An Improved Balanced Budget Amendment

By McCulloch, J. Huston | Independent Review, Fall 2012 | Go to article overview

An Improved Balanced Budget Amendment


McCulloch, J. Huston, Independent Review


The national debt of the U.S. government has doubled to $15.2 trillion in the past four years. The statutory national debt ceiling has proven ineffective in restraining runaway deficit spending, so that a constitutional amendment that requires a supermajority of both houses of Congress to raise the debt ceiling is long overdue. However, an ineffective or ill-written balanced budget amendment would be worse than none at all.

On November 28, 2011, 62 percent of the House of Representatives voted in favor of a proposed balanced budget amendment introduced by Representative Bob Goodlatte (R-Va.). Although this majority was short of the two-thirds majority required for passage, twenty-five Democrats joined all but four Republicans, so it had significant bipartisan support. An identical proposal actually passed the House and nearly passed the Senate back in 1995 and was reconsidered in 1997.

It was fortunate, however, that this well-intentioned proposed amendment, known as House Joint Resolution 2 (HJR2), did not pass because a key provision in it is unworkable. Furthermore, it does nothing to prevent games of budgetary chicken that threaten to shut down the entire federal government, and it contains a gaping loophole that allows the Federal Reserve System to evade its intent easily.

For comparison, HJR2 is included here as exhibit A, and a greatly strengthened and clarified improved balanced budget amendment that corrects these deficiencies is presented as exhibit B at the end of the article.

The National Debt Ceiling

Section 1 of HJR2 would require the budget to balance every fiscal year unless a three-fifths majority of both Houses approves of the deficit. However, this provision is unworkable because one cannot identify which of several appropriations is the one that drives expenditures over receipts and therefore requires a three-fifths vote. Furthermore, fluctuations in the timing of receipts and expenditures may create surpluses in one year that ought to be carried over to the next year, yet such carryover is prohibited by this wording. The proposed improved amendment eliminates this section altogether.

Section 2 of HJR2 assumes that the national debt has a ceiling and requires a three-fifths vote of both houses to increase it. This provision contains the amendment's real teeth, and therefore it has been built into section 1 of the improved amendment. A hard limit on outstanding debt means that outlays cannot exceed receipts, so this limit makes section 1 of HJR2 entirely redundant. However, HJR2 section 2 simply states that there shall be a "national debt limit," not that it may not be exceeded. This defect has been corrected in section 1 of the improved amendment. Furthermore, HJR2 does not state what the initial value of the debt limit should be. The improved amendment gets down to business immediately by setting the initial limit at the value of the debt on the date of ratification. If this limit is deemed too harsh, the initial limit can instead be set a few percentage points higher than the actual debt on the date of ratification.

The No-Chicken Mechanism

A big weakness of the existing statutory national debt limit has been that it often leads to a game of budgetary chicken in which each faction threatens to shut down the entire government if it does not get its way. This outcome occurred in 1999 and again in 2011, and HJR2 would do nothing to prevent the recurrence of such crises.

Section 2 of the improved amendment corrects this defect simply by requiring the president to "impound any appropriations as necessary and expedient to remain within said limit." This provision gives the president not only the authority but also the responsibility to prioritize which government expenditures are essential and which are expendable. He may gore any sacred-cow spending boondoggle, be it a bridge to Ketchikan or an unnecessary military system, whenever the national debt limit is in danger of being breached. …

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