The topic of this episode is, “Should Congress pass a balanced budget amendment to the Constitution?”
The federal government experienced a shutdown in autumn 2025, which is one of many that have occurred in the past 20 years. The nation also has racked up about $38 trillion in debt, and Congress and the president have not taken real action to right America’s fiscal ship.
So should Congress pass a balanced budget amendment to the US Constitution?
My guest Kurt Couchman says ‘Yes, it should.’ Kurt is the author of the new book, Fiscal Democracy in America: How a Balanced Budget Amendment Can Restore Sound Governance (Palgrave MacMillan, 2025).
Kurt has been kicking around Capitol Hill for about 15 years. Presently he is a senior fellow at Americans for Prosperity, a group that promotes the principles and policies of economic freedom and liberty. Previously, Kurt worked for two members of Congress, and has had stints at the Cato Institute and the Committee for a Responsible Federal Budget, among other gigs. He has spent a lot of time engaged with Congress on matters relating to federal spending and the budget, so I am delighted to have him here with us to discuss the idea of a balanced budget amendment to the US Constitution.
Kevin Kosar:
Welcome to Understanding Congress, a podcast about the first branch of government. Congress is a notoriously complex institution, and few Americans think well of it. But Congress is essential to our republic. It is a place where our pluralistic society is supposed to work out its differences and come to agreement about what our laws should be.
And that is why we are here: to discuss our national legislature and to think about ways to upgrade it so it can better serve our nation. I am your host, Kevin Kosar, and I’m a resident scholar at the American Enterprise Institute, a think tank in Washington DC.
Kurt, welcome to the podcast.
Kurt Couchman:
Thanks so much for having me, Kevin. I’m a longtime listener and first time guest.
Kevin Kosar:
You have worked in Congress and have watched Congress and budgeting decisions up close. Legislators and presidents seem incapable of coming anywhere near balancing the budget. The feds had a $1.8 trillion deficit this year alone. Why is this happening?
Kurt Couchman:
So speaking of the members of Congress that I worked for, there were two fiscal hawk, constitutionalist members of Congress. So they were always frustrated, and by extension I was frustrated—why doesn’t this place work? Why are things out of so out of control?
Over time, I’ve realized that there are a number of different pieces to the story, different perspectives on the emerging debt crisis, and it turns out that they all have part of the truth. The most basic is that there are a lot of what you might call extra-constitutional activities that the federal government is currently engaged in: things that don’t have a specific basis in the text of the Constitution, but are derived from penumbras and that sort of thing.
Chuck Blahous, who’s a former Social Security commissioner and Jessica Riedl, who’s a think tank analyst, have pointed to the Great Society programs in particular—especially the expansions in the 1960s and 1970s, which expanded Social Security, created Medicare and Medicaid and a whole host of social welfare programs.
In addition to that, Eugene Steuerle at the Urban Institute has written about how there are autopilot adjusters on both the spending side and the revenue side of the budget ledge that have consumed fiscal space. So in terms of spending growth, he talks about how Social Security is now indexed to wage growth. It didn’t used to be that way. It used to be that Congress would just increase benefits through new legislation. On the revenue side, there are inflation adjusters built into that at different places. So using his terminology—this is kind of a different perspective on it—the giveaways the Congress does are too easy (perhaps much easier than they should be) and the takeaways are too difficult.
I ascribe that to a lack of modern decision making frameworks. Congress started out informal and small; it could be informal when there were 26 senators and 50 representatives or something. But it’s changed. It’s much bigger, the scope and scale of what the federal government does and what Congress does, and the demands on Congress have grown tremendously.
And we need to apply modern best practices for decision making frameworks to Congress in order to get them to manage not only the deficits in debt, but coordination and overlap and duplication and fragmentation and just poor performance. So there’s a lot of things that we need, but largely in my view, stems from Congress needing to, and not yet having taken the next step forward in modernizing the way it does business.
Kevin Kosar:
Certainly some of this deficit spending is driven by that automatic spending or things they don’t vote on each year. Sometime ago I had on the podcast, Jonathan Rauch, who wrote a book called Demosclerosis where he basically said, under the First Amendment, you’re allowed to approach the government and petition it for a redress of grievances. We’ve got a lot of interest groups and a lot of lobbyists and a lot of people who want things, and it’s very easy for politicians just to say yes because the money’s coming out of their pocket. If you can just borrow, it makes it easy to deficit spend, right?
Kurt Couchman:
Absolutely. It’s the logic of concentrated benefits and diffused costs. If you have a lobbying shop and are able to press legislators on why something is supposedly in the public interest—but it’s really in your private interest—then you can often get away with that, especially if it comes at a very low cost to a lot of people.
The sugar program is something people talk about a lot; it transfers about $10 per person to the sugar industry—the producers and refiners of sugar. $10 a whole lot to you or me. It’s not really enough to petition your members of Congress to do something about, but it’s very lucrative for the relative handful of people that are in that business.
And it’s not just that one thing. There are a whole bunch of different programs like that that just take a little bit from everybody here and there, but provide big dividends to the lobbyists and the people they represent. So that is definitely a challenge. And the goal of sound institutions is to counterbalance some of those pressures. Right now, so much of that shifts into the future in the form of borrowing, and so we have these chronic, large, and—actually, quite—dangerous debts that are piling up. We need to do something about that, and that’s why I’ve been working on fiscal rules and balanced budgets and all that.
Kevin Kosar:
I would say I’m certainly a guy who loves low taxes, but I’m not such a fan of low taxes when you keep expanding spending on the other side; that seems a little dishonest. On the one hand, it seems perfectly rational for a politician to say, I’m going to give you more government stuff, but on the other hand, I’m not going to raise your taxes and present the bill for it; I’m just going to lower your taxes if I can. But that seems to be where we’re at. The idea of members of Congress talking seriously about receipts not being as high as the outlays and that something should be done about this doesn’t happen.
Kurt Couchman:
The idea is that if you are spending but you are not taxing in real time to pay for it, then it makes government look cheaper. Then it really is classic economics. Demand curves slope downwards, so when something looks cheaper, people want more of it. The voters want more of government when it seems cheap because so much is being financed through borrowing. And you know, presumably if there was balance required, people would, would desire a lot less spending because they would see the full cost of what it is.
Kevin Kosar:
And you add on top of that the submerged state phenomenon identified by Suzanne Mettler in a book some years ago where she said, government does something new for people and they may briefly get excited about it. But then they just kind of bake it into their assumptions and don’t even think of it as something that costs money that the government is giving to them. Rather it becomes like a floor—an expectation—of how life is supposed to be, and that just compounds over the year.
You’ve got a proposal for a balanced budget amendment to the US Constitution. For listeners who haven’t gotten the book yet, what would this amendment say?
Kurt Couchman:
Yeah, I write the book around what’s called a principles-based balance budget amendment. What it would do is have broad concepts like the existing provisions of the US Constitution. You really need three things for a fiscal rule. You need the basic rule of how balance is going to be. You need a safety valve for emergencies. And then when you have big deficits like we have right now—and frankly like most governments have had when they’ve adopted balance rules—you need a transition of some sort. So the operative rule in this proposal is, “expenditures and revenues shall be balanced, which may occur over more than one year.”
That’s pretty vague. It’s a principle. It doesn’t really say exactly how it’s going to be done. Then it also would allow Congress to head towards primary balance or full balance. Primary balance does not include net interest, so over the next 10 years, it’s about half as much deficit reduction as full balance. I would like to get to full balance. That doesn’t seem politically feasible right now. Primary balance does seem within the realm of possibility, and then there’s two thirds for emergencies. We do have them. We need Congress to be able to respond. That is part of fiscal responsibility, being able to deal with emergencies in real time.
And then Congress would have 10 years after ratification to get to balance. Uh, ratification historically has taken about two or three years from a median perspective. You don’t want to count the 27th amendment because that took a long, long time. That was proposed with the Bill of Rights, but wasn’t adopted until I think 1992. The principles-based BBA also doesn’t have any of the features that have undermined support for other balanced budget amendment proposals, including all of the ones that Congress has ever voted on. So based on that description, you can see that it really does leave a lot of the details—maybe most of the details—to implemented legislation, which is how Congress takes these principles and makes them applicable for the country’s modern circumstances. Or at least that’s what’s supposed to happen.
Kevin Kosar:
Just for listeners, I want to pause here and clarify. A balanced budget amendment might lead listeners to think, ‘Kevin said there’s a $1.8 trillion. Deficit this year alone, Congress under a balanced budget amendment that would force Congress to like find $1.8 trillion either by raising it in taxes or just slashing government to the bone.’ Is that what, is that what Kurt Couchman wants? The answer is no, correct?
Kurt Couchman:
No is the answer.
Again, we’re talking about a phased-in transition to potentially primary balance. So instead of a $1.8 trillion deficit, the current primary deficit is about half of that: $900 billion. So that you’re kind of excluding interest.
Then it’s up to Congress to find the spending efficiencies, to reduce tax loopholes to provide for economic growth through regulatory reform or all sorts of different things like that. But the point is to have a long period of time so that politics can do its thing and Congress can work and they can find large and small deals to be able to make those changes in a way that doesn’t provide a sudden shock to the economy.
Kevin Kosar:
So this is something where you’re ultimately trying to bend the budget curve over a long period of time, with the recognition that over that course of that time, there could be emergencies or other exigencies. One thing everyone should appreciate is that to balance a budget, you need to have revenues match up outlays. Macroeconomic factors can affect how many revenues are coming in. If the economy goes down and companies are not paying as much in taxes, or if the stock market slumps and there are fewer capital gains dollars flowing in, it’s not easy to just try to get the numbers for the federal budget to line up every single year, there’re going to be deviations.
Kurt Couchman:
That’s right. And you don’t want to have annual balance. Annual balance has been the fatal flaw in most of the BBA proposals that have been put out there so far. That’s because revenue is incredibly volatile. It jumps around from year to year. So if you try to tether your spending to revenue, then you’re going to do a couple of different things. You’re going to either create enormous policy instability—Congress will be having to change spending and revenue programs dramatically from year to year just to match that annual balance requirement—but more likely you’re going to have them fudge things. You’re going to have them, for example, raid pension funds this year and just do all sorts of juggling tricks. We see this in the states that have annual balance rules. They do this all the time. There’re all sorts of options they have, so why not just say, let’s have a rule that smooths things out, balance over the medium term, the business cycle—the technical term is structural balance.
And then you don’t have to make all those crazy changes and you have a stable and predictable platform for making your policy.
Kevin Kosar:
Another thing listeners might be wondering when they hear balanced budget amendment is, ‘Didn’t Kevin earlier say that we have like $38 trillion in debt and that’s only going to get higher? Does Couchman want to make all that debt go away?’
Kurt Couchman:
No, and we actually want to have some debt. It’s helpful with trading. It’s helpful to have a reserve currency. There are actually benefits from having some debt, but as the debt level gets too high, then the costs exceed the benefits, and we’re way past the crossover point.
But let’s say that the debt held by the public is about the same size as the economy right now. Now, we’re not going to balance the budget all of a sudden. But if we did over about 20 years or so, we would double the size of the economy if you were to hold the debt constant. Double the size of the economy, the debt burden has now fallen from 100% of GDP to 50% of GDP. So all we need to do is grow the economy faster than the debt is growing in order to reduce the debt burden to manageable sizes and avoid this fiscal crisis that’s coming our way unless we deal with this.
Kevin Kosar:
You mentioned fiscal crisis and earlier you used the phrase debt crisis. Let’s just pause here, because a fiscal crisis—a debt crisis—that seems to be one of the things that you are profoundly worried about. For listeners, what do you mean by debt crisis?
Kurt Couchman:
Well, I am profoundly worried about it, and I’m not the only one. Bridgewater co-founder Ray Dalio thinks we’ve got about three years—plus or minus a year—before we have a fiscal and economic heart attack. The Congressional Budget Office and a lot of other observers are very worried about this.
The way that it would likely unfold is that those who normally buy bonds at treasury auctions don’t buy as many as they normally would or they put up the bids for the treasuries that are being auctioned that are at a lower ratio than seems healthy. This could come if there’s a recession, if other countries start dumping our debt—basically, when the buyers of bonds want fewer of them than the government is trying to supply.
And then the interest rates start going up, which becomes a self-feeding cycle of people losing confidence. Now, there are warning signs that exist. Already, we’ve had some bad auctions and there’s been an incredible run-up in the price of gold. So these are signs that all is not well. This could happen almost any time; the risk of this happening is quite high.
And yes, we have the world’s reserve currency and that gives us an exorbitant privilege. But that is not a foreordained thing. We didn’t have it from the beginning of the country. It used to be Britain that had that, and we have it now, but it’s not guaranteed to continue. So if this happens, then we have basically a financial and economic freakout and deep recession, the federal government would be scrambling to cut spending and raise revenue. Dalio talks about in his recent book that historically, there are massive tax increases, a massive change in the international order.
We have 200,000 plus troops in permanent duty stations all around the world. Many of them would probably come home immediately simply to save a buck. And so when you add onto that some of the stretching of the boundaries of the executive branch’s spending powers—to put it delicately—you can imagine how in a debt crisis scenario, how even more liberties are taken under the idea that if that doesn’t happen from the executive branch it won’t happen at all. And we’ll just spiral into a depression and security vacuums and who knows what else.
Kevin Kosar:
Listeners should remember that the reason we’re able to deficit spend is because other nations look at us and say, ‘We’re willing to lend you money. And we’re willing to do that for a relatively low interest rate because we trust we’re ultimately going to be paid back.’
But at a certain point in time, if a nation’s finances get too far out of whack, that confidence erodes and they start demanding higher interest rates, which as you indicated can create this spiral, so it’s definitely a very bad scenario. It’s the sort of thing that could bring about the fall of a nation now.
Balanced budget amendment proposals are not new. You’re not the first guy to bring them up. In your book, you note that the first one was proposed in the 1930s. Yet, almost a century has gone by and we don’t have one, which is pretty remarkable considering how many have been introduced into Congress.
Why have they failed? You indicated earlier that one problem is sometimes they pursue a balance objective that is not attractive as a policy idea. But are there other factors that have led to Congress rejecting balanced budget amendments?
Kurt Couchman:
Absolutely, and there are, there are a number of things I talk about in the book, but you have to have good policy meeting with good timing. The last time that we really had good timing was during the Tea Party era in 2011 when there were votes on balanced budget amendments, but they didn’t come close to passing.
I think part of that was because Congressman Amash and I had been making the case for the business cycle balance budget amendment, which would limit spending to a rolling average of three years. The last three years of revenue adjusted for inflation and population to smooth everything out and make it stable and predictable. There were a number of Democrats and Republicans who saw the clear benefits of that as compared to annual balance, so there are better proposals out there. Now, I do think the principles-based balance budget amendment is even more broadly attractive than the business cycle balance budget amendment. But I believe that if the business cycle BBA had come up for a vote in 2011, then it would’ve passed the house and possibly the Senate as well, which is a bold statement to say, but that was my reading at the time.
So I think the issue was that there were design problems with the 1995 BBA that passed the House 300-132 and almost passed the Senate. It only failed by one vote, although there were Democratic senators that were willing to switch from “Yes” to “No” if they needed to keep it from passing. But there were some real problems with that. Senators Kennedy, Leahy, and Feingold wrote extensively about those problems, and I respond to each and every one of their criticisms in Chapter 8 in the book with respect to the principles-based BBA.
But the timing is not quite right. We don’t have the bipartisan consensus that a constitutional fiscal rule is necessary. That doesn’t exist right now. It has existed in an increasing number of countries. We’re one of the very few countries in the most prosperous parts of the world that don’t have a constitutional fiscal rule.
The other piece is that we don’t have clear institutions about how we would turn enough dials to get to balance. The appropriations process is important, but right now, it’s only about a quarter of spending and none of the revenue or the tax preferences. There are all these dials that are out of sight, out of mind, and procedurally out of reach for the current congressional budget process. So we need that too.
Kevin Kosar:
My own sense is that the incentive structure for elected officials to vote for a balanced budget amendment carries with the sense this perceived risk that they have. It may sound good to vote for, but once they actually have to start budgeting, it opens them up to electoral risk.
Kurt Couchman:
Yeah. I was in a briefing of members of Congress that my then boss, Maya MacGuineas, when I was a committee for Responsible Federal Budget was giving to the members. And at the end of her whole spiel about the need for fiscal responsibility, one of the members said, “Maya, we know what we need to do. We just don’t know how to do it and survive.”
That was a seminal moment for me when I realized that these guys know what’s up and they want to do it because they know it’s good for the country, it’s good for them. But they don’t know how to make it possible to keep coming back as members of Congress. That is why what I was just starting to hint at—moving towards a system of making decisions that would give them the ability to do the tough but necessary work and survive politically—is really important.
The key part of that is the Comprehensive Congressional Budget Act, which was a bipartisan bill introduced last Congress. The idea is really just to move from the current appropriations process—again, just a quarter of spending, none of the revenue—to an annual congressional budget that has all of the spending, all of the revenue, getting all of the committees to manage their portfolios, appropriators would keep doing the discretionary, and then the other committees would manage their direct spending or mandatory spending portfolios in addition to revenue for Ways and Means and Finance.
That way, when you do need to do something, first of all, you can do something every year. But then it’s also reversible: if you do a little bit this year, and maybe you even delay the implementation of it. Then you realize that you shouldn’t have done that. You can take it back the following year. This would always have bipartisan votes—at least as long as no party has 60 votes or more in the Senate—so there’s some cover there. It’s hard for partisans to attack their own partisans in addition to the other party. You’d be able to say, “I didn’t like this thing that that committee did, but I voted for the overall budget anyway because it had X, Y, and Z that I do like.” So for all these different reasons, it becomes possible to do what needs to be done and also survive.
That’s a really key part of it. The balanced budget amendment is also part of that, of course, because you can say, “We had to balance the budget or move towards ballot in the budget, so I had to do that thing. Sorry. Let’s try again next year.”
Kevin Kosar:
That’s right. Appeal to the higher authority of the Constitution and hope that the voters forgive you. And speaking of voters, voters should certainly reach out to their members more often and tell them, “We need to do better with our federal budgeting. What we’re doing right now is, is not acceptable.” And maybe if more members heard from more voters saying that sort of thing, they would feel a little more courage.
We are all out of time. Kurt Couchman is the author of the new book, Fiscal Democracy in America: How a Balanced Budget Amendment Can Restore Sound Governance. Kurt, thank you for helping us better understand the case for a balanced budget amendment to the Constitution.
Kurt Couchman:
Kevin, thank you so much for having me. It’s been a joy.
Kevin Kosar:
Thank you for listening to Understanding Congress, a podcast of the American Enterprise Institute. This program was produced by Jaehun Lee and hosted by Kevin Kosar. You can subscribe to Understanding Congress via Stitcher, iTunes, Google Podcasts, and TuneIn. We hope you will share this podcast with others and tell us what you think about it by posting your thoughts and questions on Twitter and tagging at AEI. Once again, thank you for listening, and have a great day.
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