Murray N. Rothbard, “The Balanced-Budget Amendment Hoax” (1987)

This file is a short single-author polemical policy essay, appearing as an entry in Making Economic Sense. Rothbard’s thesis is that the balanced-budget amendment is not a serious fiscal restraint but a political device: it converts public anxiety over deficits into constitutional theater while leaving the incentives, loopholes, and accounting tricks that produce deficits intact.

It is a hallmark of the triumph of image over substance in modern society that an administration which has submitted to Congress budgets with the biggest deficits in American history should propose as a cure-all a constitutional amendment mandating a balanced budget.

The essay begins from this irony and immediately generalizes it into a critique of constitutional formalism. For Rothbard, the same political forces that generate deficit spending would also shape the interpretation and enforcement of any amendment. Courts are not outside government; they are embedded in the very structure they would supposedly restrain.

The federal courts are appointed by the executive and confirmed by the legislature, and are therefore part and parcel of the government structure.

Its structure is a compact sequence of objections. First, Rothbard attacks the reliance on projected rather than actual balance. A future “estimated” balance is, in his account, an invitation to official optimism and manipulation.

The major defect is that they only require a balance of the future estimated budget, and not of the actual budget at the end of a given fiscal year.

Second, he argues that balancing through higher taxation would defeat the purpose of fiscal discipline. The point is not merely accounting balance but a reduction in the burden of government. Hence his sharp formulation:

Second, balancing the budget by increasing taxes is like curing influenza by shooting the patient; the cure is worse than the disease.

Rothbard then turns to the proposed tax-limitation clauses, especially those tied to “national income” or GNP. His conceptual move is to deny that such aggregates are stable constitutional objects; they are statistical constructions vulnerable to redefinition. A rule based on them would not bind the state so much as empower technicians and politicians to revise the measuring stick.

It is absurd to include such a concept as “national income” in the fundamental law of the land; there is no such real entity, but only a statistical artifact, and an artifact that can and does wobble according to the political breeze.

The next objection concerns the budget itself as an object of evasion. Off-budget expenditures already make deficits appear smaller; an amendment would intensify the incentive to move spending outside the official frame. Rothbard’s broader claim is that rules aimed at “the budget” invite government to redefine what counts as budgetary.

Any balanced-budget amendment would provide a field day for this kind of mass trickery on the American public.

He extends this point to proposals to exclude “capital” items from the federal budget. The analogy to private capital budgeting, he argues, is illegitimate when applied to a coercive state. It would allow ordinary boondoggles to be relabeled as investment, expanding rather than restraining public expenditure.

The final section reframes the amendment as camouflage. Rothbard asks what enforcement would mean if Congress or the president violated it, implying that courts cannot realistically compel the political branches to obey fiscal limits. The amendment’s real function, therefore, is not to impose discipline but to reassure the public while deficits continue.

The purpose is not actually to balance the budget, for that would involve massive spending cuts that the Establishment, “conservative” or liberal, is not willing to contemplate.

The essay’s relevance lies in its public-choice skepticism toward fiscal rules: constraints fail when the officials constrained control forecasts, definitions, exemptions, and enforcement. Rothbard closes by comparing the amendment to a “phony gold standard”: both borrow the symbolism of sound policy while preserving inflationary finance and deficit politics.

In both plans, we would be dazzled by the shadow, the rhetoric of sound policy, while the same old program of cheap money and huge deficits would proceed unchecked.