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What impact would a balanced budget amendment to the Constitution have on our economy?

Updated on January 3, 2015


There are many calls for a balanced budget amendment and while this would be great the impact of such action must be understood. Congress does need to balance the budget each year with the income that is received. The main problem as I understand it is knowing the level of income and what it will be from one year to the next in order to establish a balanced budget. One option in this situation would be to establish a budget based on the previous year’s income.

In discussing the impact of a balanced budget amendment we must first understand the current level of deficit spending and the out of control culture it places on future generations unlike anything in the past. A balanced budget if it were to come to pass must include money allocated to pay off our national debt. Money needs to be allocated to not just pay the interest but to actually pay on the principle. Understanding the details of our national debt has never really been explained as to who is owed the enormous amount of money included in the total bombarding us on a daily basis.

It is true that we do owe money to countries such as China and Japan who has loaned us money but the debt to foreign countries is not the bulk of the deficit. The majority of debt is owed to the American people in such programs as Social Security, Medicare and Medicaid some of which the funds have been borrowed from and not replaced. The current debt of $18 trillion and growing amounts to every child being burdened with over $55,000 that is their share of the debt.

Part of the current debt is money which will be due upon maturity of government savings bonds which many individuals in the United States and around the world have purchased. There are many details which make up the total for our national debt and getting it under control will require difficult decisions to be made. Examples of these decisions and the actions involved require Congress to work for the good of the country not their political party.

The first thing Congress needs to do in a balanced budget environment whether it is forced upon them or they do it on their own is to prioritize spending to critical programs such as the defense of our country and our safety. Prioritizing is not an easy task for Congress in the current economic environment but it must be done. In addition to our safety and the defense of our country there are the entitlement programs which are a big part of not only our current deficit but also future unfunded liabilities. There is no doubt that changes need to be made to entitlement programs to bring them into a solvent economic environment. This does not mean that entitlement programs should go away only that they need to be restructured. Restructuring entitlement programs which are running high deficits is not going to solve the entire problem.

Balancing the federal budget will impact getting rid of what some have labeled in news reports is wasteful government spending. It will be difficult if not impossible to justify some of the current spending habits if the budget was balanced between income and expenses. Another victim of this environment would be pork barrel legislative actions which on their own cannot be justified as an expense. There is no doubt that the federal government has grown to such levels that the cost of this expansion has increased the cost of government and thereby the need to borrow to keep the expansion intact.

Another potential impact of a balanced budget would be actions initiated to increase revenue coming to the federal treasury. This does not or should not involve raising taxes either on individuals or business but lessening the burden on our economy by providing incentives for businesses to hire. This involves getting rid of burdensome regulations including tax rules and regulations. Congress needs to stop making decisions which have not worked in the past and institute actions which have had proven success. The federal government needs to take some cues from state governments who have turned around their economies with the decisions they have made including initiating actions to tap into our energy reserves. A balanced budget amendment or at least the philosophy of a balanced budget may force Congress to take the actions necessary to improve the economic future of our country.


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