Thirty years ago, Congress failed by just one vote to send to the states a constitutional amendment requiring a balanced budget. Today, federal debt held by the public stands at $29 trillion. As a percentage of the economy, it has doubled since 1996. When you add in other liabilities for federal employee pensions and health care, not even including the entitlement programs of Social Security and Medicare, the federal government’s liabilities extend to $45.5 trillion.
The federal government’s financial position is dire by any measure. Even adding assets (cash, inventory, loans receivable, and equipment, but not federal land) leaves them at a net worth of negative $40 trillion. Future Social Security and Medicare shortfalls for those already alive amount to over $65 trillion. So the unfunded future obligations of the federal government come to over $800,000 per US household.
A balanced budget amendment (BBA) would require Congress to stabilize the federal debt. Since Congress won’t voluntarily do it, it might be the only option to prevent massive tax increases and inflation within the next 30 years. But Congress repeatedly fails to take action. Why?
The main reason is that Democrats oppose it. The last time the House voted on a BBA, it won a majority, but not the two-thirds needed to advance a constitutional amendment. Democrats voted against it, 178 to six.
The Democrats might have been right to oppose it. The law would have required a balanced budget every year, unless Congress waived it by a three-fifths vote of each House or by a joint resolution that the provisions of the BBA would not apply during a military conflict. It also would have required a three-fifths vote to raise the debt ceiling.
Since there is no hope that Congress could manage to balance the budget in a single year (the just-closed fiscal year’s deficit is projected to have been $1.9 trillion), this amendment would have effectively required a bipartisan three-fifths vote to pass a budget every year. Sound familiar? As of this writing, Senate Democrats cannot agree with Republicans to pass a continuing resolution, which requires a three-fifths vote, and as a result, the government is shut down.
A better BBA would eliminate shutdowns and build in enough flexibility to make it unnecessary to override its provisions. Rep. Jodey Arrington’s 2024 resolution would have done some of this, but it never got a vote. It would have limited spending to the prior-three-year average of revenue plus population and inflation, built in a 10-year gradual closure of the deficit after ratification, and required a two-thirds vote for override.
Switzerland’s debt brake is an even better idea to adapt. It allows expenditures to equal no more than the revenues that would be expected from trend GDP. In other words, deficits are allowed during times of recession, and surpluses are expected during times of peak growth.
A flexible debt brake is more likely to be honored than a strict, every-year balanced budget rule. And one of the counterintuitive insights of rational-choice political science is that a higher-spending “reversion point” makes political actors less likely to vote for higher spending. For example, if we eliminated government shutdowns and simply legislated that whenever a budget fails to pass, the previous year’s budgeted expenditures would carry on, then defeating a budget would be a more tolerable option. The decisive voter in Congress would be less likely to acquiesce to high spending as the price to pay to avoid an intolerable shutdown.
Most Democrats are true believers in Keynesian aggregate demand management through fiscal policy. The debate among economists about the effectiveness of fiscal versus monetary policy goes on, but there is no need to resolve that debate for all time in the Constitution. A cyclically adjusted balanced budget amendment would address the concerns of the pro-fiscal stimulus camp while not foreclosing the possibility of even stricter fiscal rectitude if there is a congressional majority for it. Thus, a Swiss debt brake-type proposal could get the bipartisan support needed to advance a constitutional amendment.
It’s well past time for Congress to get serious about controlling runaway federal debt. A well-crafted, flexible balanced budget amendment to the US Constitution could finally get bipartisan support, end shutdowns, and set a hard limit on the federal government’s fiscal profligacy.