Definition§
The Gramm-Rudman-Hollings Amendment, officially known as the Balanced Budget and Emergency Deficit Control Act of 1985, is federal legislation aimed at reducing the deficit in the United States federal budget. The amendment set specific deficit reduction goals and mandated automatic, across-the-board cuts in federal spending if Congress failed to meet those annual targets. Named after its sponsors, Senators Phil Gramm, Warren Rudman, and Ernest Hollings, the act sought to impose fiscal discipline on federal budgets.
Examples§
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Deficit Reduction Targets: Initially, the amendment set annual deficit targets, starting with $180 billion in fiscal year 1986, to gradually decrease the federal budget deficit to zero by 1991.
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Automatic Spending Cuts: If Congress failed to meet the deficit targets, the legislation mandated automatic sequestration, which uniformly reduced spending in discretionary programs while excluding some mandatory programs like Social Security.
Frequently Asked Questions§
Q1: What was the main objective of the Gramm-Rudman-Hollings Amendment?
A1: The primary objective was to reduce the federal budget deficit through a combination of specific targets and automatic spending cuts.
Q2: How did the Gramm-Rudman-Hollings Amendment enforce deficit reduction?
A2: It enforced deficit reduction by setting annual deficit targets and implementing automatic, across-the-board spending cuts (sequestration) if these targets were not met.
Q3: Were there any exclusions from the mandatory spending cuts?
A3: Yes, certain mandatory programs like Social Security, defense spending, and some entitlement programs were excluded from the mandatory cuts.
Q4: Why is the amendment significant in U.S. fiscal policy?
A4: It introduced a systematic approach to controlling the federal budget deficit and served as a model for subsequent legislative efforts in fiscal discipline.
Q5: What happened when the targets set by the amendment were not met?
A5: Automatic sequestration was triggered, leading to uniform cuts across eligible discretionary spending programs.
Related Terms§
- Sequestration: A process of automatic, across-the-board cuts to federal spending when budget targets are not met.
- Federal Deficit: The shortfall when the government’s expenditures exceed its revenues in a fiscal year.
- Balanced Budget: A financial situation where total revenues are equal to or exceed total expenses.
Online References§
Suggested Books for Further Studies§
- “Fiscal Challenges: An Interdisciplinary Approach to Budget Policy” by Elizabeth Garrett, et al.
- “Balancing the Budget is a Progressive Priority” by Stuart M. Butler and Alison Acosta Fraser
- “The Public Budgeting and Finance Primer: Key Concepts in Fiscal Choice” by Jay Eungha Ryu
Fundamentals of Gramm-Rudman-Hollings Amendment: Fiscal Policy Basics Quiz§
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