I hope you already know this, but just in case:
Balanced Budget Amendment “Very Unsound Policy,” Leading Economists Warn: A balanced budget amendment to the Constitution would be “very unsound policy” that would adversely affect the economy, a group of leading economists including four Nobel laureates explain in a letter today to President Obama and Congress, which the Economic Policy Institute and the Center on Budget and Policy Priorities spearheaded. Several constitutional amendments requiring a balanced budget have been introduced in Congress, and the Senate Judiciary Committee is holding a hearing today on the issue.
“A balanced budget amendment would mandate perverse actions in the face of recessions,” the letter notes:
In economic downturns, tax revenues fall and some outlays, such as unemployment benefits, rise. These built-in stabilizers increase the deficit but limit declines in after-tax income and purchasing power. To keep the budget balanced every year would aggravate recessions.
A balanced budget amendment also would prevent federal borrowing to finance infrastructure, education, research and development, environmental protection, and other vital investments. Adding arbitrary caps on federal spending — which some balanced budget proposals include — would make the amendment even more problematic, the letter says.
The signatories include Nobel laureates Peter Diamond, Eric Maskin, Christopher Sims, and Robert Solow...