Balanced Budget Amendment 1997 Analysis

Balanced Budget Amendment 1997 Analysis Balanced Budget Amendment Vu Luu    Introduction In March 4, 1997, the balanced budget amendment was defeated in the United States Senate by just one vote. Fast forward to the present, the United States is facing a $17 trillion deficit versus the $5 trillion in 1997. The question that remains to be asked is had the balanced budget amendment passed the United States Senate and approved by Congress in 1997, would we be facing the debt crisis that we are facing today? Based on my conclusion, the answer that I believe is no, the debt crisis would not have been as severe as it is today. In this paper I will argue why the United States need a national balanced budget amendment in the constitution. In particular, I will discuss the following points to back up my claim; future implications if no changes in policies and solving government spending. As the United States’ federal deficit continues to grow, many are asking for a balanced budget amendment to be added to the constitu tion. A balanced budget amendment would require the federal government not to spend more than it receives in revenue. This means it would be unconstitutional and against the law for the federal government to accumulate budget deficits. THE NATIONAL DEBT ISN’T GOING TO GO AWAY According to the 2012 Congressional Budget Office report, our current policies will eventually lead to a federal debt that would eventually reach a 90% gross domestic product by 2022, 109% by 2026, and 200% by 2037 (CBO 11). These estimates are based on the assumption that our current laws remain generally unchanged and that our spending policies which is the cause of the accumulation of budget deficits remain the same. The CBO budget estimates are also based on forecasts of economic state, demographic trends, and past experience. The other interesting estimate that the CBO reported was that even if there were general changes in our current laws, they estimate that the budget deficit would reach about 60 % of GDP by 2020 which is only 10% lower than our current situation (CBO 7). As indicated by the chart above, our annual deficit through 2021 would never drop below $1 trillion dollars under current policies. Although the main cause of the spike in deficit spending from 2008-2011 was mainly due to the recession, the Congressional Budget Office doesn’t believe the United States would recover under current laws. The balance budget amendment does allow exception, which in this case is the recession. If the national balance budget amendment was in place then after 2011, the annual deficit would only go down because of the radical budget changes in programs. It’s pretty apparent that the money we are borrowing is increasing more and more, but what will happen when it reaches that point when we have to start repaying these loans? The government textbook gives us a great example of what happened to Greece when they couldn’t pay off all their loans. The interest rates o n Greek government went way up and by 2011, they had to pay 25% to obtain a two-year loan from private sector (Sidlow 6). Compared to the United States, we are paying a mere 0.44% compared to the 25% Greece had to pay. The ending results in the Greek government shut out of private borrowing and had to depend on other European countries. The Greece example and the CBO’s estimates are huge future implications and urge for huge changes in our policies which I believe is the federal balanced budget amendment.