Question

What are some of the arguments for and against a requirement that the federal government budget be balanced every year?

Short answer

Some arguments for a balanced federal government budget every year include: 1. Reducing national debt: A balanced budget prevents the government from spending more than its revenue, which can prevent the accumulation of more debt, leading to a more stable economic environment and reduced future burden on generations through increased taxes or reduced services. 2. Increased fiscal discipline: A balanced budget requirement encourages the government to make tougher choices about resource allocation, possibly leading to more efficient and effective spending and providing better value for taxpayers. Arguments against a balanced federal government budget every year include: 1. Constraining response to economic shocks: A balanced budget requirement could limit the government's ability to increase spending in times of recession, potentially resulting in longer or more severe downturns. 2. Cuts to government programs and services: Balancing the budget may lead to harmful cuts in essential services like education, healthcare, and social welfare programs, disproportionately impacting lower-income individuals and families who rely on these services the most.

Step-by-step solution

Argument 1: For Balanced Budget

A balanced budget means that the government's spending and revenues are equal within a fiscal year, meaning there would be no deficit or surplus. One argument in favor of a balanced budget is that it could help reduce the national debt. With a balanced budget, the government cannot spend more than it receives in revenue, which would prevent it from accumulating more debt. This could lead to a more stable economic environment and a reduced burden on future generations to pay off the debt through increased taxes or reduced services.

Argument 2: For Balanced Budget

Another argument for a balanced budget is the increased fiscal discipline it would encourage. By being required to balance the budget every year, the government would need to make tougher choices about how to allocate its resources, possibly leading to more efficient and effective spending. This could result in the government being more careful about where it spends its funds and working to provide better value for taxpayers.

Argument 1: Against Balanced Budget

One argument against a balanced budget requirement is that it could constrain government's ability to respond to economic shocks and crises. In times of recession, for example, the government might need to increase spending to stimulate the economy and support struggling businesses and individuals. A balanced budget requirement would limit this ability, and economic downturns could last longer or become more severe as a result.

Argument 2: Against Balanced Budget

Another argument against a balanced budget requirement is that it could lead to harmful cuts to government programs and services. In order to balance the budget, the government would need to cut spending or raise taxes if expected revenue was not enough to cover expenditures. This could result in reduced funding for essential services such as education, healthcare, and social welfare programs. These cuts could disproportionately impact lower-income individuals and families who rely on these services the most.