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The Pursuit of an Effective Balanced Budget Amendment

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  • Cebula, Richard

Abstract

This article provides an alternative to the standard simplistic form of a balanced budget amendment to the U.S. Constitution. Instead of simply prohibiting government outlays from exceeding government revenues, which could lead to higher government spending and to higher taxation levels, this proposal provides potential flexibility in the federal budget and deficit conditions (when necessary) while protecting against tax increases and excessive growth in government outlays. The proposal prohibits government spending from exceeding revenues; however, under some conditions, with the approval of a two-thirds majority of both the House and Senate along with approval of the president, a temporary budget deficit of up to 2.5 percent of GDP could be authorized. The requirements that must be met for such a limited budget deficit include the following: the ratio of government spending to GDP may not exceed 20 Percent (its approximate average historical level), and the unemployment rate must exceed 8 percent (to reflect genuine recessionary conditions). The conditions could be modified; for example, a 7.5 percent unemployment rate could be adopted.

Suggested Citation

  • Cebula, Richard, 2010. "The Pursuit of an Effective Balanced Budget Amendment," MPRA Paper 60030, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60030
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    References listed on IDEAS

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    1. repec:jpe:journl:585 is not listed on IDEAS
    2. repec:kap:iaecre:v:17:y:2011:i:1:p:45-65 is not listed on IDEAS
    3. Keith M. Carlson & Roger W. Spencer, 1975. "Crowding out and its critics," Review, Federal Reserve Bank of St. Louis, vol. 57(Dec), pages 2-17.
    4. Richard J. Cebula, 2005. "Recent empirical evidence on the impact of the primary budget deficit on nominal longer term treasury note interest rate yields," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 7(1), pages 47-58.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    balanced budget; tax limits; expenditure limits; exceptions;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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