This chapter begins with the describtion of the fiscal binds in which federal, state, and local governments find themselves. It considers the origins of the tax revolt in the United States and its success in imposing taxing and spending limitations on governments, with special emphasis on both California’s experience with Proposition 13 and the proposed balanced budget amendment to the United States Constitution. The chapter explores the consequences of inflexible budgets, the tax revolt, and reduced growth rates of government budgets. The federal government has also provided fiscal aid with relatively few strings attached to the states. Faced with continuing demands for increased quality and quantity of services, local governments have had to switch from heavy dependence on the overworked property tax to increasing dependence on state and federal financing. Reduced federal spending may be a laudable goal, but the balanced budget amendment is a dangerous and uncertain way to achieve that goal.