RPC Must Read August 25, 2011

Control Federal Spending by Balancing the Federal Budget

A Balanced Budget Amendment is considered a responsible public policy among the American people.  In a recently released poll, 74% of Americans indicated that they favored a Balanced Budget Amendment.  Later this year, Congress has the opportunity to deliver to the American people a policy that they overwhelmingly support.  And, a Balanced Budget Amendment is good for government and good for business in a variety of different ways:

1.       The federal government currently adds to the national debt at an average of $129 billion per month.  A recent Treasury report shows that in just 31 months the Obama administration has added $4 trillion to our nation’s national debt.   This is the most rapid increase in federal debt by any US President.  According to the Congressional Budget Office our federal deficit will reach $1.3 trillion by the end of fiscal year 2011.  A Balanced Budget Amendment would return our nation to a sound fiscal policy and grow our economy without growing the size of government.

2.      Federal deficits, when financed by borrowing, increase the demand for credit and drive interest rates higher.  Higher interest rates can crowd individuals and small businesses out of credit markets. Out-of-control government spending hinders the economy’s performance by transferring resources from the private sector to the government whether by means of a tax or by borrowing.  A Balanced Budget Amendment insists that Congress clear the way for economic growth by reducing the burden of ruinous debt the business community.

3.      A Balanced Budget Amendment is an institutional measure designed to counteract the proven tendency of deficit spending.  Federal budget rules would be changed to foster greater top-down discipline.  With tighter budget rules, Washington would be required to make the needed tradeoffs that are often avoided under current rules.  As a constitutional measure rather than legislation, a Balanced Budget Amendment binds Congress to adhere to the policy at the highest level.  These constraints will make it difficult to use borrowing as a way to raise revenue.

4.      In the United States, 49 states have a form of a Balanced Budget Amendment.  Since 1973, 32 states at some time have requested a constitutional convention for proposing a Balanced Budget Amendment.