In response to the hectic process in which the federal government was able to avoid defaulting on our debt payments, there are thoughts about creating a balanced budget amendment to avoid future financial problems. This same amendment failed back in 1995 but is this the economic, financial, and political climate to make this change? (NYTimes Article)
It will be interesting to see how this could filter down to impact federal agencies and their budgeting process as well as our program level funding. This could also have an impact on our government operations as the ability to add budget funding for programs and projects through earmarks would be in opposition to this process unless funding sources are identified as part of the bill. States are required to have balanced budgets, so it would make sense that the federal government do the same.
How do you see this taking shape with your job, department or government as a whole?
This is just something else for them to fight about, methinks.
@Andreas, All theories sound great until reality sets in. Wait until a congressperson’s pork is affected and see how long fiscal responsibility lasts.
Most states do have balanced budget amendments – and look at the financial condition of states. I don’t think it would do much to help the current budget debate. Legislators would just find a new way to hide deficits and spending. Does anyone know how this would affect states? I would have to look into it, but I would guess a balanced budget amendment would lead to extreme cuts that would ultimately hurt the states which are already struggling economically. Many federal programs would have to be cut too – I feel like most of this is just good rhetoric and not a solution to the budget crisis.
@Patrick, Rhetoric is the operative word. Congress will always find a way around something it does not want to do.
@Patrick States financial woes were impacted by incorrect revenue forecasts that limited their financial support of operations, not because of having to keep a balanced budget. There are always budgetary impacts on services and programs. I think a balanced budget could help build accountability and transparency in operations. But i also think @stephanie has a point too and this could just be another political battle brewing.
I think it Stephanie is right too, it is for sure going to be part of the conversation and budget debates. I just feel like the debt ceiling debates and balanced budget amendments move us farther away from tackling issues like entitlements and tax reform. Incorrect revenue forecasts are only part of the problem at the state level – having a balanced budget amendment sounds great politically, but not sold of the current feasibility economically. Going to read up on it, maybe I will have a change of heart!
1. Constitutional amendments require a 2/3rds majority in both Houses of Congress just to be sent to the states for consideration. So a BBA would require 290 votes in the House and 67 in the Senate. Not easy but possible, supporters came close in 1995 when it fell short by 1 vote in the Senate.
2. Even if Congress sends a BBA to the states, it requires rdification by 3/4 of the states through a legislative, referendum or convention process. Most of the blue states will reject the amendment for a wide variety of reasons including concerns about losing access to federal funds. By my count the BBA would lose NY, VT, NH, Mass, Conn, RI, De, Md, Mich, Ca, ILL, Or, Wa and Hi in the first week of consideration. Even if it swept all the rest of the states (doubtful) it falls 2 short of ratification.
This Simon Johnson article articulates a number of the fundamental problems with a balanced budget amendment. If I’ve learned anything from the debt ceiling fracas it’s that the handcuffs we build ourselves are often the most dangerous. If people want a balanced budget they can pay more in taxes or reduce consumption of services, and elect representatives that will legislate those priorities. Absent that, not even a constitutional amendment is going to fix the inherent problem of us not wanting to pay for what we consume.
Thanks for sharing the article, Dave. It was a good read – a friend reminded me that a balanced budget does not necessarily mean it’s a good budget.
Sure thing – to try and balance things out, here’s an article from Alex Tabarrok advocating for an UN-balanced budget amendment. Basically while the Feds could still run a deficit during periods of contraction, it would be required to run a surplus during periods of strong growth. Kind of a neat idea, and not untested (Sweden has one).
I think a balanced budget amendment will lead to opening congressional debate on what were formerly executive decisions, like disaster relief and military responses. These need to happen in real time, not the epoch-spanning time congress seems to need to accomplish anything. Furthermore, wasn’t a bba part of the fiscal problems in California? With the partisanship in this congress, relying on something that requires their cooperation with each other is not unwise, it’s stupid.