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Government and Politics

Ohio backs a balanced budget, but what backs the logic?
Economists debate what the amendment would do to the U.S. economy

Karen Kasler
In The Region:

State leaders left the Statehouse today to travel west to Lima, to sign a resolution calling for a federal balanced budget amendment. Ohio Public Radio’s Karen Kasler reports that’s a hotly debated topic in economic circles.

LISTEN: Kasler on the balanced budget debate (extended)

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LISTEN: Kasler on the balanced budget debate (longer)

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The resolution passed in Ohio calls for Congress to come up with an amendment requiring a balanced federal budget, or to allow the states to convene a Constitutional convention. Conservative economist Richard Vedder is teaches economics at Ohio University in Athens, and makes the basic case for a balanced budget amendment. 

The future generation question
“We are endangering future generations by massive deficit spending and the debt reduction proposals and the balanced budget amendment seem to be sort of a crude way of dealing with the issue, they are usually effective as state governments have shown time and time again with their own budgets.”

While the idea of a balanced budget amendment has been popular with conservative thinkers and politicians for many years, Vedder admits his is the minority view and isn’t widely embraced by economists. Jim Thomson is the chair of the Finance Department at the University of Akron, and says a balanced budget amendment doesn’t allow for the flexibility a government should have in spending. 

Tied hands
“I think the big problem with most balanced budget amendments are that they tie the hands of the federal government a little too tightly.” 

Wendy Patton is an economist with the liberal think tank Policy Matters Ohio. She says during a recession the federal government can spend when consumers and businesses can’t, and that keeps recessions from becoming depressions. And she says a balanced budget amendment could result in job losses and big cuts in programs that help communities. 

“We would see the federal government prioritizing expenditures on the FBI, on veterans’ benefits, on things they have to spend money on. Ohio would be cost support in water treatment plants, in equipment for police officers, in schools, in research and development.” 

But one economist thinks the U.S.would be better off now if a balanced budget amendment had been in place during the last recession. Todd Nesbit is a senior lecturer at Ohio State University and is affiliated with the Mercatus Center, a free-market think tank. 

“Even in the short run, I think that we would have made better decisions overall on how our elected officials were actually spending a lot of the money, doing a better job of really, truly understanding what are the opportunity costs. If we spend more money over here, that means we can’t do this other project here. Which one is actually going to provide us the greatest benefit to our entire society on this?”

Do families really stay within their budgets?
But most economists are still wary.  James Newton runs Economic Perspectives, an independent economic consulting firm in central Ohio. He takes the often heard argument – that a family has to balance its budget, so the government should to – and turns it around. 

“There are lots of families that do not, in a single year, find themselves in a position where what they spend and what they bring in in income is exactly the same. It’s a matter of: Is the amount of debt that you take on, is that difference between income and spending narrow enough that it’s comfortable? It’s that way for a family – it can just as easily be that way for a nation.”

Ohio is the 20th state to pass a balanced budget amendment resolution. Backers need 34 states to pass it for it to move forward.


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