On Balanced-Budget Amendments

by Michael J. New

Like Ramesh, I do not think House Republicans should make passing a balanced-budget amendment a top priority. It may be useful as an act of political theater, but getting such an amendment ratified would be a virtual impossibility. There are not 67 votes for a balanced-budget amendment in the U.S. Senate and getting 38 states to ratify it would be extremely difficult. Additionally, having analyzed state fiscal policy, I think that tightly worded balanced-budget amendments can lead to tax increases. Furthermore, in some cases short-term deficit spending may be better economic policy than raising taxes.

However, enforceability is not among my main concerns. Right now, 49 states have balanced-budget amendments. Obviously these amendments differ in terms of their stringency, but they all seem fairly well enforced. In many cases, state balanced-budget amendments have resulted in politically damaging spending cuts and tax hikes. I am sure that in these situations, many legislators and governors would have liked to ignore these balanced-budget amendments, but they seemed to make a good faith effort to abide by them. I really cannot think of any instances where state balanced-budget amendments were unenforced.

Interestingly, state courts have been very tough on other fiscal limits, but fairly supportive of balanced-budget amendments. During a budget standoff in Nevada in 2003, the courts basically nullified Nevada’s constitutional supermajority requirement for tax increases.

However, they left Nevada’s balanced-budget amendment intact.

— Michael J. New is an Assistant Professor at The University of Alabama, an Adjunct Scholar at the Cato Institute and an Assistant Professor at The University of Alabama.