Be Careful What You Wish For:
The Implications of a Constitutional Amendment to
Balance the Federal Budget
By Mina Ghantous, Flaherty, Sensabaugh, Bonasso, PLLC, Morgantown, WV
Though its potential impact would be reverberant, the movement for a federal constitutional
amendment requiring a balanced national budget has tread relatively softly, quietly breathing life
into Article 5. Pursuant to its provisions, when two-thirds of the states consent, a convention
may be called to discuss changes to a document that has governed this country for more than
two hundred years. Any proposal made must then be ratified by three-quarters of the states to
constitute a valid amendment. Currently, twenty-eight states have adopted resolutions calling
for such a convention to discuss an amendment requiring a balanced federal budget, including
ten in the last three years, with West Virginia joining their ranks this past spring. This collection
of states is only six shy of the quota required to call a constitutional convention. However, the
call for such a convention, and the amendment it is intended to produce, should not be made in
haste. Political appeal must yield to deliberate consideration of the economic and legal implications of interfering with
market forces during times of both stability and strife.
Political Appeal. The sound bite a balanced federal budget generates has mass appeal for conservatives and
likely the average American. The conservative advocacy groups who have garnered support for a balanced federal
budget are a mélange of “free-market, low-tax and small-government proponents,” frequently funded by corporations
and deeply conservative supporters. The American Legislative Exchange Council (“ALEC”), a nonprofit financed by
corporate and private donors, including the billionaire Koch brothers, is at the center of the convention effort.
As the New York Times explains, “federal frugality” has broad appeal. Governmental waste and a stratospheric
national debt, typically saddled by those who did not incur it, are frequently the sources of public ire and ennui. A
government that spends beyond its means is regarded with disdain by the average person, who must live within her/
his own. However, requiring the federal government to balance its budget to ameliorate these issues is not as simple
as politicians wish to portray it.
Economic Consequences. Described as “highly ill-advised” by the Center on Budget and Policy Priorities,
requiring a balanced federal budget could have disastrous effects on federally-funded government programs and the
national economy itself during times of fiscal strife. Because a balanced federal budget would require federal revenues
and expenditures to be balanced in the same year, the federal government would be unable to draw down on its savings
to pay for certain benefits. For example, it would basically be unconstitutional for Social Security to use its own
savings, in the form of Treasury securities, to pay for benefits because all spending would have to stem from revenue
collected only that year. Military retirement and civil service retirement systems, with their own trust funds, would
be affected similarly. The banking system itself would also be endangered by requiring a balanced federal budget.
Specifically, neither the FDIC nor the Pension Benefit Guarantee Corporation could draw upon accumulated assets
from years prior to pay deposit or pension insurance because this would essentially constitute “deficit spending.”
Put simply, the U.S. government “would only be able to fulfill its legal commitments if their costs did not cause a
deficit.” Requiring a balanced federal budget would also disrupt the economic mechanisms that help to stabilize
the economy during a recession. When it slows down, federal revenues decline or grow more slowly. Spending
on unemployment insurances and other social programs increases, which causes the deficit to rise. Tax collection
is lowered, to stimulate spending and infuse capital into the market, and unemployment and other benefits increase.
These are “automatic stabilizers” in the language of economics, and they “cushion” the weakened economy. Requiring
increased taxation and cuts in much-needed social program expenditures to balance the federal budget, during a time
when exactly the opposite course of action is needed, would cause the economy to further plummet.
An argument can be made that states are required to balance their budgets, so why shouldn’t the Feds? Well,
because the situations are not exactly analogous. States are required to balance their operating budgets, as opposed
to their capital budgets. Expenditures encapsulated in the operating budget include salaries, wages, aide to local
government, and health and welfare benefits, for example. Capital expenditures are mainly for land, highways, and
buildings, which are largely financed by debt. Importantly, states can “build reserves during good times and draw
down on them during bad times without counting the drawdown as new spending that unbalances the budget.”
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Though the proposed amendment would allow a vote of three-fifths of the House and
Senate to waive the balanced budget requirement, as the Center on Budget and Policy Priorities notes, a “paralysis”
often marks the Senate’s work, and by the time a recession was actually recognized, and the requisite vote secured,
extensive damage could already have been done.
Legal Issues. As the LA Times points out, it is questionable whether the spirit, as opposed to the letter, of Article 5
has been complied with, in terms of obtaining the requisite quota of the thirty-four states to call the convention. Only
twelve states have passed resolutions to do so in recent years; the other sixteen were passed decades ago. Though
Article 5 makes no mention of the time frame during which the resolutions must have been passed to call a convention,
it seems constitutionally questionable to cobble together legislation that is the result of the political and economic
forces of decades past.
Besides the logistics of the convention, the amendment itself raises important legal questions. As the Center on
Budget and Policy Priorities inquired, assuming the amendment passed, how would it be enforced? State balancedbudget systems do not impose legal penalties for failure to meet requirements, so would the Feds receive similar
treatment? Who would decide which programs needed to be cut to reduce spending to balance the budget? Could the
U.S. Supreme Court declare a defeated reconciliation bill to be law if the budget is not balanced? What happens when
federal courts award judgments against the United States, but the costs would unbalance the budget?
Rather alarmingly, there are no restrictions on a constitutional convention’s power, per the terms of Article 5.
Though the current movement has been for a balanced federal budget, once a convention is called, there is no limit as
to what can be proposed—and eventually ratified, given the consent of three-quarters of the states. Besides the reality
of habitually contentious domestic policy, it seems particularly dangerous to open Pandora’s box in the fragile global
security environment in which we now exist. Laws born of instability tend to reflect judgment clouded by fear, not
reason and conscientious scrutiny.
Moving Forward. All of these considerations, particularly those concerning the effects of economic interference,
admonish us to proceed with caution. Gilded veneers conceal the true nature of things, and requiring a balanced
federal budget is no different.
"The History of Political Corruption in West Virginia"
Presented by
The Honorable Allen H. Loughry, II
Chief Justice, Supreme Court
of Appeals of West Virginia
Tuesday, February 21, 2017
4:00 - 5:00 pm
Embassy Suites
Ballroom AB
Charleston, WV
Approved: 1.20 Hours WV MCLE Credits
Followed by:
Legislative Reception
5:00 - 7:00 pm
Salon C
Fee to attend one or both events: $25
Visit the DTCWV website for more information at www.dtcwv.org
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