislation, which may rely on estimates of outlays and receipts.

Section 7. Total receipts shall include all receipts of the United States Government except those derived from borrowing. Total outlays shall include all outlays of the United States Government except for those for repayment of debt principal.

Section 8. This article shall take effect beginning with the later of the second fiscal year beginning after its ratification or the first fiscal year beginning after December 31, 2010.

Before, between, and since, markedly different measures have been proposed (albeit typically with fewer Congressional sponsors). For example, Anthony Hawks of the libertarian Cato Institute, with the intention of establishing a self-enforcing mechanism to reduce deficit spending, proposed the following text in Cato Institute's Policy Analysis #487:

Section 1. For purposes of this article, the budget of the United States for any given fiscal year shall be deemed unbalanced whenever the total amount of the debt of the United States held by the public at the close of such fiscal year is greater than the total amount of the debt of the United States held by the public at the close of the preceding fiscal year.

Section 2. If the budget of the United States is unbalanced for any given fiscal year, the President may separately approve, reduce or disapprove any monetary amounts in any legislation that appropriates or authorizes the appropriation of any money drawn from the Treasury, other than money for the legislative and judicial branches of the United States Government, and which is presented to the President during the next annual session of Congress.

Section 3. Any legislation that the President approves with changes pursuant to section 2 of this article shall become law as modified. The President shall return with objections those portions of the legislation containing reduced or disapproved monetary amounts to the House where such legislation originated, which may then, in the manner prescribed under section 7 of Article I for bills disapproved by the President, separately reconsider those reduced or disapproved monetary amounts.

Section 4. The Congress shall have the power to implement this article by appropriate legislation.

Section 5. This article shall take effect on the first day of the next annual session of Congress following its ratification.

Section 6. This article shall be inoperative unless it shall have been ratified by the legislatures of three-fourths of the several States within seven years from the date of its submission to the States by Congress.

According to the analysis, current Balanced Budget Proposals contain no enforcement mechanism and favor increased taxes over spending reduction. Author Anthony Hawks prefers the Balanced Budget Veto Amendment method which favors reduced spending and minimizes opportunities for circumvention.

History

The Articles of Confederation and Perpetual Union had granted to the Continental Congress the power

to borrow money, or emit bills on the credit of the United States, transmitting every half-year to the respective States an account of the sums of money so borrowed or emitted

And, with this as a model,[2] Article I, Section 8, Clause 2 of the Constitution grants to the United States Congress the power

To borrow money on the credit of the United States;

At the time that the Constitution came into effect, the United States had a significant debt, primarily associated with the Revolutionary War. There were differences within and between the major political coalitions over the possible liquidation or increase of this debt. As early as 1798, Thomas Jefferson wrote

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government; I mean an additional article taking from the Federal Government the power of borrowing. I now deny their power of making paper money or anything else a legal tender. I know that to pay all proper expenses within the year would, in case of war, be hard on us. But not so hard as ten wars instead of one. For wars could be reduced in that proportion; besides that the State governments would be free to lend their credit in borrowing quotas.

(Although Jefferson made a point of seeking a balanced budget during the early years of his administration, he seems to have later reversed himself in purchasing the Louisiana Territory. But note also that he made no exception for war, but rather saw the requirement of maintaining a balanced budget as a salutary deterrent.)

The issue of the federal debt was next addressed by the Constitution within Section 4 of the Fourteenth Amendment (proposed on June 13, 1866 and ratified on July 9, 1868):

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

On May 4, 1936, Representative Harold Knutson (R-Minnesota) introduced a resolution in support of a Constitutional Amendment that would have placed a per capita ceiling on the federal debt in peacetime.

Article V of the Constitution specifies that if the legislatures of two-thirds of the states petition Congress for a constitutional amendment on the same subject, then Congress must call a convention for proposing that amendment. Between April 29, 1975 and January 29, 1980, 34 petitions from 30 different state legislatures were submitted to Congress on the subject of a Balanced Budget Amendment. The participating states were Alabama, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Maryland, Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wyoming. Since 1980, two additional state legislatures have petitioned Congress for a convention for a Balanced Budget Amendment, bringing the total number of participating states to 32. If two additional state legislatures were to petition, then the required two-thirds majority of states would be reached (34 out of 50 states) and Congress would be required to call a convention to propose a Balanced Budget Amendment. In December 2008, the Ohio legislature considered making Ohio the 33rd state to petition for a convention on the subject, but decided against it.

Deficit spending versus balancing the budget

Unlike the constitutions of most U.S. states, the United States Constitution does not actually require the United States Congress to pass a "balanced" budget, one in which the projected income to the government through taxes, fees, fines, and other revenues equals the amount proposed to be spent. This has led to "deficit spending" and the creation of a national debt. Except for a short period during the presidency of Andrew Jackson, since its inception the United States Government has always been in debt. During the second term of President Bill Clinton at the end of the twentieth century, the President and Congress managed to craft a budget surplus. This surplus was a 'budgeted surplus' only, however, as the outstanding national debt has increased every year since 1957.

Keynesians and deficit spending

Supporters of the current system state that the federal government, unlike state governments, needs the ability to increase the movement of money in the economy in times of economic crisis. This is in keeping with Keynesian theory, which holds that the government can and should engage in massive deficit spending during a recession as a means of economic stimulus. They also state that the federal government, unlike the states, has the sole power and authority to wage war, and must defend the country even if this means going further into debt, and perhaps under circumstances which could not be contemplated by any supermajority bypass provisions which are in most "BBA" proposals.

Many also state that as a percentage of gross domestic product both the current levels of deficit spending and overall national debt are acceptable, and even could be considered low in historic terms. At one time, those largely unworried by deficits also said that the deficit was largely irrelevant because it was "the debt we owe ourselves", meaning that it was largely owed to U.S.-based investors.

Support over the years

As a political issue, the deficit, national debt, and the proposed Balanced Budget Amendment have ebbed and flowed in levels of discussion and the proposed amendment has varied greatly in level of support. The modern discussion of the issue seems to have been started by the Republican Party in response to the "guns and butter" policies of President Lyndon B. Johnson, who simultaneously announced his desires for "Great Society" social programs while prosecuting the Vietnam War. Johnson also pushed for Congressional enactment of a surtax as well as other tax increases which allowed him to leave office in 1969 with a balanced budget (plus a small surplus) on the books. This was the last time the United States would see a balanced budget for nearly three decades.

Nixon and Carter

Deficit spending resumed under Richard Nixon, who had become president by the time that the 1969 surplus was known. Nixon's advisors chose to fight inflation rather than to maintain a balanced budget. Nixon was famously quoted as saying, "We are all Keynesians now," with regard to the budget deficit that his administration began to accumulate during years of mild recession. (He also imposed the first peacetime wage and price controls, mandatory petroleum allotments, and many other features of a planned economy).

With the distractions of the Watergate scandal and the budget deficit relatively small, however, most criticisms were sidelined until the administration of Jimmy Carter. During Carter's presidency, the term "stagflation" enjoyed widespread use as the economy stagnated even among increased inflation rates. This economic situation had been previously unheard of in the United States where increasing prices and wages had generally been seen during times of economic growth. Republicans began to make much mention of "Democratic deficits" and proposed the Balanced Budget Amendment as a cure. This was politically costless for them as long as they controlled neither house of Congress nor the Presidency, as they knew that it would not be enacted.

During this time period, many liberal Democrats began to call for a Balanced Budget Amendment, including Governor Jerry Brown of California, who ran for president against Carter in 1980, and then-Congressman Paul Simon, who, upon his election to the U.S. Senate, would write the version of the amendment that came closest to passing.

Reagan versus Congress

The 1980 presidential election gave the presidency to Republican Ronald Reagan and control of the Senate to the Republicans. Passage of the amendment started to seem more possible, though passage of a constitutional amendment requires a two-thirds majority in both houses of Congress. Deficit spending soared in the 1980s. A program agreed to by Administration and Congressional leaders which was supposed to entail two dollars of spending cuts for every dollar of tax increases was an abysmal failure, and deficits soared further. It became apparent that Congress had no intention of passing the Balanced Budget Amendment.

The amendment's backers, far from despairing, said that it was needed more than ever. They began a plan to make an "end run" around Congress, for the U.S. Constitution also allows two-thirds of state legislatures to petition for a new constitutional convention to be called for the purpose of writing proposed amendments to the Constitution, a procedure which has never happened at the federal level since the original constitutional convention of 1787. Many people were appalled at the concept; some constitutional scholars suggested that such a body could not be limited to its ostensible purpose and could largely rewrite the Constitution, perhaps removing or reducing the Bill of Rights, a fear that backers described as being totally groundless, since any proposed changes would still have to be approved by three quarters of the states, which would presumably doom any attempt to end basic constitutional freedoms.

Detractors also noted that there was no mechanism in place by which to select delegates to any such convention, meaning that the states might choose to select them in a way which tended to subvert democracy. Backers also produced their own constitutional scholars stating that limiting such a convention was perfectly constitutional, that it could be limited to whatever purpose the states had called it for, and that states would be free to select the delegates to represent them, as was the case in 1787.

Gramm-Rudman-Hollings Act

Perhaps motivated by the number of state legislatures calling for such a convention approaching the required two-thirds, and recognizing its inability to make sufficient cuts on its own initiative to balance the budget, Congress responded in 1985 with the Gramm-Rudman-Hollings Act, named for its Senate sponsors, which called for automatic cuts in discretionary spending when certain deficit-reduction targets were not met. This act soon became a convenient target for opponents of all stripes, who blamed it for government failing to meet perceived needs, for not abolishing the deficit, and anything else that might be wrong with government. When it began to affect popular programs, and was partially overturned in the courts, it was first amended to postpone the strength of its effects until later years, and then repealed in its entirety.

George H. W. Bush and Ross Perot

President George H. W. Bush, in part to help ensure Congressional support for the Gulf War, agreed to turn back on a campaign promise of no tax increases, reportedly in part because he saw disaffection from his conservative base due to the looming deficit.

Deficit spending continued, but was no longer much of an issue until the presidential bid of Ross Perot during the 1992 presidential election. Perot made the deficit, and his plans to eliminate it, the major issue of his campaign, along with his protectionist plans to reduce and then eliminate the trade deficit. Many supporters of the Balanced Budget Amendment flocked to the Perot camp. However, after Perot failed to carry a single state, he faded from the political scene and when appearances were made, focused more on the trade deficit issue.

Clinton and a budget surplus

The Republican takeover of Congress in 1994 led to a push for a balanced budget as part of the Republican Contract with America campaign, continuing deficit reductions by President Clinton consistent with his 1992 campaign promise. Despite political conflicts with President Clinton, the Legislature and the Chief Executive reduced the deficit.

At this time, Americans viewed reducing the deficit one of the most important public policy objectives. In March 1995, a Balanced Budget Amendment passed the House of Representatives and came within one vote of passing the Senate.

Out of office, former House Speaker Newt Gingrich called for continued payments toward the debt with a view to paying it off entirely. Ross Perot's less effective 1996 presidential bid was in part evidence of the declining significance of the deficit, and hence the Balanced Budget Amendment, as an issue.

In his final State of the Union, President Clinton said the United States should continue to balance its books and pay off the debt entirely.

Deficits under George W. Bush and Barack Obama

Subsequent tax cuts during the Bush administration, the technology downturn which began impacting the economy in mid-2000, and increased military and other spending have eliminated Clinton-era surpluses. Both the deficit and debt grew to the largest in U.S. history, although not as a percentage of GDP. In fiscal years starting September 30, 2002 and ending September 30, 2006 the national debt increased nearly 50%..

In the first year of Barack Obama's presidency, the deficit is expected to reach $1.75 trillion. President Obama does not intend to balance the budget during his term(s) but does plan to lower the deficit to $533 billion by the year 2013.

Support

A Balanced Budget Amendment has the support of several legislators, including South Carolina Republican Senators Lindsey Graham and Jim DeMint, who introduced a Balanced Budget Amendment to the Constitution in 2007.

Chuck Norris is also a vocal supporter of a Balanced Budget Amendment. In his weekly column for the Web site Human Events, he wrote "we must demand our representatives seek a balanced-budget amendment to the Constitution, which will keep the government living within its means."

While Professor Larry J. Sabato has not personally indicated his position on a Balanced Budget Amendment, in A More Perfect Constitution he argues that the issue should be debated at a national constitutional convention because the current system of rising deficits and national debt is unsustainable.

Various non-profit organizations also work towards passing a Balanced Budget Amendment, including Americans for a Balanced Budget Amendment.

See also

• Balanced Budget Veto Amendment
• Deficit spending
• George Snyder

External links

• Read Cato's Policy Analysis and Proposal of the Balanced Budget Veto Amendment
• Americans for a Balanced Budget Amendment
• Senator Paul Simon Papers at Southern Illinois University Carbondale Special Collections Research Center