The federal budget lays the groundwork for all government revenues and expenditures. When Congress and the President agree on a budget, it becomes law and defines all of the government's spending for that year. Often the government spends more than it collects through taxes. This creates a budget deficit. In order to make up the difference, the government sells bonds through the Treasury to investors. This has become a common practice today. However, the selling of bonds to generate revenue was originally created to pay for war efforts. As each successive yearly budget falls into the deficit category, the national debt grows. The national debt refers to all the outstanding debt the government owes to the holders of government bonds and other parties that have loaned the government money. Currently, the debt stands at nearly $7 trillion, or around $20,554.36 per citizen. The problem of having the national debt is the future stability of the U.S. economy and the government's ability to use tax revenues to fund federal programs.

CS Question #1: Do you think that the federal deficit is harmful to our economy?

In January of 1995, the House of Representatives passed the Balanced Budget Amendment. The Balanced Budget Amendment prohibited total spending from exceeding total revenues for a fiscal year, essentially forcing the government to pass only balanced budgets or budgets that generated a surplus. The only way to pass a budget with a deficit was to gain approval from three fifths of the members of both the House and Senate. The amendment tied the President's hands, forcing him to create a balanced budget. The proposal also prohibited any increase in taxation unless approved by a simple majority in the House and in the Senate. The amendment did have one clause to waive all provisions of the amendment if a state of war was officially declared. Supporters of the bill saw the Balanced Budget Amendment as a way to prevent the federal government from growing any larger while the national debt was simultaneously kept in control.

CS Question #2: Why would it not be in the President's best interests to support the Balanced Budget Amendment?

The amendment faced very strong opposition since many individuals in government and economics worried about its effect on the economy. How would it affect the stability of the government and the balance of power within the government? The amendment would force a balanced budget at the cost of government social programs and stabilization policies, regardless of the state of the economy. Traditionally, when the economy weakens, the government acts to stabilize the problems through fiscal and monetary policies. These stabilization efforts may include increased social spending to pay for unemployment benefits, job training, and infrastructure investment. The amendment would make this nearly impossible, tying legislators' hands during a recession. The amendment also threatened the stability of the government and the balance of power among the three branches. If no agreement could be reached between the President and the Congress on a balanced budget, and the 3/three fifths majority could not be reached in order to pass a budget deficit, then the matter could become a court battle. The judicial branch would suddenly be deciding how the amendment should be enforced, essentially creating a budget without checks and balances.

CS Question #3: How would the Balanced Budget Amendment disrupt the balance of power within the government?

Ultimately, the opposition to the bill could not be overcome. President Clinton spoke of the need to write a balanced budget, but disagreed strongly with the idea of passing a constitutional amendment. He and many others worried about the implications of such an amendment. In the end, the amendment was unable to get the two-thirds majority in the Senate to be passed. It was, therefore, never sent to the states for ratification. The federal budget, however, was balanced that year and has since generated surpluses. This has been made possible by a strong economy rather than by any acts of government.

CS Question #4: What happens to the budget surpluses when our economy weakens? Would it be important to pass the Balanced Budget Amendment then?

Further Thought:

1. What do you think caused the budget surpluses of the late 1990s?
2. Why did certain members of the government want to force balanced budgets?
3. The Balanced Budget Amendment was voted down along party lines. The Republicans wanted the amendment, but the Democrats strongly opposed the idea. How does this reflect the differing ideologies of the two parties?