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- - CAN WE MAKE ENDS MEET Should the government balance the federal budget One might assune assume that it would be good to balance the federal budget However a few economic thinkers disagree and have suggested new paradigms For the last sixty years the government has run budget deficits as a primary method for stimulating economies with high unemployment rates In theory the budget should return to balance or surplus during boom times According to the article The Balanced Budget Constitutional Amendment Center on Budget and Policy Priorities January 9 1995 the Reagan administration cut taxes to such a degree that the United States would forever face high deficits regardless of how hot the economy was The writers of that article believe the answer is not a balanced-budget amendment because they believe it would prevent the federal government from combating recessions Worse yet under such an amendment the federal government would be forced to make recessions worse When the economy slows down income and Social Security tax revenues drop due to falling wages and profits Meanwhile costs for some programs such as unemployment compensation rise These changes automatically put the federal budget into deficit even if a balanced budget had been planned at the beginning of the fiscal year If a constitutional amendment requires the government to balance spending and revenues at the end of the year not just in the original plan then the White House would be forced to cut spending or raise tax rates thereby slowing the economy down just at the time when it is most in need of stimulus One argument for a balanced is as follows Deficits force the Federal Government to borrow money on the capital markets That Government borrowing competes with businesses borrowing to buy factories and machines that make workers more productive and raise incomes and with families borrowing to buy new homes cars and other goods that provide valuable
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