The takeaway: Trump wants a balanced budget, but half the work is already done.
15 USC § 3101(b)(2) lists as one of the goals for economic growth a balanced budget. Specifically, the section reads:
“(2) Aggregate monetary and fiscal policies alone have been unable to achieve full employment and production, increased real income, balanced growth, a balanced Federal budget, adequate productivity growth, proper attention to national priorities, achievement of an improved trade balance, and reasonable price stability, and therefore must be supplemented by other measures designed to serve these ends.”
15 USC § 3101(b)(3) goes on to say that:
“Attainment of these objectives should be facilitated by setting explicit short-term and medium-term economic goals, and by improved coordination among the President, the Congress, and the Board of Governors of the Federal Reserve System.”
These sections come from the Full Employment and Balanced Growth Act of 1978. They came to mind while listening to President Trump’s address to Congress this evening. Mr Trump mentioned briefly his desire for a balanced budget along with noting the need for a fall in interest rates.
For years Republicans have argued for making it a requirement of the Constitution that Congress and the President balance the federal budget. What has puzzled me is the delay in achieving that goal. While the Constitution does not explicitly mention budgets much less balancing one, given that the spending power of the government lies in the Congress, using monetary and fiscal policies along with setting short-term and medium-term goals along with coordination between the White House, Fed, and Congress sounds appropriate under the Constitution. They are ancillary to Congress’ powers to regulate commerce and regulate the value of money.
It could be that coordination between the branches along with setting short and medium-term goals are ineffective tactics. Monetary and fiscal policies are supposed to play a role in balancing the budget and achieving economic growth, but if, for example, the Federal Reserve Board and the White House are not talking, then you may have an explanation for failure.
Maybe that ship can turnaround come May 2026 when Mr. Trump will have an opportunity to replace the Fed chairman. Something tells me that balanced budgets won’t be a priority then.
Alton Drew
4 March 2025
News scan:
Federal Reserve Bank of New York. Credit access. “The Federal Reserve Bank of New York will release “Credit Insecurity in the United States, 2018–2023,” on March 6, 2025. The report introduces the Credit Insecurity Index, a geographic measure of credit access across the United States. The index combines data about the share of adults who are credit-constrained—relying on high-cost credit and struggling to manage debt—with the share of adults without a credit score or credit file.” — New York Fed.
Federal Reserve Bank of Atlanta. Raphael Bostic. Atlanta Fed president Raphael Bostic will make remarks to The Birmingham Business Journal on 6 March 2025. — Atlanta Fed.
The data:
U.S. Treasury rates
The ten-year, and thirty-year Treasury rates increased between 9:30 am this morning and 4:30 pm this afternoon while the two-year rate was unchanged. According to Treasury data, the two-year rate remained at 3.96%. The ten-year rate increased from 4.16% to 4.22%, while the 30-year rate increased from 4.45% to 4.53%.
Board of Governors of the Federal Reserve System
Data from the Board of Governors of the Federal Reserve System has the EUR/USD is priced at 1.0402 while the USD/JPY is priced at 150.6400.
Federal Reserve Bank of New York reference rates
The Effective Federal Funds Rate for domestic unsecured borrowings between commercial depository institutions is at 4.33%. The Overnight Bank Funding Rate, a measure of wholesale, unsecured overnight bank funding costs, also held at 4.33%.
The Secured Overnight Financing Rate, which measures the cost of borrowing cash overnight secured by Treasury securities, came in at 4.33%, while the Broad General Collateral Rate, a measure of rates on overnight Treasury general collateral repurchase agreement transactions, came in at 4.31%.
The Tri-Party General Collateral Rate, a measure of rates on overnight, specific counterparty, tri-party general collateral repurchase agreement transactions, came in at 4.31%.
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