Economics, Taxes and Spending

What’s wrong with the Senate GOP’s Balanced Budget Amendment?



Senate Republicans have introduced a balanced budget amendment to the Constitution. The balanced budget part is great; it’s the rest that will sink the idea.

The Senate GOP proposal would do two things: First, require a balanced budget each year, and second, cap government expenditures at 18% of gross domestic product.

The usual rap against a BBA is that it would prevent the federal government from stabilizing the economy. But this objection can be overcome, say, by exempting automatic stabilizers like unemployment insurance or by requiring a balanced budget over the business cycle rather than annually.

The real problem with the GOP’s proposal is that it couples a popular and potentially passable provision—the balanced budget part—with a requirement that spending never exceed 18% of GDP, effectively an unconditional surrender by Democrats to Republicans in the debate over the size of government.

I’m all for small government and I’d go lower than 18% of GDP if I were in charge, but any Democrat would be out of his mind to accept that limitation. And since Senate Democrats have not lost their minds, the whole proposal—including the balanced budget part—will go nowhere.

And that may be by design: No one, in either political party, has any plans on how to balance the budget in the short-term. Even the House GOP’s pledge to balance the budget over 10 years would require some serious means testing of entitlements, something I don’t think is very good policy.

The merit of a balanced budget amendment is that it’s agnostic regarding the size of government. It merely says that, whatever amount of government you want, you have to pay for it. That’s an idea that’s worth an up-or-down vote.

5 thoughts on “What’s wrong with the Senate GOP’s Balanced Budget Amendment?

  1. I wish the GOP would simply resolve to impose the discipline of the debt ceiling. That would force a balanced budget (i.e. we would only be able to spend up to the $2.6 trillion we collect in annual receipts), without the hassle of amending the constitution. If we’re serious about a balanced budget, we already have the mechanism in place to force one — the debt ceiling!

  2. Instead of amending the constitution to force a balanced budget, why don’t we just adhere to the debt ceiling? Doesn’t that result in a balanced budget? As I understand it, once we hit the debt ceiling, the federal government can only spend up to the $2.6 trillion it collects in annual receipts. So, doesn’t the mechanism for a balanced budget already exist? The debt ceiling?

  3. ” The usual rap against a BBA is that it would prevent the federal government from stabilizing the economy. ”

    If the economy needs stabilizing, government has failed, government debt stabilizes bad government, not the economy.

    ” cap government expenditures at 18% of gross domestic product. ”

    Start government shrinking wholesale with a gold dollar, working people control what a dollar buys, not government, price controls are impossible. A gold dollar unites government’s interest with everyone’s, with the success of commerce, the minimizing of government.

    ” What’s wrong with the Senate GOP’s Balanced Budget Amendment? ”

    2 things:

    1) The 2nd part says nothing about principles of government, doesn’t belong in a constitution.

    2) A balanced budget is incompatible with fiat money, the 2nd part is only an issue because of fiat money. The US Constitution says regulate money’s value, the 1913 Federal Reserve Act changed the subject, said regulate how much money there is. No one at the Federal Reserve can say what a dollar is, if they did they’d be regulating money’s value, the constitutional directive means a standard of value. Fiat money constantly loses value no matter what, the Federal Reserve is for putting as much distance as possible between money’s value and the US government, guaranteed bad government and government debt.

  4. Study my Letter on [email protected]. (Search; Crazy Inbox)
    Various Economic Experts, such as Prof. Laurence Kotlikoff of Boston University, claim that the so-called “national debt” is actually about $228 Trillion, & is going up about $1 Trillion a month.
    What Balanced Budget Amendment??????

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