I’m certainly no fan of a balanced federal budget (however our area representatives Walberg and Latta are) and I doubt of legislators would really be happy with it if it happened unless they just cheat. For example, the Iraq and Afghanistan wars didn’t even come out of the budget. Robert Greenstein of the Center on Budget and Policy explains some fallacies of the tired phrase you hear over and over and over. That one about how families balance their budgets so the government should, too:
Families must balance their budget every year, proponents of a constitutional balanced budget amendment often argue, so why shouldn’t the federal government? This argument has several serious flaws, the most basic being that families often do not balance their budgets, for good reason.
A family that takes out a student loan to send a child to college, for example, might end up with a large “deficit” for that year — that is, it will spend more than it earns that year. But a college education is a solid long-term investment that is likely to translate into significantly higher earnings over the child’s working career.
Similarly, a family that obtains a mortgage will almost certainly have a “deficit” for that year, but it will also have a house to live in.
Families also build up savings in good economic times and draw them down when times are tight to cover expenses that exceed their current incomes.
The proposed constitutional amendment would bar the federal government from such practices. The federal government couldn’t borrow to finance investments that boost future economic growth, such as infrastructure improvements. And if it ran a surplus one year, it couldn’t draw it down the next year to help balance the budget if the economy turned down.
In fact, even if a family financed a new house or a college education entirely out of savings – with no loans and no mortgage – that would still be prohibited “deficit financing” under the terms of the balanced budget amendment, because it is still a case of spending more in that year than the family earned in that year.
In short, a balanced budget amendment wouldn’t align federal budgeting practices with those of families. It also would threaten serious economic harm, especially in recessions — and would harm family budgets by causing many Americans to lose their jobs, as Macroeconomic Advisers has explained. It also would create a host of problems for Social Security, and other basic federal functions, as we’ve explained.
More to consider here.
More than once, I’ve wondered whether any of those who advocate a balanced budget even know what it means. It looks good in print and sounds good when the Republican candidates say, “When I am president, the first thing I’m going to do is balance the budget”. The jabberwockies in the crowd holler, “Yeah, that’s the ticket”. Instead, someone should be relentless in their asking, “Do you even know what a balanced budget entails?”
That’s some funny stuff right there. “Savings”. When did the federal government ever “save” anything other than banks that were deemed “too big to fail”?
IMHO, the analogy of a family budgeting should fit. If a family takes out a loan for college or a home they are expected to make timely payments until the debt is paid off. IF per chance they are able to save back enough money to pay cash, then great.
Here’s the difference as I see it. The government doesn’t know how to save money back for a “rainy day”. They spend and spend and borrow and borrow with no set goal or “budget plan” to pay it down. Unlike the family, if a family doesn’t have the means to make the house payments they may face losing the property.
What is the government going to lose? Is the whole group of lenders to the U.S. going to come in and repo the country? No, more than likely what will happen is they won’t let the U.S. borrow any more unless they pay down what is already owed.
Of course the government would have a wider tax base if more people were actually able to pay taxes by working. Which is another topic for another time.