Yet this is a false analogy. And while most constitutional balanced budget amendments introduced in Congress would allow Congress to waive the balanced budget requirement with a supermajority vote in both chambers, that hardly solves the problem. When the economy slows, federal revenues decline or grow more slowly and the cost of unemployment insurance and other social programs increases, causing deficits to rise. Potential for Serious Economic Harm The nation faces challenging, though manageable, long-term fiscal problems,  but a balanced budget amendment to the U. Finally, it raises troubling questions about enforcement, including the risk that the courts or the President might be empowered to make major, unilateral budget decisions, undermining the checks and balances that have been a hallmark of our nation since its founding. Our nation's critical need to balance the federal budget rises to that level. The vast majority of states have constitutional or statutory mandates to balance their budgets each fiscal period. This paper outlines the risks of a constitutional balanced budget amendment. It is an important factor that dampens the amplitude of our economic cycles. This wealth vastly overshadows the net financial liabilities of the federal, state, and local governments. We just noted that if your income grows faster than your debts, your financial position improves.
Yet over those 33 years, the debt fell from In short, this is not a course the nation should follow. It would threaten significant economic harm, as explained below. The two measures in Fiscal Years , and diverge only slightly. Consider that in December Congress enacted a large tax cut, disproportionately for the benefit of corporations and wealthy investors, by a very close and entirely partisan vote — and now, a few months later, H. When Republicans and Democrats are forced to spend only what we take in, Congress will not be able to sidestep tough decisions about our national priorities. Beyond the economy, a balanced budget amendment would raise other problems. It would involve far more fiscal restraint than is necessary for prudent budgeting. The amendment would force policymakers to cut federal programs, raise taxes, or both when the economy is weak or already in recession — the exact opposite of what good economic policy would advise. The Congressional Budget Office estimated in March that under the Obama administration public debt would rise from However, it has been argued that this official balanced budget only constituted a surplus in the public debt or on-budget , in which the Treasury Department borrowed increased tax revenue from intragovernmental debt namely the Social Security Trust Fund , thus adding more interest on Treasury bonds. Goodlatte has also introduced House Joint Resolution 1 H. Similarly, if your assets grow faster than your debts, your financial position improves. The forum reported that 99 percent disagreed with the proposition. Nixon's advisors chose to fight inflation rather than to maintain a balanced budget. Can it override a presidential veto of such legislation? For example, they draw down savings to make down payments on mortgages, to pay for college tuition, or to support themselves in retirement and, when times are tight, to cover expenses that exceed their current incomes. If a balanced budget were required in , when revenue is projected to be down at Increased expenditures for UI, SNAP, and Medicaid benefits during a recession, when jobs are scarce, not only help the families that receive the benefits, but also help preserve the remaining jobs and incomes of those who produce or sell groceries, school supplies, health care, and other essentials. Fiscal years GDP measurements are derived from December Bureau of Economic Analysis figures which also tend to be subject to revision. For example, when a collapse of the U. 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. To summarize, if required to operate under the same restrictions as the proposed balanced budget amendments, not only would a family be prohibited from taking out a mortgage to buy a house, it would be prohibited from using years of savings to accumulate enough cash to buy a house. It requires that federal programs be cut or taxes increased to offset the automatic stabilizers and prevent a deficit from occurring — pulling money out of the economy at exactly the wrong time, the opposite course from sound economic policy. Beginning with the budget year, during his second term, the federal government ran a yearly budget surplus through FY While this is an extreme case, the required program cuts would be extraordinarily deep under any set of circumstances.
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