The Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act of 1985 (99th Congress, S.1702, Pub.L. 99-177, title II, December 12, 1985, 99 Stat. 1038, 2 U.S.C. § 900) and Budget and Emergency Deficit Control Reaffirmation Act of 1987 (Pub.L. 100-119, title I, Sept. 29, 1987, 101 Stat. 754, 2 U.S.C. § 900) (both often known as Gramm-Rudman) were, according to U.S. Senator Phil Gramm of Texas, "the first binding constraint imposed on federal spending, and its spending caps have become part of every subsequent U.S. budget. Together with a rapidly growing economy it produced the first balanced federal budget in a quarter of a century." In reality, after passage of this bill the smallest unified budget deficit of the Reagan era was -$155.178 billion in FY88.
Senators Ernest Hollings (D-South Carolina), Warren Rudman (R-New Hampshire) and Phil Gramm (R-Texas) were the chief sponsors. The Acts were aimed at cutting the budget deficit, which at the time was the largest in history. They provided for automatic spending cuts (called "sequesters") if the deficit exceeded a set of fixed deficit targets. The House passed the bill 271-154 and the Senate 61-31, and President Ronald Reagan signed the bill on December 12, 1985.[1] On August 12, 1986, Representative Dan Rostenkowski introduced the Balanced Budget and Emergency Deficit Control Reaffirmation Act. The Senate passed the bill with two amendments 36-35, and the House approved the Senate's first amendment by voice vote but rejected the second amendment; the Senate receded that amendment by voice vote. President Reagan signed the bill on August 21.[2] The process for determining the amount of the automatic cuts was found unconstitutional in the case of Bowsher v. Synar, 478 U.S. 714 (1986) and Congress enacted a reworked version of the law in 1987.[3] Gramm-Rudman failed, however, to prevent large budget deficits. The Budget Enforcement Act of 1990 supplanted the fixed deficit targets.
Balanced budgets did not actually emerge until the late 1990s when budget surpluses (not accounting for liabilities to the Social Security Trust Fund) emerged.