How about a usually-balanced budget amendment?

Just think­ing out loud here for a moment. I’m sure that any flaws in my log­ic will be point­ed out in the comments.

My only prob­lem with a bal­anced bud­get amend­ment is that times of eco­nom­ic down­turn could be the worst time to cut back spend­ing. I’m not going to go full key­ne­sian and say that if the econ­o­my shrinks that it’s time to increase spend­ing, but I will con­cede that cut­ting back at those times is like­ly to be counterproductive.

So here’s my pro­pos­al: an amend­ment that requires the spend­ing in the Fed­er­al Gov­ern­ment to be matched by rev­enue unless rev­enue has (in real dol­lar val­ues, not adjust­ed for infla­tion) dropped since the pre­vi­ous year, in which case spend­ing must be capped at the lev­el of rev­enue from the pre­vi­ous year (or per­haps the last year before the down­turn in rev­enue if there are two years in a row where real-dol­lar rev­enues drop.)

Actu­al real-dol­lar rev­enues don’t drop very often any­way, so it would end up being pret­ty darn close to a bal­anced bud­get amend­ment. It would lim­it bor­row­ing to the time of actu­al reces­sion while still putting a brake on bor­row­ing and spend­ing (though not on tax­ing and spend­ing.) It would also be clos­er to in line with what Keynes actu­al­ly sug­gest­ed: allow mod­er­ate bor­row­ing to be paid back at the end of the downturn.

Prob­a­bly more impor­tant even than a bal­anced bud­get amend­ment would be a debt repay­ment amend­ment requir­ing, in years when real-dol­lar rev­enues increase that that increase goes to repay 1% of the debt pri­or to allo­cat­ing any funds to an increase in non-debt spending.

For exam­ple: in 2016 rev­enue is $4 tril­lion, bud­get (thanks to the above BBA and to make math eas­i­er) is $4 tril­lion, and the Fed­er­al debt is $20 tril­lion. in 2017 rev­enue is $4.3 tril­lion. $200 bil­lion would have to be allo­cat­ed to debt reduc­tion before any oth­er bud­getary spend­ing increas­es. Con­gress would still have $100 bil­lion extra to play with.

How­ev­er, if rev­enues only increase from $4 tril­lion to $4.1 tril­lion, there would be zero bud­getary spend­ing increase (though also no manda­to­ry decrease) and $100 bil­lion would go to debt repayment.

These poli­cies would make infla­tion­ary poli­cies less appeal­ing to politi­cians, which would decrease the effects of the hid­den tax on every­one’s sav­ings while also forc­ing politi­cians to make choic­es that grow the econ­o­my, because real growth will be the only way they get more mon­ey to play with. This is JFK-style lib­er­al­ism: JFK pushed for low­ered tax­es because he want­ed more tax rev­enue so that there would be more in the gov­ern­ment cof­fers to spend on social programs.

What­ev­er any­one’s prob­lems with Fed­er­al Gov­ern­ment spend­ing are, I hope every­one can agree that grow-and-spend is bet­ter than either tax-and-spend or borrow-and-spend.