A theoretical analysis of the case for a balanced budget amendment

A balanced federal budget is not a best outcome for all situations, and a constitutional amendment to require annually balanced budgets is not well defended on grounds that it is. However, the case for a balanced budget amendment may have some merit on other, subtler grounds. This article outlines a set of such grounds.Specifically, if it can be shown that the political process systematically undervalues a desirable relationship between revenues and expenditures, a balanced budget requirement might be defensible. The grounds would be that annually balanced budgets are a second best solution, given an argument that the unconstrained political process produces even less desirable outcomes. However, existing knowledge does not make an adequate case that such a rule is needed.I would like to acknowledge the support of National Science Foundation Grant #SES-8218421, and the comments of the following persons on an earlier version: Arthur Benavie, J. Budziszewski, Henry Chappell, Richard Froyen, Paul (Kress, Peter Lange, Jeffrey Obler, Donald Searing, Kenneth Shepsle and the late Clement Vose. Of course, none of the above bears any responsibility for the content.