Balanced budget amendment

The Balanced Budget Amendment is a proposed amendment 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.

Unlike the constitutions of most 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.

This fact has many critics. Briefly, their arguement against this practice is usually twofold – the first point being that debt requires large portions of governmental revenues going not to any program or need but merely to pay interest to investors and the second being that the U.S. Government's ability to incur essentially limitless debt leads invariably to the expansion of government into areas which they believe the Founders never intended it to enter, such as the realm of social policy. They also note that many taxpayers themselves live off of what their income is, or even considerably less, and that government should do likewise. Even those taxpayers who incur debt, they note, are limited by considerations of creditworthiness and repayment, which hardly affect the U.S. Government because the results of its going into default are essentially regarded to be unthinkable, and it is therefore considered an event that will not happen, because it would be politically impossible to permit it. The supporters of a "balanced budget amendment" are often conservatives or libertarians whose major motivation is to reduce the size and role of government, or at least limit its growth.

Supporters of the current system state that the federal government, unlike state governments, needs the ability to control the size of the money supply. Followers of Keynesian economics believe that the government should deliberately engage in deficit spending during times of recession as a method of economic stimulation. 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 national 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 defecit was largely irrelevant because it was "the debt we owe ourselves," meaning that it was largely owed to U.S.-based investors. Recent studies have shown that this in increasingly not the case; many holders of U.S. bonds are Japanese, Europeean, and even Chinese.

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 support level. The modern discussion of the issue seems to have begun by the Republican Party as a reaction 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 the enactment through the United States Congress of a surtax and other tax increases that resulted in his last budget, that for 1969, being balanced with a small surplus, the last time that this was to occur for about three decades.

Deficit spending resumed under Richard M. Nixon, who had become President by the time that the 1969 surplus was known. Nixon's advisors made fighting inflation a higher priority than a balanced budget, and Nixon was famously saying that "We are all Kenyesians now" with regard to the budget deficit that his administration began to run as it fought a mild recession. (He also imposed the first peacetime wage and price controls, mandatory petroleum allotments, and generally many features of a command economy). However, with the distractions of Watergate and the budget deficit relatively small, most concerns about it were laid aside until the adminstration of Jimmy Carter. During his term, the term "stagflation" first became current as the economy stagnated even as inflation greatly increased, something previously unheard of in the United States, where increasing prices and wages had generallly 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.

However, when the 1980 U.S. Presidential election gave Republicans both a new President in the person of Ronald Reagan and control of the United States Senate, suddenly the odds for the amendment did not seem so long (even though passage of a constitutional amendment requires a two-thirds majority in both houses of Congress). Deficit spending soared under a composite of Republican-promised tax cuts and Democratic-favored new programs. 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 and "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 proceedure 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 obstensible 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 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 chose 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.

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 initative to balance the budget, Congress responded 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 defecit, and anything else that might be wrong with government. When it began to affect popular programs, and was partially overturned it the courts, it was first amended to postpone the strength of its effects until later years, and then repealed in its entirity. President George H. W. Bush, in part to help insure Congressional support for the Gulf War, agreed to turn back on a campaign promise ("Read my lips -- no new taxes!") and agree to a tax increase, again in return for a promise of spending cuts which proved to be phantom, possibly in part because he saw disaffection from his conservative base due to the looming deficit to be more damaging than violation of his tax promise. If so, this proved to be a miscalculation.

Deficit spending continued, but was no longer much of an issue until the maverick Presidential bid of H. Ross Perot in 1992. 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; most were stunned when he suspended his campaign in August, 1992, and were thrilled when he re-entered the race in October just in time for the Presidential debates, where he again pounded the candidates of the major parties, President George H. W. Bush and governor of Arkansas Bill Clinton on the deficit issue. However, after Perot failed to carry a single state, he temporarily faded from the scene somewhat and when he made appearances, focused more on the trade deficit issue.

Clinton, perhaps stirred by the traction Perot had gotten on the issue, despite having run on the promise of a middle-class tax cut, instead proposed a budget with a tax increase, albeit one largely concentrated on upper-income persons. The combination of this tax increase and major economic growth made for a balanced budget by early in Clinton's second term, considerably earlier than what his own projections for this had indicated, and afterwards, a surplus which actually allowed the retirement of some government debt. Momentarily, the deficit issue faded from view. Out of office, former House Speaker Newt Gingrich called for continued payments toward the debt with a view to paying it off entirely. Perot's less effective 1996 Presidential bid was in part evidence of the declining signifcance of the deficit, and hence the Balanced Budget Amendment, as an issue.

However, events seemed to conspire against long-term budget surplus and the retirement of the national debt. Once President George W. Bush entered office, he began a program of tax cuts reminiscient of Reagan's. Following the September 11, 2001 attacks, suddenly restraining governmental spending seemed to be a low priority. Even though deficits are now the largest in U.S. history in nominal dollars (although still below those of the early Reagan years in constant ones), fiscal conservatives are appalled. However, the issue of deficit reduction or a Balanced Budget Amendment seems to have little traction as a U.S. political issue as of 2004. It will most likely take another polarizing figure such as Perot was in the 1990s to alter this situation to any significant degree, because neither of the major parties seems interested in making it an important issue in the 2004 Presidential campaign.