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October 2016 Policy Study, Number 16-3

   

How To Restore Federal Fiscal Sanity: The State Legislatures Hold The Key

   

How Will The Balanced Budget Amendment (BBA) Work?

   

 

What will this amendment do for us?

 

This Constitutional Amendment will halt the soaring, unchecked growth of federal debt. It will make balanced budgets the norm and make a deficit the exception – in sharp contrast to 28 consecutive years of deficits and rising debt (1970-1997).

 

Is this BBA flexible enough?

 

Yes. We realize that in a real emergency, such as a major recession or war, a limited amount of deficit spending may be necessary.  That’s why a three-fifths vote of both Houses of Congress can allow a specific amount of deficit spending.  That’s why the balanced budget requirement doesn’t apply during a declared war.

 

Thomas Jefferson advocated a Constitutional Amendment to prohibit all federal debt.  This BBA takes a more cautious approach, not prohibiting debt but making it much more difficult to increase debt.

 

Is it too flexible?  Won’t Congress vote an exception every year?

 

Not likely.  A three-fifths vote of all members is very hard to get in either House of Congress –and it is even harder in both Houses.  Any member who is absent or doesn’t vote has the same effect as a “no” vote.

 

Before three-fifths of both Houses vote to allow an unbalanced budget, there will have to be a strong national consensus that there is a real emergency and an agreement on the specific amount of deficit.

 

There will be a roll-call vote on the issue of allowing a specific amount of deficit spending.  This will be a visible and unpopular vote.  It won’t happen easily. 

 

Now, Congress passes an unbalanced budget every year without a direct vote on this issue.  It happens automatically when Congress passes a batch of appropriations bills that spend more than the government takes in.

 

The Balanced Budget Amendment will make deficits difficult instead of easy – and rare instead of annual and automatic.

Could Congress evade the BBA by putting expenses off-budget?

 

The amendment closes the off-budget loophole because it covers all federal outlays – total federal spending except repayment of debt principal.  There will be no more off-budget expenses under this amendment.

 

Does the BBA allow Congress and the President enough time to get the budget in balance?

 

Yes. That’s why the amendment takes effect for fiscal year 2002 or the second fiscal year beginning after it is ratified by 38 State Legislatures, whichever is later.

 

NTU would prefer an earlier deadline – perhaps three years.  However, a five-year deadline is better than no deadline.

 

A Constitutional Amendment – even with this ample five-year deadline – will force the President and Congress to get serious about a deficit-reduction timetable because they can’t postpone or waive or repeal the Constitution.  The BBA will give powerful support to the many members of Congress who are sincerely trying to balance the budget by 2002.

 

How can we prevent raising taxes to balance the budget instead of controlling spending?

 

That’s why the BBA requires a constitutional majority vote – a majority of all members of each House – to increase revenue in any way.  This is a roll-call vote with no place to hide. This will make it much harder to raise taxes. Now, Congress can raise taxes by voice vote with many members absent.  Often a tax increase is hidden in a “Christmas tree” bill.  The amendment will make each member of Congress – and the President – visible and accountable to the voters.

 

There have been 15 federal tax increases in the last 20 years.  Seven of these 15 increases – including the huge 1993 tax hike – would have been prevented by the BBA because they didn’t get a constitutional majority (majority of all members) in both Houses of Congress.

 

There is no need to raise taxes.  Total federal revenue grows so fast under current tax laws that if the government merely slows the growth rate of total federal spending, revenue will catch up with spending long before the BBA’s effective date.

 

It would be better to include in the BBA (1) a two-thirds vote requirement to raise taxes and (2) a specific limit on the growth rate of all federal revenue, perhaps limiting it to the rate of inflation plus population growth.  However, this would make BBA harder to pass, and prompt action is urgent.

 

(NTU strongly supports a separate Constitutional Amendment that would require a two-thirds vote in both Houses of Congress to raise taxes.  This Tax Limitation Amendment doesn’t yet have enough votes in Congress, but support is growing.)

 

Research by NATIONAL TAXPAYERS UNION FOUNDATION shows most of the growth in federal spending has occurred during years when deficits were large.  Thus, stopping the annual deficits will sharply slow the growth of federal spending and help defeat higher taxes.

 

   

 

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