25 Fiscal Lessons
Learned over the course of 25 years, paving the way toward a better economic future.Read the Lessons
Many politicians and members of the public who are frustrated with the inability of Congress and the president to make responsible fiscal choices have proposed a seemingly simple solution: Amend the Constitution to require a balanced budget.
While the sentiment behind this idea is understandable, it would be very difficult in practice to compel a balanced budget each year, and attempting to enforce it through the courts would be all but impossible.
Moreover, the federal government does not need to balance its budget annually for fiscal policy to be sustainable. There isn’t anything magical in an economic sense about the federal ledger hitting an exact numerical target each year. Instead, the most economically meaningful target is for the national debt to grow more slowly than the economy as a whole.
In addition, borrowing can be justified to stabilize the economy during economic downturns or to finance government actions in wars, natural disasters or other emergencies. A strict balanced budget amendment that precludes such policy responses could make a bad situation worse. And a balanced budget amendment with exceptions in these cases would wind up with so many loopholes that it would probably be ineffective or, at the very least, would force budget policy to be debated in court.
Finally, the best argument for a balanced budget amendment, and one The Concord Coalition made at its founding in 1992, is that some mechanism is needed to block politicians from making wild fiscal promises or passing irresponsible tax and spending legislation. However, history still demonstrates that a balanced budget amendment is not the only means to fiscal discipline.
Prior to 1970, balanced budgets were not uncommon. Only in the last few decades has the nation run chronic deficits. And soon after The Concord Coalition began, policymakers were able to balance the budget four times from 1998 to 2001 -- all without a constitutional amendment.
Now the nation faces large projected increases in deficits, and debt is projected to grow faster than the economy. The key to reversing that trend: Policymakers and the public having the political will to do so -- and acting on it, as they have at times in the past. A constitutional amendment cannot substitute for that political will, nor should the absence of an amendment serve as an excuse for irresponsible fiscal policy.