A Balanced Budget Amendment That Borrows from Switzerland’s Fiscal Playbook

The Biggs BBA Gets the Design Right—Mostly

Photo by Nellie Adamyan on Unsplash

This week, the House is set to vote on H.J. Res. 139, a balanced budget amendment introduced by Rep. Andy Biggs (R-AZ) in January. It is not perfect, but it is the first balanced budget amendment designed around structural primary balance to receive a floor vote in Congress. That is significant, in part, because structural primary balance aims for longer-run fiscal sustainability, less economic disruption, and greater likelihood of adherence compared to a simple annual-balance requirement. Given America’s untenable fiscal outlook, that’s worth taking seriously. Getting the federal government back on a sustainable path starts with clear and enforceable budget targets. A well-designed balanced budget amendment is the one of the stronger mechanisms available to impose needed fiscal discipline.

For decades, Congress has debated adopting a balanced budget amendment (BBA) in one form or another. Most simply, a BBA would make it unconstitutional for annual federal expenditures to exceed annual revenues. This design approach, called annual balance, is intuitive but problematic, primarily due to volatility in federal revenues. During a recession, such a rule might force the government to cut spending or raise taxes precisely when doing so might deepen economic downturn.

The Biggs BBA avoids this common criticism by capping spending levels to a three-year rolling average of historical federal revenues, adjusted for both population growth and inflation. This smooths volatility while still putting the budget on a glide path toward balance. The amendment also excludes interest payments on the federal debt from the calculation of total spending. Taken together, these requirements mean the Biggs BBA targets structural primary balance, favoring gradual and predictable fiscal consolidation over the medium term rather than immediate overall balance.

This is the amendment’s strongest feature, and it partly mirrors the approach of Switzerland’s debt brake, one of the more successful fiscal rules in the developed world. The Swiss debt brake requires federal budget balance over the business cycle rather than in any single year, allowing deficits during downturns while mandating offsetting surpluses during expansions. Since adoption, Switzerland has reduced its federal debt-to-GDP ratio and consistently outperformed its European peers across many fiscal sustainability metrics.

In the event of an emergency, the Biggs BBA allows Congress to exceed the spending cap pursuant to a two-thirds roll call vote in both chambers. That’s a meaningfully higher bar than the simple majority or three-fifths thresholds found in other fiscal rules, like Statutory PAYGO. The roll call requirement is also important insofar as it forces members to go on record in support of bypassing the balanced budget amendment.

However, the Biggs BBA creates a special exception for wartime, stating that Congress can bypass spending limits for any year a declaration of war is in effect pursuant to a roll call vote. Note that declarations of war themselves only require a simple majority. This creates a lower bar than the regular emergency threshold, which should be concerning given that wartime spending has historically driven some of the largest fiscal expansions in American history. Worse, the exception creates a perverse incentive for Congress to declare war should it want to bust spending limits.

All too often, Congress uses emergencies to bypass well-intentioned fiscal rules. Since 1992, Congress has used emergency designations to spend more than $12.5 trillion outside of spending caps—comparable to the entire amount spent on Medicaid and veterans’ programs combined over the same period. The war exception in the Biggs BBA, which lacks a supermajority requirement, is the weakest link in an otherwise well-constructed rule. History suggests short-sighted legislators will take advantage of it.

Separately, the Biggs BBA includes a new limitation on tax increases. The BBA requires that any new tax or tax increase be approved by a two-thirds supermajority roll call vote in both chambers. The intention to deter Congress from adopting new taxes is understandable. The US has a spending-driven problem, not a lack of tax revenue (see the chart below). In addition, revenue-driven fiscal consolidation tends to be both more recessionary and less durable than spending-driven fiscal consolidations.

However, the limitation also cuts against good rule design. Sound fiscal rules need to be neutral. Rules that are perceived as partisan are less durable and liable to be waived by a future Congress that views the rule as non-credible.

There is also a practical political problem. Constitutional amendments require two-thirds majorities in both chambers and ratification by three-fourths of states. A BBA that requires a supermajority for tax increases is an immediate deal breaker for Democrats.

Despite these flaws, the Biggs BBA’s central feature, targeting structural primary balance, is a realistic reflection of best fiscal practices. For that reason alone, it merits consideration. Still, a BBA that can actually pass, endure, and do what it promises needs to fix both the emergency loophole and the neutrality problem. For the emergency exemption, defense and non-defense ought to be treated the same, both requiring two-thirds supermajority to override spending limits. On neutrality, the supermajority requirement for tax increases should be dropped. Congress should not primarily rely on tax increases to close the deficit, but that should be a separate debate from the design of our nation’s core fiscal rules.