Pros And Cons Of A Balanced Budget

1397 WordsApr 23, 20176 Pages
Tristan Santos Andrew Jalil Economics 351: History of Macroeconomic Policy 4/21/17 Pros and Cons of a Balanced Budget In 1995, US Congressional lawmakers introduced an amendment to the United States Constitution that would restrict federal spending to the sum of its collected revenues in any given fiscal year. The “Balanced Budget Amendment” would’ve taken full effect in 2002, guaranteeing a balanced federal budget unless a budgetary deficit was approved by two thirds of the Senate . The proposed amendment passed the House of Representatives but came up one vote short in the senate. More than two decades later, the US budget remains an incendiary topic; Total federal debt exceeds $15 Trillion dollars and the Federal Budget Deficit…show more content…
It is pertinent that the US address its growing budget deficit, and an amendment to the constitution forcing the start of that process would provide long term benefits to the US economy. In 2017, at 77 percent, government debt held by the public comprises its largest share of GDP since the end of the second world war (SOURCE). As more and more funds are allocated to the growing costs of health and social services dedicated to the US’s aging population (SOURCE), analysts expect government debt should continue to grow. The Congressional Budget Office estimates that, should trends in federal spending continue, (IMAGE) total US Federal debt owed to the public will exceed gross domestic product by 2033, and by 2035 will exceed the post war peak of 106% of GDP. The rate at which the US accumulates this debt will be even more accelerated should the current administration honor its two trillion-dollar commitment aimed to improve the US infrastructure. (SOURCE) While these figures are just estimates, should they prove true they would have dramatic effects on the US economy; as the ratio of public held debt to GDP grows, investors of US held assets will demand a larger interest rate in order to negate the assumed higher risk that comes from US holding larger amount of debt. The increased
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