Should the Constitution Have a Balanced Budget Amendment That Caps Federal Spending at 20% of GDP? (S. Joint Res. 19)

What is S. Joint Res. 19?

(Updated February 19, 2020)

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 $22 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% 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 S. Joint Res. 19

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. Richard Shelby (R-AL) introduced this proposed constitutional amendment to require a balanced federal budget that doesn’t exceed 20% of GDP as a means to address the $22 trillion national debt:

“While our national debt continues to climb, it is imperative that we stop spending without proper constraint. I have long believed that our Constitution lacks a requirement for the federal government to balance the budget — something that hardworking Americans are required to do every day. This legislation would implement a common-sense policy to improve our spending of taxpayer funds and help protect the future of the next generation.”

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

In its budget and economic outlook for the 2019 to 2029 period, the Congressional Budget Office (CBO) projects that under current law, spending as a percentage of GDP is expected to rise from 20.8% in 2019 to 22.7% in 2029.

Media:

• Sponsoring Sen. Richard Shelby (R-AL) Press Release

Summary by Eric Revell

(Photo Credit: iStock.com / sborisov)