Should the Constitution Have a Balanced Budget Amendment That Caps Spending at 20% of GDP? (H. Joint Res. 114)

What is H. Joint Res. 114?

(Updated August 28, 2018)

This resolution would propose an amendment to the U.S. Constitution that requires the federal budget to be balanced each year, meaning that federal spending couldn’t exceed tax revenue collected. The amendment would also prohibit the federal government from spending an amount exceeding 20 percent of U.S. gross domestic product (GDP) and require the president to submit a balanced budget to Congress. The spending restrictions wouldn’t be in effect in a fiscal year when a declared war is in effect, or if three-fifths of the Senate and two-thirds of the House vote to suspend them.

Because it proposes a constitutional amendment, after this resolution’s passage by two-thirds of both chambers of Congress it would have to be ratified by three-fourths of the state legislatures (38 states) to amend the U.S. Constitution.

Argument in favor

The federal government has lived beyond its means for far too long, racking up a $20 trillion debt that will have to be paid by future generations. A balanced budget amendment to the Constitution that also caps federal spending at 20 percent of GDP would help put the country’s fiscal house in order.

Argument opposed

A balanced budget amendment would pose too much of a constraint on the federal government, preventing it from funding many vital programs because deficit spending would be difficult politically for Congress to approve. The federal government needs to tax and spend more despite the debt.

Impact

American taxpayers and the general public; the federal government; Congress; and the president.

Cost of H. Joint Res. 114

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Rep. Martha Roby (R-AL) proposed this balanced budget amendment with a spending cap to prevent the federal government from living beyond its means:

“For far too long our federal government has operated far beyond its means. It is irresponsible and dangerous to continue down this fiscal path. American families balance their budgets. Businesses balance their budgets. Most states and local governments have no choice but to balance their budgets. With more than 19 trillion dollars in federal debt, it is past time that Congress and the President were constitutionally required to balance our budget.”

Historically, federal spending as a percentage of GDP has trended very closely to the 20 percent cap proposed by Roby’s constitutional amendment. After peaking at 40.6 percent in the final year of World War II, the proportion fluctuated between 10.8 percent and 19.8 percent from 1947 to 1979, next exceeding 20 percent during the recession of 1980. It remained between 20 and 20.3 percent throughout the 1980s before gradually dropping to 17.6 percent at the end of the 1990s. During the most recent recession spending as a percentage of GDP peaked at 24.4 percent in 2009. It has remained above 20 percent since 2008, totaling 20.7 percent in 2016.

Media:

• Sponsoring Rep. Martha Roby (R-AL) Press Release
  
• Montgomery Advertiser
  
• Federal Reserve Bank of St. Louis (Context)