Maybe we need an UNbalanced budget amendment rather than a balanced budget amendment

An interesting idea from Alex Tabbarok:

The unbalanced budget amendment is a requirement that in good times the government must run a budget surplus. The virtues of such a rule are that it allows for counter-cylical fiscal policy during a recession. Indeed, it reduces the cost of counter-cyclical fiscal policy because it guarantees a reserve fund for just such emergencies. The unBBA is thus a type of automatic stabilizer of the kind I have argued for before (e.g. here).

As for the politics of it:

Notice that while making counter-cyclical fiscal policy easier the unBBA would tend to create budget balance as surpluses in good times were spent in bad times. Thus over a period of time the unBBA has similar results to a BBA. By requiring surpluses (and thus taxes) to be high(er) in good times,however, rather in bad times the unBBA has a lower cost and a better chance of being passed than the BBA.

I'm not sure everyone's who's signed the taxpayer protection pledge would be persuaded to hike taxes in good times...

Comments

[Ricardo's Ghost]

"I'm not sure everyone's who's signed the taxpayer protection pledge would be persuaded to hike taxes in good times..."

Of course not. They have no interest in long-term policy, just getting their taxes down by any means necessary.

An unBBA is interesting (a joyful embrace of Keynesianism) but isn't there something fundamentally wrong with outsourcing fiscal policy to the judiciary and keeping the legislature out of it?