Congress and the President agree henceforth to enact and sign a balanced federal budget by 30 September each calendar year. Further every elected member of Congress and every member of their staffs, the President, the Vice President and every member of the President's, Vice President's and the White House staff shall forfeit his or her salary for each day that the budget is past due. If the budget is in deficit, these same officials and their staffs shall forfeit a fraction of their salary equal to the projected annual federal budget deficit divided by the total projected federal budget for the current year. If the federal budget is in surplus, these same officials and their staffs shall receive a fractional bonus to their salary equal to the projected annual federal budget surplus divided by the total projected annual federal budget for the current year.
In other words, make the people who set the budget bear personal consequences for mismanaging it. (Why do I pick on the staffs? They are the ones who actually do all the work of getting the budget calculated, negotiated, recalculated, written and signed. And they are the ones who will have the most leverage with the Congress and President, who normally become rich enough to go without their salaries for a long time.) No need for artificial spending limits or borrowing caps. Just make it personal and set them free to do the right thing. Stay tuned - I'm trying to work one up for health care.