C.1. Balanced Budgets and Deficit Spending

Congress may only authorize those expenditures whose projected outlays do not exceed projected revenues for the same fiscal period, as estimated by the Congressional Budget Office.

At the time I am writing this (August 2025), the CBO is projecting the federal budget deficit for this year will be $1.9 trillion.[1] Every American knows this deficit exists, and we are all nervously whistling past the fiscal graveyard day after day, year after year.

This clause is a mandate for Congress to pass a balanced budget. While it’s impossible to know actual revenues in advance, the CBO routinely provides official estimates. Congress is expected to adhere to them when legislating a budget bill. I’ll remind the reader that the CBO must be allowed to report its findings independently. It does so before anyone in Congress is permitted to see them and respond.[2] Congress can’t rely on “independent” projections. It can’t resort to guesswork. Finally, revenue projections can’t be built on optimistic gamesmanship.

The secret to this clause’s effectiveness lies in its precision. The language here says “may only authorize those expenditures….” There is no permissiveness, and the old trick of moving spending “off-budget” won’t work because this covers expenditures, not budget items.

Finally, except for the emergency provisions outlined below, there are no carve-outs in this mandate. It applies across the board.

Exceptions of limited scope and fixed duration may be enacted in two circumstances:

1. A formally declared war;

2. An economic downturn, as recognized by a separate joint resolution passing with at least three-fifths (³/₅) of Representatives and Senators voting in assent.

In such cases, deficit spending may not exceed the total of the budget items specifically allocated to relieve the triggering condition. It may not be automatically reauthorized for any subsequent fiscal period. If an extension is necessary, Congress must provide that extension “manually” through separate legislation.

Critics of balanced budget mandates will argue that the ones we have tried in the past had no mechanism for emergency flexibility, among other shortcomings. Those critiques land squarely on those historical attempts, but they don’t apply here.

“Emergency spending” has also been abused as an excuse for deficit spending. How can we balance the need for emergency flexibility with the fiscal interest in preventing accounting games?

There are only two circumstances specifically carved out where Congress can resort to deficit spending. During war, necessary expenditures will likely exceed revenues. So, as long as that war is formally declared,[1] deficit spending to meet those special needs is authorized. No special action is required to do so beyond the declaration of war.

The other exceptional circumstance that allows deficit spending is in an economic downturn. Both chambers of Congress can pass a joint resolution by a three-fifths supermajority declaring a downturn is in progress. If the resolution passes, then Congress may authorize deficit spending to respond to that emergency. It isn’t an automatic provision; sixty percent of the members of Congress have to agree.

Regardless of how the deficit spending is authorized, the deficit can’t be bigger than the expenditures designed to respond to the emergency. Furthermore, the deficit expenditures can’t be automatically reauthorized. Congress has to meet the necessary conditions, and a new spending bill has to be passed to extend the deficit beyond the first year. Congress retains its flexibility to act in crisis, but not without guardrails.

At all times, both payments on interest and on principal are considered line items in the federal budget.

Technically, this statement is covered under the “all expenditures” language, but it is included here explicitly to make it unambiguous. When the United States borrows money, both the principal and the interest are part of future expenditure calculations. They aren’t somehow exempt from the picture.

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[1] See Article II, Section 4.I. Note that, under this Charter, Congress can declare war against non-state actors, not just recognized nations and states.

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[1] CONG. BUDGET OFFICE, THE BUDGET AND ECONOMIC OUTLOOK: 2025 TO 2035; BY THE NUMBERS (Jan. 2025), https://www.cbo.gov/publication/61172.

[2] See Article II, Section 3.B.