Balanced budget amendment

Public finance
Policies Agricultural Economic Energy Industrial Investment Social Trade Fiscal Monetary Policy mix
Fiscal policy Budget policy Debt internal Deficit / surplus Finance ministry Fiscal union Revenue Spending deficit Tax
Monetary policy Bank reserves requirements Discount window Gold reserves Interest rate Monetary authority central bank currency board Monetary base Monetary (currency) union Money supply
Trade policy Balance of trade Free trade Gains from trade Non-tariff barrier Protectionism Tariff Trade bloc Trade creation Trade diversion Trade / commerce ministry
Revenue Spending Non-tax revenue Tax revenue Discretionary spending Mandatory spending
Optimum Balanced budget amendment Economic growth Fiscal illusion Price stability
Reform Fiscal adjustment Monetary reform
Portal
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A balanced budget amendment or debt brake is a constitutional rule requiring that a state cannot spend more than its income. It requires a balance between the projected receipts and expenditures of the government.

Balanced-budget provisions have been added to the constitutions of Germany, Hong Kong, Italy, Poland, Slovenia, Spain and Switzerland, among others, as well as to the constitutions of most U.S. states. In the United States, the Republican Party has in the past advocated but no longer advocates for the introduction of a balanced budget amendment to the United States Constitution.

Balanced budget amendments are defended with arguments that they reduce deficit spending and constrain politicians from making irresponsible short-term spending decisions when they are in office.^[1] Research shows that balanced budget amendments lead to greater fiscal discipline.^[2] However, there is substantial agreement among economists that strict annual balanced budget amendments have harmful^[vague] near-term economic effects. In times of recession, deficit spending has significant benefits, whereas spending cuts by governments aggravate and lengthen recessions.^{[3][4][5][6][7][8]} To prevent that, most balanced-budget provisions make an exception for times of war, national emergency, or recession, or allow the legislature to suspend the rule by a supermajority vote. In 1995, such an amendment passed the US House and came within one vote of passing the Senate.^[9]