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Advantages & Disadvantages of the Balanced Budget Amendment

Original post by Tom Gresham of Demand Media

A federal balanced budget amendment occasionally emerges as a political hot-button issue. The amendment would require that the U.S. government not run a budget deficit, limiting expenses to the amount of revenue the government brings in. Passage of a balanced budget amendment requires overwhelming congressional and state support, needing the approval of three-fourths of the states and two-thirds majorities in both houses of Congress.

Debt Load

The chief advantage of a federal balanced budget amendment is that it reduces federal debt because it requires the government to operate without a deficit. Advocates argue that a balanced budget amendment would lead to a smaller federal government and less government waste, including a major reduction in pork-barrel spending -- the practice of legislators pushing pet projects for their constituencies. An elimination of the deficit also would reduce the millions of dollars in interest that the government pays on its debt when it runs a deficit.

Taxes and Saving

Over the long term, a balanced budget amendment would lower federal taxes on average, according to "Analyzing the Case for a Balanced Budget Amendment," a research paper by economists from Texas, Princeton and Cornell. Advocates argue that these lower taxes would spur economic growth. In their research paper, the economists also argue that a balanced budget amendment likely would inspire the government to increase savings to hedge against future problems in the broader economy.

Crisis Response

A key concern frequently raised about a balanced budget amendment is the lack of flexibility it allows. Because the budget is required by law to be balanced, the federal government has fewer options for responding to economic developments as they arise. Although an amendment plan is expected to provide flexibility in the event of a war or natural disaster, proposals typically do not have the same room for maneuvering if there is a strong need to stimulate the economy in a downturn.

Social Programs, Tax Volatility and Borrowing

Critics of a balanced budget amendment argue that it would lead to the reduction and elimination of necessary services provided by the federal government, including social services and defense. The authors of the research paper "Analyzing the Case for a Balanced Budget Amendment" also project that an amendment would lead to increased tax volatility, because the government would be forced to hike rates occasionally to meet the amendment's requirements. Also, an amendment would limit the type of borrowing the federal government routinely needs to do to fund important projects in a range of areas, according to a 2011 letter by prominent economists to the president and top congressional leaders.

                   

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About the Author

Tom Gresham is a freelance writer and public relations specialist who has been writing professionally since 1999. His articles have appeared in the "Washington Post," "Virginia Magazine," "Vermont Magazine," "Adirondack Life" and the "Southern Arts Journal," among other publications. He graduated from the University of Virginia.

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