1 Pros and Cons of a Balanced Budget at the Federal Level Student Full Name Institutional Affiliation Course Full Title Instructor Full Name Due Date 2 Pros and Cons of a Balanced Budget at the Federal Level A balanced budget amendment is a legislation that demands a nation cannot be in a state where its expenditure exceeds the earnings. It requires a balance between the estimated receipts and government expenditure (Ross, 2023). Since the American Revolution, the U.S. government has operated under deficits due to economic conditions, wars, and stock market crashes. Individuals in support of a balanced budget at the federal level claim that the growing federal debt will negatively affect taxpayers in the future (Ross, 2023). Those who oppose the balanced budget believe that deficits should be run to keep off foreign or economic threats and also believe that national debt is not an urgent issue. Therefore, this essay examines the pros and cons of having a balanced budget amendment at the federal level. Pros of a Balanced Budget One advantage of a balanced budget at the federal level is that it will help reduce spending by the government. Since a balanced budget will limit the amount the government can borrow, the government will borrow less cash and keep the debt at manageable levels (Lumen Learning, n.d.). Moreover, a balanced budget will restrict the federal government from spending pointless projects or programs or channeling too much money into some projects. This would greatly reduce the national debt since the government recovers the money lost in pointless programs or projects. Moreover, proponents argue that a balanced budget enhances fiscal responsibility. Fiscal responsibility requires the government to be accountable and responsible for the needs of its citizens (Ross, 2023). Therefore, this will be beneficial as the federal government will be able to spend within its limits. A balanced budget would also lead to long-term economic stability. For 3 instance, reducing excessive spending, preventing tax increases, and reducing deficits will create a more sustainable economic environment. Cons of a Balanced Budget A balanced budget could exacerbate problems during recessions and hurt the economy. Regardless of the state of the economy, a balanced budget will risk putting a weak economy into recessions, which become longer, deeper, and more frequent (Kogan, 2019). This would result in the loss of many jobs and hurt sustainable economic growth. This is because the federal government and policymakers will be forced to raise taxes or cut spending during recessions. Another con is that a balanced budget would undercut Medicare, Social Security, and other programs that have established reserves. A balanced budget amendment prohibits spending that surpasses the revenues collected (Kogan, 2019). This implies that Medicare, Social Security, the Pension Benefit Guarantee Corporation, the Federal Deposit Insurance Corporation (FDIC), and the civil and military service retirement funds will be prohibited from utilizing their reserves. Besides, the balanced budget puts stricter constraints on the federal government that fiscally responsible households impose on themselves (Kogan, 2019). For instance, prudent households balance their checkbooks and not their budgets. Failure to do this would mean no student loans, no borrowing, no car loans, and no mortgages. Besides, even rich families use some of their savings to pay for college or buy a house, implying that their spending will exceed their income. Conclusion Overall, the balanced budget amendment debate requires a comprehensive examination of its advantages and disadvantages. However, balancing the nation’s budget is not an easy task. The U.S. government has been running under a deficit since its independence and federal government debt has always been the most attractive and safest investments and that is why 4 some are against the balanced budget. Besides, it is worth noting that the government must spend to keep providing services and running. Those in support feel that it will impose financial trouble on future generations who will experience high taxes. I believe that the federal government can reduce or stabilize the debt even with modest deficits rather than balancing the budget every year. 5 References Kogan, R. (2019, April 29). 5 Reasons to Reject Any Constitutional Balanced Budget Amendment. Center on Budget and Policy Priorities. https://www.cbpp.org/blog/5reasons-to-reject-any-constitutional-balanced-budget-amendment Lumen Learning. (n.d.). The Question of a Balanced Budget | OpenStax Macroeconomics 2e. Courses.lumenlearning.com. Retrieved January 19, 2024, from https://courses.lumenlearning.com/suny-macroeconomics2/chapter/the-question-of-abalanced-budget/ Ross, S. (2023). What Are the Pros and Cons of a Federal Balanced Budget? Investopedia. https://www.investopedia.com/ask/answers/042415/what-are-pros-and-cons-operatingbalancedbudget.asp
