A balanced budget amendment or debt brake is a constitutional rule requiring that a state cannot spend more than its income.
[2] However, there is substantial agreement among economists that strict annual balanced budget amendments have harmful[vague] near-term economic effects.
[3][4][5][6][7][8] To prevent that, most balanced-budget provisions make an exception for times of war, national emergency, or recession, or allow the legislature to suspend the rule by a supermajority vote.
In November 2011, the Austrian coalition government tried to amend its constitution and introduce a German style Schuldenbremse ("debt brake").
[20] Under the amended Constitution, deficit spending can still take place in the event of emergencies, but only if authorized by a majority of the entire membership in both houses of Parliament.
In practice, the term "emergency" has been loosely interpreted, and Parliament has always authorized the borrowing of new debt; Italy has not yet had a balanced budget since the passage of the amendment.
Poland's constitution (adopted in 1997) caps the public debt at 60% of GDP – the government cannot take on any financial obligations that would cause that limit to be exceeded.
The law states that public debt cannot exceed 60% of GDP, though exceptions would be made in case of a natural catastrophe, economic recession, or other emergencies.
Most of these proposed amendments allow a supermajority to waive the requirement of a balanced budget in times of war, national emergency, or recession.
[32](Although Jefferson made a point of seeking a balanced budget during the early years of his administration, he seems to have later reversed himself in purchasing the Louisiana Territory.
Except for a short period during the presidency of Andrew Jackson since its inception the United States federal government has always been in debt.
Fiscal years 1950-2010 GDP measurements are derived from December 2010 Bureau of Economic Analysis figures which also tend to be subject to revision.
Nixon was famously quoted as saying, "We are all Keynesians now," with regard to the budget deficit that his administration began to accumulate during years of mild recession.
Joint Resolution 58 passed in the Senate[41] but was defeated in the House of Representatives, falling 46 votes short of the 2/3 majority needed.
Much of this effort was initially organized by the National Taxpayers Union and its president at the time, George Snyder, a former Majority Leader of the Maryland State Senate.
Perhaps motivated by the number of state legislatures calling for such a convention approaching the required two-thirds, and recognizing its inability to make sufficient cuts on its own initiative to balance the budget, Congress responded in 1985 with the Gramm-Rudman-Hollings Act, named for its Senate sponsors, which called for automatic cuts in discretionary spending when certain deficit-reduction targets were not met.
When it began to affect popular programs and was partially overturned in the courts, it was first amended to postpone the strength of its effects until later years, and then repealed in its entirety.
[citation needed] In his rhetoric to defend the idea of a balanced budget amendment, Bush likened the U.S. government to a household.
President Bill Clinton did not support a constitutional amendment, but in his 1992 campaign, he called for balancing the budget through ordinary fiscal policy.
[45][46][47][48][49][50][51] Meanwhile, Government Sponsored Enterprises (GSEs) such as GNMA, FNMA and FHLMC continued to borrow and spend an extra $543.6 billion over and above their previous 3 years.
[a][52] In 1995, the Republican-led Congress immediately engaged in a battle with President Clinton culminating in a vetoed budget and a brief shutdown of the Federal government.
[53][54][55] One provision of their "Contract with America" campaign document, the brainchild of Newt Gingrich who would later become Speaker of the House, called for a balanced-budget amendment.
By the end of 2008, a large reduction in tax revenues caused by the Great Recession and the cost of federal stimulus spending began contributing to a rapidly increasing deficit.
[64][65] In addition to balancing the budget, it would also impose a constitutional limit on federal spending as a percentage of gross domestic product and would set a supermajority requirement on tax increases.
[65] The Budget Control Act of 2011, which resolved the debt-ceiling crisis, required Congress to vote on a balanced-budget amendment in the near future.
[4][5][6][7][8] In 2003, approximately 90% of the members of the American Economic Association agreed with the statement, "If the federal budget is to be balanced, it should be done over the course of the business cycle, rather than yearly.
[69] Economist and public choice scholar James Buchanan was a prominent advocate for a balanced budget amendment.
"[75] Economist Dean Baker has noted that if the federal government were to run budget surpluses with the US still experiencing a large trade deficit, the economy would, in the absence of economic bubbles, shrink and experience rising unemployment.
While the Congress may be mandated by the amendment only to pass balanced budgets, this could be easily circumvented by inflating revenue projections or routing spending through off-budget channels.
[77] The Hong Kong Basic Law stipulates that the government must keep “the expenditure within the limits of revenues in drawing up its budget” and “avoid deficits”.