Balanced Budget Myth

As our country is supposedly "dealing" with the debt crisis, and the debt ceiling, and the total national debt, we are being subjected to the usual brand of theatrical politicking that goes on in our, nearly paralyzed, capital all the time. Of course this year it is particularly concerning because both sides in this purely political debate seem unwilling to see country first, and political ambitions as secondary. Both parties seem to have more divisions within their own party, than between the parties. Added to all that mess, we are starting down the road toward another presidential election to complicate things even more. Or Perhaps that's why this is such a complicated mess.

So with all this happening, naturally some Republicans are resurrecting the old fall-back stance that the only way to resolve our money problems is through a Constitutional Amendment requiring a balanced budget. It's  not unexpected- this kind of silly rhetoric comes up from time to time. But this time I hearkened back to the typical media blitz we see when these things start swirling through the national debate.

Picture this (and I know you can- because we've all seen this one on TV), a typical middle class couple sitting at the kitchen table- a stack of bills in front of them. The couple speak in earnest tones and big sighs to each other about how hard it is to make ends meet. They say, "well, we"ll just have to tighten our belts and cut back till things get better. I sure wish those big-spenders in Washington would do what families have to do. Then they would understand what we're going through". Then you see some politician come on and say, "American families know how to balance their budget. Elect (or support, or contribute to, or believe) me, and I'll bring American common sense to government in Washington. If American Families can balance their budget, then Washington can too!"

Wow, very inspiring! But total crap. Using the typical American family as an analogy for the way government ought to function is a myth. It is a myth because Americans, in fact people in most developed nations, do not operate on a balanced budget- nor can we. Let's examine the truth behind this myth and dispel forever the lies we get fed on this issue and others like it.

First, we know that "Balanced Budget" means that we can spend only the money we take in. This applies to any entity; family, business, or government. Now imagine that an American family can only spend the money it takes in during any budget cycle- typically that is one month or one year, but we could make it two years just for fun. Very few people would be able to buy a new car-almost all new cars are purchased on credit. Very, very few would be able to buy a house. We have mortgages for that. (i.e. long-term debt)Very few would be able to purchase furniture, appliances, any other durable goods, or be able to travel. Imagine trying to enroll your child in college and the registrar stops you and says, "sorry, we only serve families with balanced budgets. If you don't have the $35 thousand for this year you can't come in". Student loans folks! (i.e. more long-term debt)

Sophisticated  budgets operate on credit. That includes most business and family budgets. Developed countries, and their people, absolutely require it to even out budget cycles and to purchase items over time. These activities actually stimulate economies and are a healthy part of commerce. Think about any small business owner, the folks Republicans tout so much, trying to stay in business without a line of credit (i.e. continuing debt). To prove the point, Americans are currently holding about 1.5 trillion dollars in consumer (non-mortgage) debt- and many trillions more in mortgage debt. This is what makes the current political foolishness so frustrating and nerve-racking. Everyone of normal (non-political) intelligence knows we must be allowed to barrow or the economy would grind to a halt in about a day. Think of the consequences of a true balanced budget for our federal government. We would never have the ability to respond to natural disasters or military aggression against us, or any other national emergency without sudden and precipitous tax increases every time some event occurred. Imagine the politics of that!

I'm not arguing in favor of senselessly stacking up crippling debt. But I am sickened by the hypocrisy of those who are holding things up now; when they were the very same people who ran up the debt for two wars, unfunded drug company giveaways and tax breaks for rich people- the same people who are absolutely intractable on the idea of raising even one more dollar in taxation while defending the richest people in their corporate jets. At the very least I want to be spared the indignity of using my family and the families of so many others to push lies about balanced budgets. The analogy just doesn't fit.

I would just hope those in Washington would stop the posturing and raise the debt ceiling like they did for President Reagan seventeen times and they did for President G.W. Bush seven times, without comment or conditions. They are really playing with economic fire and risking all of our livelihoods. If this country defaults- there will be a world-wide credit crisis that will effect every person you know and send us in to an even deeper economic trough.

I'm in a bit of a cranky mood on this topic- but, thanks for looking in.