Enforcement of a
Constitutional Balanced Budget Amendment:
Questions Without Answers
by Richard Kogan
How would the balanced budget amendment be enforced? For the amendment to have effect, the Supreme Court or the President would have to compel compliance in those circumstances when legislation to keep the budget in balance was not enacted.
This analysis examines some of the enforcement issues the balanced budget amendment raises. The analysis finds that the amendment raises very serious enforcement questions to which no one knows the answer. It also finds the amendment could lead to profound shifts in the balance of powers, with substantial new powers flowing to the President, the judiciary, or both. The questions the amendment raises about enforcement fall into two categories: what would be the role of the courts?; and what would be the role of the President?
Even after all 13 of the annual appropriation bills are enacted for a year, it cannot be known with assurance whether the budget will be balanced. The level of federal tax receipts depends on variables such as the levels of corporate profits, wage income, and other types of personal income. The level of tax collections is highly sensitive to the economy. For example, a recession can cause revenues to fall short of expectations by $100 billion or more.
In addition, the level of expenditures for entitlement programs depends on variables such as whether a slowing of economic growth causes more people to become eligible for unemployment compensation, whether there is a flu epidemic, and other developments that cannot be predicted in advance. Here, too, the exact level of costs cannot be known until the year is over.
Even for non-entitlement programs, the level of spending (as distinguished from the level of appropriations) is not known with certainty before the end of the year. While the appropriations process imposes a dollar limit on the cost of the contracts that a government agency can sign, the agencys actual spending during a fiscal year depends on how quickly those obligations are incurred and how quickly the contractors deliver the goods and services. All appropriated funds will eventually be spent, but no one can know with precision the exact portion of the expenditures for non-entitlement programs that will occur in any given year rather than in the subsequent fiscal year.
Nevertheless, the balanced budget amendment says that outlays must not exceed receipts. This makes it unconstitutional not only to run a deliberate deficit but also to run an accidental deficit.
Authors and supporters of the balanced budget amendment envision that it would be enforced. For example, Rep. Henry Hyde, chairman of the House Judiciary Committee, has called the balanced budget amendment "much more than a mere symbol. It would establish a binding, legal framework, a disciplined structure requiring Congress to make the tough choices..."1 Similarly, Reps. Dan Schaefer and Charles Stenholm, the primary sponsors of the House version of the amendment, have written that "[A]s a last resort, the judicial branch may act to insure that the Congress and President do not subvert the amendment."2
Yet there are numerous questions surrounding enforcement of the amendment. This analysis examines some of them.
Who Goes to Court?
Suppose it becomes apparent that the budget for a fiscal year will not be balanced? Who can sue?
A general rule of law is that only injured parties can go to court. The traditional judicial doctrine of "standing" requires that a plaintiff have a direct and specific personal stake or injury. If a deficit develops, it is unclear who the injured party is. If the court takes the view that no one has standing, the balanced budget amendment is unenforceable by the judicial branch.
Perhaps the existence of a deficit constitutes an injury to future generations, so that, for example, an organization claiming to represent people under 30 would have standing to go to court. The authors of the amendment, however, do not think so. In materials that the House co-authors of the amendment, Reps. Dan Schaefer and Charles Stenholm, circulated in November 1996, they wrote: "A generalized or undifferentiated public grievance, such as would suggest taxpayer standing via-a-vis macroeconomic policy decisions, is not recognized."
To get around the possibility that no one would have standing, Schaefer and Stenholm assert that, "[a] member of Congress...probably would have standing to file suit challenging legislation that subverted the amendment." There is no language in the amendment granting such special standing. It is far from clear the courts would agree with Schaefers and Stenholms assertion on this matter.
What Enforcement Action Could the Courts Take?
Assume the courts ruled someone did have standing to go to court in the face of an impending deficit. What remedies could the courts order?
The amendment is silent on this matter. There are three general types of actions the courts could take:
The first possibility contempt citations and jail would be unprecedented. The second court-designed tax increases and program cuts should not be ruled out. For example, Judge Robert H. Bork has written: "Unless attention is paid to the institutional problems involved, a constitutional amendment [requiring a balanced budget] would become in practice a nullity either that, or the budgetary process would pass into the hands of the courts, an outcome desired by no one."3
If the courts do not design specific program cuts and tax increases, a number of further questions arise. To reduce a deficit, Congress normally takes several steps. It uses the congressional budget process to set a limit on the total amount that can be funded in the annual appropriations bills. It also can direct, in the congressional budget resolution, that a reconciliation bill be developed in which various entitlement benefits are reduced and/or taxes raised.
Reconciliation bills are often contentious. They do not always pass Congress or secure a Presidential signature. Suppose a deficit would be eliminated if a pending reconciliation bill were enacted, but the bill is defeated and the budget threatens to be out of balance. Might a court order implementation of the reconciliation bill even though it has been defeated? Such an approach might be viewed as less presumptuous than action by a court to design a detailed deficit reduction plan itself. Yet a judicial action to order implementation of a bill Congress had rejected would stand on its head the process by which our nations laws have been made for 200 years.
This raises yet another possibility. If a court could declare a defeated reconciliation bill to be law to fulfill a constitutional mandate of a balanced budget, could a court also declare a bill waiving the balanced budget requirement to be law, especially if such a bill had garnered majority (though not supermajority) support while a defeated reconciliation bill had fallen short of amassing even a simple majority? When a deficit threatens, the balanced budget amendment instructs Congress to choose between eliminating the deficit by majority vote or accepting the deficit by supermajority vote. If Congress does neither, can the courts choose either course?
The courts might be reluctant to declare as law a piece of legislation that Congress had failed to pass. They might well prefer an alternative route of declaring as unconstitutional the particular piece or pieces of legislation that have caused the deficit. This seems to be the role that Reps. Schaefer and Stenholm envision the courts playing. They write:
The courts could make only a limited range of decisions on a limited number of issues. They could invalidate an individual appropriation or tax act. They could rule as to whether a given Act of Congress or action by the Executive violated the requirements of this amendment... [A]bsolutely no role for the courts is foreseen beyond that of making a determination as to whether an Act of Congress or an Executive action is unconstitutional and [making] a court order not to execute such Act or action.
Nothing in the language of the amendment supports this limited reading of the amendment. But let us assume this limited reading is correct. What does it imply?
Reps. Schaefer and Stenholm raise the possibility that an Executive action would precipitate a deficit and be unconstitutional. They say the courts could order the president "not to execute such action." Consider the situation just discussed in which enactment of a pending reconciliation bill is needed to eliminate the deficit. Suppose Congress passes the bill, but the President vetoes it. Can the courts override the veto and declare the bill law in order to fulfill the constitutional balanced budget mandate? If the balanced budget amendment had been in effect in the fall of 1995, could the courts have used this authority to order President Clinton to sign the reconciliation bill Congress sent him?
Which Laws to Strike Down?
Suppose the courts decide they can not "enact" a defeated or vetoed reconciliation bill but can merely strike down laws that have been enacted. At first blush, this might seem to be a logical approach for the courts to take. But which laws could they strike down? After all, a deficit occurs when the sum of all expenditures exceeds the sum of all receipts. No particular spending bill and no particular tax cut is more culpable than any other. This would be especially true if the budget appeared to be in balance when Congress completed action for the session but was subsequently thrown into serious deficit by an economic slowdown or unforseen developments in the financial markets.
Thus, the courts might have to pick and choose which laws to invalidate. In theory, in the event of an unaddressed deficit, the courts could choose among such disparate pieces of legislation as the defense appropriations act, the appropriations act for the departments of Health and Human Services, Labor, and Education, the Medicare Act, or the 1981 Kemp-Roth tax cut. In such a circumstance, the result may be considerably less equitable than if the court could design an even-handed approach that trims all areas of the budget. But Reps. Schaefer and Stenholm suggest the court should view a court-designed budget cut as beyond its authority.
To avoid arbitrary action by the courts in selecting which laws to invalidate, suppose the courts decided that laws resulting in either government spending or tax reductions should be struck down in reverse chronological order until the budget is balanced. For example, if the last bill enacted by Congress before adjournment was a tax cut, the tax cut would be struck down. If that was insufficient to produce budget balance, the last enacted appropriations bill say, the agriculture appropriations bill would be struck down next. If that was still insufficient, the next-to-last appropriations bill would be invalidated, and so on.
Such an approach would raise serious equity problems. Why should one agency be shut down and a different one remain open simply because the appropriation for one agency was enacted September 28 and the other September 27? Note that bills generally land on the Presidents desk in bunches, and he can choose the order in which to sign them.
This also would raise practical questions. Suppose, for example, the last bill enacted is the appropriations bill that funds the Department of Transportation. Among other results, striking down that bill would appear to send home the air traffic controllers and shut down the nations airports. Yet as those who lived through the partial government shutdown of 1995-1996 know, there is a permanent federal statute called the "antideficiency act" that provides indefinite (open-ended) funding to maintain those government activities "essential to protect life and property" in the absence of a regular, annual appropriation bill. If the Transportation Department shuts down, the president can determine that air traffic controllers are essential. But if he did, might the courts argue that such a determination was "an executive act causing a deficit" and therefore unconstitutional?
If the courts agree that the president retains authority to pay essential employees, they would have to strike down appropriations one at a time, determining in each case the estimated cost of keeping essential activities going, and then move on to the next most recently enacted law. In the case of a recession, which could cause a deficit of more than $100 billion, it is plausible that striking down the entirety of all 13 appropriations bills would not be sufficient to restore balance, given the large cost of essential activities such as national defense, border protection, air traffic control, and food and water inspection. At that point the courts could move to the most recently enacted entitlement law. Cost-of-living adjustments for compensation payments to disabled veterans are enacted annually, so they would generally to be the first to go. Farm bills, which reauthorize price support programs and food stamps, are enacted periodically; they might be the next to go.
The invalidation of the most recently enacted expenditure laws and tax cuts would almost certainly lead to considerable jockeying for early enactment. This would not be a salutary outcome; when single Senators or small groups of Senators can hold up bills against the wishes of the majority, the threat that a late bill might be a dead bill would strengthen the ability of a single senator to extort concessions. Supporters of a particular agency might feel the need to concede on other issues to get their agency funded early.
The Role of The President
The balanced budget amendment raises equally serious questions about the role of the President. Reps. Schaefer and Stenholm have sought to offer assurances that the balanced budget amendment would not greatly enhance the powers of the President. In the materials they circulated in November, they wrote:
The language of Section 1...creates an ongoing obligation to monitor outlays and receipts and make sure that outlays do not breech (sic) receipts. This does not envision any sort of discretionary impoundment power on the part of the president... [He] would be bound, at the point at which the government runs out of money, to stop issuing checks.... [The balanced budget amendment] does not broaden in any way the powers of the President.
But this assurance raises more questions than it answers. For example, what does "stop issuing checks" mean? Suppose that in August, the Treasury estimates the net budget surplus usually run in September a month in which a large portion of estimated business taxes are paid will not be large enough and the fiscal year will end in the red. Suppose further that, if the government mails no checks for the last 17 days of September, that will balance the budget. Is the president required to issue such an order?
If the answer to this question is "yes," two further questions arise. First, failing to pay checks for 17 days doesnt make the legally required expenditures go away; it just pushes them into a new fiscal year. This is simply a timing shift, which will (all other things being equal) cause a deficit in the next fiscal year. Can the courts invalidate the Presidents order on the grounds that it causes a subsequent deficit?
Second, does the phrase "stop issuing checks" mean the President must order agencies to stop incurring financial obligations? That is, must he ground the military, furlough federal employees (civilians and soldiers alike), cancel Social Security payments, unemployment compensation payments and food stamps, halt Medicare and Medicaid reimbursements, and so on?
If so, persons with a legal right to payment defense contractors who have delivered their tanks, depositors with federally "guaranteed" deposits in failed banks, citizens owed interest on their Treasury bills, the elderly owed their Social Security checks, and others will go to the Court of Claims for redress.4 What will that Court rule? Will it say that rights under federal statute and contract law disappear if there is a deficit? Or will it order the President to make payment? And in the latter case, suppose that the Treasury has reached the debt limit and cannot legally borrow more must the President ignore the mandate of the Court of Claims? Or, alternatively, can that Court order the Treasury to borrow and the President to pay, notwithstanding the balanced budget amendment?
As this discussion indicates, there are very serious questions about the meaning of the balanced budget amendment, how it will be enforced, and the extent to which it will shift vast new authority to the judiciary or the President and alter the balance of powers that has served our nation well for 200 years. The troubling questions discussed here, especially those concerning the role of the courts and the President under a balanced budget amendment, have no clear answers.
The murkiness of the amendment on issues of such importance is cause for concern. As Judge Bork has written: "...not all policies can be made into effective law. There is a tendency to think that constitutional rules execute themselves and that they accomplish precisely what was intended, but that is not by any means always the case."5
1 Congressional Record, January 25, 1995, p. H629
2 Reps. Dan Schaefer and Charles Stenholm, materials entitled "Cosponsor The Balanced Budget Amendment," Nov. 18, 1996.
3 "On Constitutional Economics," Regulation, Sept./Oct. 1983.
4 For a discussion of the implications of the balanced budget amendment with respect to deposit insurance and other "binding" government commitments, see Richard Kogan, "A Balanced Budget Could Jeopardize Our Financial Stability," Center on Budget and Policy Priorities, June 1995.
5 Bork, Op. Cit.
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