Balanced Budget Amendment

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A Balanced Budget Amendment is any one of various proposed amendments 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.

Contents 1 Text 2 History 2.1 References 3 Deficit spending versus balancing the budget 3.1 Criticism 3.2 Keynesians and deficit spending 4 Support over the years 4.1 Nixon and Carter 4.2 Reagan versus Congress 4.3 Gramm-Rudman-Hollings Act 4.4 "Read my lips…" 4.5 Clinton and a budget surplus 5 See also

[edit] Text

There is no one proposed Amendment to which all proponents have agreed. Here, for example, is the text of the version presented to the Senate and to the House of Representatives which (after revision) was approved by the Senate (by a vote of 69 to 31) on 4 August 1982 but supported by an inadequate majority of the House of Representatives (with a vote of 236 to 187) on 1 October 1982:

Section 1. Prior to each fiscal year, the Congress shall adopt a statement of receipts and outlays for that year in which total outlays are no greater than total receipts. The Congress may amend such statement provided revised outlays are not greater than revised receipts. Whenever three-fifths of the whole number of both Houses shall deem it necessary, Congress in such statement may provide for a specific excess of outlays over receipts by a vote directly to that subject. The Congress and the President shall ensure that actual outlays do not exceed the outlays set forth in such statement.

Section 2. Total receipts for any fiscal year set forth in the statement adopted pursuant to this article shall not increase by a rate greater than the rate of increase in national income in the last calendar year ending before such fiscal year, unless a majority of the whole number of both Houses of Congress shall have passed a bill directed solely to approving specific additional receipts and such bill has become law.

Section 3. The Congress may waive the provisions of this article for any fiscal year in which a declaration of war is in effect.

Section 4. The Congress may not require that the states engage in additional activities without compensation equal to the additional costs.

Section 5. Total receipts shall include all receipts of the United States except those derived from borrowing and total outlays shall include all outlays of the United States except those for repayment of debt principal.

Section 6. This article shall take effect for the second fiscal year beginning after its ratification.

Here is a version introduced into the House of Representatives with 160 sponsors on 7 January 1997:

Section 1. Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless three-fifths of the whole number of each House of Congress shall provide by law for a specific excess of outlays over receipts by a rollcall vote.

Section 2. The limit on the debt of the United States held by the public shall not be increased, unless three-fifths of the whole number of each House shall provide by law for such an increase by a rollcall vote.

Section 3. Prior to each fiscal year, the President shall transmit to the Congress a proposed budget for the United States Government for that fiscal year in which total outlays do not exceed total receipts.

Section 4. No bill to increase revenue shall become law unless approved by a majority of the whole number of each House by a rollcall vote.

Section 5. The Congress may waive the provisions of this article for any fiscal year in which a declaration of war is in effect. The provisions of this article may be waived for any fiscal year in which the United States is engaged in military conflict which causes an imminent and serious military threat to national security and is so declared by a joint resolution, adopted by a majority of the whole number of each House, which becomes law.

Section 6. The Congress shall enforce and implement this article by appropriate legislation, which may rely on estimates of outlays and receipts.

Section 7. Total receipts shall include all receipts of the United States Government except those derived from borrowing. Total outlays shall include all outlays of the United States Government except for those for repayment of debt principal. The receipts (including attributable interest) and outlays of the Federal Old-Age and Survivors Insurance and the Federal Disability Insurance Trust Funds (as and if modified to preserve the solvency of the Funds) used to provide old age, survivors, and disabilities benefits shall not be counted as receipts or outlays for purposes of this article.

Section 8. This article shall take effect beginning with fiscal year 2002 or with the second fiscal year beginning after its ratification, whichever is later.

And on 17 February 2005, a similar measure to that of 7 January 1997 was introduced with 24 sponsors, differing in these sections:

Section 6. The Congress shall enforce and implement this article by appropriate legislation, which may rely on estimates of outlays and receipts. The appropriate committees of the House of Representatives and the Senate shall report to their respective Houses implementing legislation to achieve a balanced budget without increasing the receipts or reducing the disbursements of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund to achieve that goal.

Section 7. Total receipts shall include all receipts of the United States Government except those derived from borrowing. Total outlays shall include all outlays of the United States Government except for those for repayment of debt principal.

Section 8. This article shall take effect beginning with the later of the second fiscal year beginning after its ratification or the first fiscal year beginning after December 31, 2009.

And on 13 July 2005, with 123 sponsors, a version whose first five sections were as those of the previous two above, but which continued thus:

Section 6. The Congress shall enforce and implement this article by appropriate legislation, which may rely on estimates of outlays and receipts.

Section 7. Total receipts shall include all receipts of the United States Government except those derived from borrowing. Total outlays shall include all outlays of the United States Government except for those for repayment of debt principal.

Section 8. This article shall take effect beginning with the later of the second fiscal year beginning after its ratification or the first fiscal year beginning after December 31, 2010.

Before, between, and since, markedly different measures have been proposed (albeit typically with fewer Congressional sponsors).

[edit] History

The Articles of Confederation and Perpetual Union had granted to the Continental Congress the power

to borrow money, or emit bills on the credit of the United States, transmitting every half-year to the respective States an account of the sums of money so borrowed or emitted

And, with this as a model,[2] Article I, Section 8, Clause 2 of the Constitution grants to the United States Congress the power

To borrow money on the credit of the United States;

At the time that the Constitution came into effect, the United States had a significant debt, primarily associated with the Revolutionary War. There were differences within and between the major political coalitions over the possible liquidation or increase of this debt. As early as 1798, Thomas Jefferson wrote

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government; I mean an additional article taking from the Federal Government the power of borrowing. I now deny their power of making paper money or anything else a legal tender. I know that to pay all proper expenses within the year would, in case of war, be hard on us. But not so hard as ten wars instead of one. For wars could be reduced in that proportion; besides that the State governments would be free to lend their credit in borrowing quotas.^[1]

(Although Jefferson made a point of seeking a balanced budget during the early years of his administration, he seems to have later reversed himself, to effect the Louisiana Purchase. But note also that he made no exception for war, but rather saw the requirement of maintaining a balanced budget as a salutary deterrent.)

The issue of the federal debt was next addressed by the Constitution within Section 4 of the Fourteenth Amendment (proposed on 13 June 1866 and ratified on 9 July 1868):

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

0n 4 May 1936, Representative Harold Knutson (R-Minnesota) introduced a resolution in support of a Constitutional Amendment that would have placed a per capita ceiling on the federal debt in peacetime.^[2]

[edit] References

1. ^ Jefferson, Thomas; Letter to John Taylor of Caroline, 26 November 1798; reproduced in The Writings of Thomas Jefferson v. 10, editted by Lipscomb and Bergh.[1]
2. ^ House Joint Resolution 579, 74th Congress, 2d session; reproduced in Report 105-3, 105th Congress, 1st session, 3 February 1997, pp. 3–7.

[edit] Deficit spending versus balancing the budget

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. At one time, President Bill Clinton mananged to create a balanced budget for the national government.

[edit] Criticism

The practice of deficit spending has many critics. Their argument 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, the critics 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.

[edit] Keynesians and deficit spending

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 could 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 domestic 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 deficit 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 is increasingly not the case; many holders of U.S. bonds are Japanese, European, and even Chinese.

[edit] Support over the years

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 level of support. The modern discussion of the issue seems to have been started by the Republican Party in response 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 Congressional enactment of a surtax as well as other tax increases which allowed him to leave office in 1969 with a balanced budget (plus a small surplus) on the books. This was the last time the United States would see a balanced budget for nearly three decades.

[edit] Nixon and Carter

Deficit spending resumed under Richard Nixon, who had become president by the time that the 1969 surplus was known. Nixon's advisors chose to fight inflation rather than to maintain a balanced budget. Nixon was famously quoted as saying, "We are all Keynesians now," with regard to the budget deficit that his administration began to accumulate during years of mild recession. (He also imposed the first peacetime wage and price controls, mandatory petroleum allotments, and many other features of a planned economy).

With the distractions of the Watergate scandal and the budget deficit relatively small, however, most criticisms were sidelined until the administration of Jimmy Carter. During Carter's presidency, the term "stagflation" enjoyed widespread use as the economy stagnated even among increased inflation rates. This economic situation had been previously unheard of in the United States where increasing prices and wages had generally 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.

During this time period, even many liberal Democrats began to call for a Balanced Budget Amendment, including Governor Jerry Brown of California, who ran for president against Carter in 1980, and then-Congressman Paul Simon, who, upon his election to the U.S. Senate, would write the version of the amendment that came closest to passing.

[edit] Reagan versus Congress

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, passage of the amendment started to seem more possible (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 an "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 procedure 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 three quarters of 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.

[edit] Gramm-Rudman-Hollings Act

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 initiative to balance the budget, Congress responded in 1985 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 in the courts, it was first amended to postpone the strength of its effects until later years, and then repealed in its entirety.

[edit] "Read my lips…"

President George H. W. Bush, in part to help ensure 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 during the 1992 presidential election. 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 of 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 Bill Clinton of Arkansas, 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.

[edit] Clinton and a budget surplus

The Republican takeover of Congress in 1994 led to a push for a balanced budget, President Clinton and congress reduced the deficit. Major economic growth and spending controls such as welfare reform, favored by both the President and republican congress allowed for a balanced budget (when the Social Security surplus was counted as revenue) by early in Clinton's second term - considerably earlier than what Clinton's 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. Despite the nominal surplus, the national debt grew each year of the Clinton presidency since the surplus is not applied against spending in this calculation. [3]

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 significance of the deficit, and hence the Balanced Budget Amendment, as an issue.

In his final State of the Union President Clinton said the USA should continue to balance its books and pay off the debt entirely. The subsequent technology downturn which began impacting the economy in mid-2000 combined with lost revenue from the Bush Administration's tax cuts as well as the cost to the country from the 9/11 attack and increased spending for military operations in Afghanistan and Iraq have eliminated Clinton-era surpluses and both the deficit and debt have grown to the largest in US history.

[edit] See also

• Deficit spending
• Balanced Budget Veto Amendment
• George Snyder