This brief report outlines some possible macroeconomic implications of observing a statutory or constitutional commitment to balance the Federal budget. It does not address the legal questions about the proposal or their implementation, nor the economic and political questions related to decisions about the level of Federal revenues or expenditures. On the latter, its analysis refers to revenue and expenditure levels, in relation to total national product, typical of recent years.

Projections of deficits in excess of $200 billion a year through 1990 and beyond have raised considerable concern about the economic damage they will cause. Yet, many find it hard to describe exactly what harm deficits will bring, or how such harm will come about. This report provides a brief qualitative description of what economic analysis suggests that large deficits will do to the economy, and what the likely consequences of their reduction will be.

Projections of deficits in excess of $200 billion a year through 1990 and beyond have raised considerable concern about the economic damage they will cause. Yet, many find it hard to describe exactly what harm deficits will bring, or how much harm will come about. This report provides a brief qualitative description of what economic analysis suggests that large deficits will do to the economy, and what the likely consequences of their reduction will be.