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Should the government be required to balance its budget

The Virtues of an Unbalanced-Budget Amendment One thing is certain about the deal reached to raise the debt limit: Even if the deal is fully implemented, it will not balance the U.

  1. So instead of a balanced-budget amendment, I propose that a better idea might be an unbalanced-budget amendment unBBA.
  2. Those who argue in favor of a balanced budget offer many claims about the deleterious impacts of huge federal debt.
  3. The Virtues of an Unbalanced-Budget Amendment One thing is certain about the deal reached to raise the debt limit. Others counter that balanced budgets would drastically limit the government's ability to ward off economic or foreign threats.
  4. The problem is that a recession is not the best time to raise taxes or cut spending, which is what we would be required to do every time we hit an economic rough patch if we had a balanced-budget amendment.
  5. Alex Tabarrok is an economics professor at George Mason University and a research director for the Independent Institute, a think tank.

Deficits will continue to increase, as will spending. The public is tired of repeated failures to put the U. A recent CNN poll showed that nearly 3 out of 4 Americans supported a constitutional amendment to balance the budget. If the politicians won't be virtuous then, so the thinking goes, we must substitute law for virtue.

  • So although an unBBA would allow for deficit spending on things like unemployment and food stamps during a recession, it would have similar effects to a balanced-budget amendment over time, because surpluses in good times would be spent in bad times;
  • The medical community would simply have more money to spend, improving GDP.

See the top 10 government showdowns. The problem is that a recession is not the best time to raise taxes or cut spending, which is what we would be required to do every time we hit an economic rough patch if we had a balanced-budget amendment.

Keynesian economists believe that spending during a recession can stimulate the economy. But even if one is skeptical of this argument, its clear that taxes fall during a recession and spending needs rise, as more people need unemployment insurance and Medicaid.

What's the point of unemployment insurance if it must be cut during a recession?

What are the pros and cons of operating on a balanced-budget?

So instead of a balanced-budget amendment, I propose that a better idea might be an unbalanced-budget amendment unBBA. It would allow the government to run a deficit during a recession.

  • Alex Tabarrok is an economics professor at George Mason University and a research director for the Independent Institute, a think tank;
  • A Balanced Budget Constitutional Amendment March 5, 2018 A balanced budget amendment to the Constitution — if ratified — would require the federal government to balance how much money it brings in and how much money it spends on an annual basis;
  • Several other factors haven't been addressed, including inflation , crowding out and the general inefficiency of government spending;
  • Without a balanced budget amendment, the federal government continues to overspend;
  • However, no other balanced budget amendments have passed the House since 1995.

But unlike now, the amendment would require the government to run a budget surplus in good times. So although an unBBA would allow for deficit spending on things like unemployment and food stamps during a recession, it would have similar effects to a balanced-budget amendment over time, because surpluses in good times would be spent in bad times.

  1. Most Keynesians also support at least in theory paying off the debt during boom years.
  2. But notice, it's the "what" and the "how" of the spending that's important - NOT the amount.
  3. It does not make policy decisions, but rather forces members of Congress to do so.
  4. The public is tired of repeated failures to put the U.

The idea of an unbalanced-budget amendment is not new. Since implementing its unBBA, Sweden has successfully balanced its budget and created a surplus.

A Balanced Budget Constitutional Amendment

Even more ancient sources are supportive of an unBBA. In the Bible, Joseph doesn't advise the Pharaoh to balance the budget; instead, he tells the Pharaoh to save during the seven fat years so he will be prepared for the seven lean. An unbalanced-budget amendment reflects this simple and ancient wisdom. Alex Tabarrok is an economics professor at George Mason University and a research director for the Independent Institute, a think tank.

He is also a co-author of the popular blog Marginal Revolution.

  • Since then, the House Budget Committee has written and the House has approved several budgets that balance;
  • But even if one is skeptical of this argument, its clear that taxes fall during a recession and spending needs rise, as more people need unemployment insurance and Medicaid;
  • It does not make policy decisions, but rather forces members of Congress to do so;
  • Arguments Against a Balance Budget Keynesian economic theory suggests that deficit spending can help an economy fight recessions;
  • However, it fell one vote short in the Senate and could not be sent to the states for ratification;
  • The problem is that a recession is not the best time to raise taxes or cut spending, which is what we would be required to do every time we hit an economic rough patch if we had a balanced-budget amendment.