Balanced Budget Constitutional Amendment

Background: CRS – Balanced Budget Constitutional Amendment (Jan 2018)

It has become an axiom of political life in Washington that whenever budget deficits get seriously out of control, “budget process reform” proposals proliferate.  Administration officials and Members of Congress look to procedural mechanisms to get deficits under control. But as Sid Brown, the first Chief of Budget Review at the Senate Budget Committee, used to say, no procedural reform can substitute for the political will to make hard choices.

To be fair, certain budget process reforms have made a difference—the case in point being the Budget Enforcement Act of 1990 (BEA).  The BEA’s spending caps and pay-as-you-go (PAYGO) requirements — that all new entitlement spending and tax cuts had to be paid for — were an important factor in reaching a surplus in the late 1990s. Nevertheless, budget process reform proposals are often political diversions from the real work of setting national priorities, assessing program results, and crafting responsible budgets. Ultimately, the policy decisions incorporated in the deficit reduction agreements of 1990, 1993, and 1997 were responsible for driving deficits down and achieving surpluses.

The clearest example of a budget process reform that is more political theater than substance is the Balanced Budget Constitutional Amendment (usually referred to as “Balanced Budget Amendment,” or BBA).

Congressional interest in a constitutional amendment to require a balanced Federal Budget emerged in the early 1980s, when deficits began to soar. In the ensuing years, one or both houses of Congress voted on various forms of the BBA five times: 1982, 1986, 1992, 1995, and 1997.

The BBA nearly passed Congress in 1995, achieving the required two-thirds support in the House, but it fell two votes short of the required two-thirds support in the Senate. (Article V of the U.S. Constitution requires a two-thirds vote of the House and Senate, and ratification by three-fourths of the States to amend the Constitution.)

In the 1980s, the country also came perilously close to a Constitutional Convention (the first since 1787), when nearly two-thirds (32 of the required 34) State legislatures passed resolutions calling for a Constitutional Convention to consider a Balanced Budget Amendment. Fortunately, we have never reached the two-thirds threshold that would have compelled the convening of a Convention, since this could have opened up a Pandora’s box of additional constitutional amendments.  (The danger of a Convention still exists, with advocates claiming 28 “active resolutions” according the the Congressional Research Service.)

The Balanced Budget Amendments considered by Congress varied in their respective details, but generally all included the following common elements:

  • Directing the President to submit a balanced budget to Congress;
  • Prohibiting total outlays from exceeding total revenues for a fiscal year unless three-fifths of the House and Senate vote to waive the requirement; and
  • Waiving the balanced budget requirement in the event of a declaration of war.

Various other provisions of BBA proposals (including H.J.Res. 2 in 2018) would:

  • require a three-fifths vote to increase the debt ceiling;
  • require a roll-call vote on tax increases; and
  • extend the declaration of war waiver to “imminent and serious” military threats.

Proponents have, for years, argued that Congress and the President need the authority of a constitutional balanced budget requirement to force Congress and the President to be fiscally responsible. However, the four budget surpluses achieved between FY 1998 and FY 2001 proved that a constitutional amendment is unnecessary. The surpluses were achieved because Congress and the President passed major deficit reduction legislation in 1990, 1993, and 1997 and enacted the ongoing fiscal restraints of the Budget Enforcement Act of 1990.

In addition to being unnecessary, the BBA could do serious harm for several reasons:

  1. The BBA is bad economic policy. It makes no allowance for the reality that government spending goes up and tax revenues go down during a recession. The difficulty of getting a three-fifths vote in both chambers to secure a balanced budget waiver could force spending cuts and tax increases during a recession which, most economists agree, would deepen the recession.
  2. The BBA constrains public policy. The budgetary straitjacket would limit the Federal government’s ability to respond to natural disasters, international crises, and long-term defense needs. In addition, it would prohibit the Federal government from borrowing to finance investments with a long-term pay-off, such as infrastructure investment—a practice available to every State and local government.
  3. The BBA would damage the Federal Government’s separation of powers. It would involve unelected Federal judges in spending and tax policy, and it could be construed as giving the President constitutional authority to impound appropriations—a dangerous erosion of Congress’ constitutional authority over Federal spending and tax policy.
  4. The BBA would force midyear draconian cuts in essential Federal services. For example, if early projections of a balanced budget are replaced by mid-year estimates of a $150 billion deficit, the consequences could be serious. Since entitlement benefits must, by law, be paid, the burden of cutting $150 billion in spending—halfway through the year—would fall disproportionately on discretionary spending — only one-third of the budget — with drastic cuts, or even shutdowns, of vital programs.
  5. Versions of the BBA that require a three-fifths vote to increase the debt ceiling would allow a minority of either chamber to hold the Federal Treasury—and America’s creditworthiness—hostage whenever the nation’s finances require the issuance of additional debt.
  6. The BBA would diminish the public’s respect for the U.S. Constitution by allowing Congress to waive the balanced budget requirement (by a three-fifths vote). Consider press reports that Congress is yet again “waiving” the Constitution’s balanced budget requirement. There are no other examples where Congress votes to waive a constitutional requirement.

The trillion-dollar-deficits of the current decade have renewed calls for a Balanced Budget Constitutional Amendment. Hopefully, Congress will not advance this phony and dangerous meddling with the U.S. Constitution to create the illusion of having “taken action” to restore fiscal responsibility. Real fiscal responsibility requires a serious, bipartisan effort that addresses all areas of the budget.  This unfortunately has not occurred since 2010 when two bipartisan commissions  — Domenici-Rivlin and Simpson-Bowles — proposed major spending and tax reforms.