The Question of a Balanced Budget

Self-Check Questions

How would a balanced budget amendment affect a decision by Congress to grant a tax cut during a recession?


The government would have to make up the revenue either by raising taxes in a different area or cutting spending.

How would a balanced budget amendment change the effect of automatic stabilizer programs?


Programs where the amount of spending is not fixed, but rather determined by macroeconomic conditions, such as food stamps, would lose a great deal of flexibility if spending increases had to be met by corresponding tax increases or spending cuts.