Posted in Finance, Accounting and Economics Terms, Total Reads: 795
Definition: Balanced Budget Amendment BBA
Balanced Budget Amendment is an amendment proposed in the US constitution that mandates that the government cannot spend more than its earnings. It is a measure followed to keep federal budget in check and constrain the spending. BBA ensures that the state does not account for a deficit, which in turn, leads to problems like unemployment and inflation. It enforces a cap on total spending as a percentage of country’s GDP.
This budget balance provision is exempted in the times of a calamity, war or recession by super-majority vote. Three fifths of the members (60%) should vote in favor of the exemption as per the super-majority vote.
Challenges in Implementation:
- There would be intricacies involved when the actual revenues and spending are more or less than the estimated values. Some provisions are needed to adjust for the deficit that would result after the actual data is obtained.
- There are challenges for the court to pass a balanced-budget amendment, which might sometimes challenge the government
- There might be problems if the supermajority vote is not obtained in the times of recession. Waiver legislation would not be possible then
- There would be cases of malpractices like manipulative accounting, in order to meet the budgetary requirements