The U.S. just can’t really ‘budge it’
The national budget is often compared to that of a family. We are told to “Live within your means just like the average family has to do.” But that only applies if the family in question is about 330 million extended relatives with President Mom and Vice President Dad (or vice versa). The national budget is not like a family. It is more like a corporation in that it can borrow money for quite a while as long as its revenue stream (taxes and borrowing) keeps it afloat. But I’ll use my “mega family” metaphor here.
In the case of our government, we are keeping the revenue stream going by borrowing money each year to pay for the programs Congress has approved in past years. We now have a $31.4 trillion debt that our revenue funds — i.e., taxes — don’t cover. So, we have to pull out the credit card to pay for all the stuff Congress has already approved. This bill currently amounts to about $1.3 trillion a year.
That’s the key phrase: “What Congress has already approved.” Using the family metaphor, if we don’t want to raise the debt ceiling, it’s like President Mom saying, “This credit card bill is just too big, and I refuse to pay it any longer!” The logical result of this action, or non-action, is that the family declares bankruptcy and is forced into insolvency. No one wants to do business with them any longer because they’re a bad credit risk.
If our country did the same thing, the result would be defaulting on government bills and bonds and the inability to send out Social Security checks, pay for Medicare benefits and fund the military, to name just the Big 3 of government expenses. And the people who have kept the government afloat (i.e. the investment community) would disappear. Obviously, this would be a catastrophe. So, the first order of business is to pay the damn bill!
Beyond that, though, the real problem still exists. The deficit is now six times larger than it was in 2000. A few years before that there was a balanced budget during the Clinton administration due to reduced defense spending (the short lived “peace dividend” after the collapse of the Soviet Union), and a surge in tax revenues from the explosion of the dot com revolution. Unfortunately, those rosy revenue numbers faded quickly after the dot com crash in 2000.
Then 9/11 happened and the defense budget was increased (by both parties) and tax cuts were passed (by both parties). Add in the Great Recession with an $800 billion TARP (Bush and Obama) and another $3 trillion pandemic stimulus injection (Trump) and $1.9 trillion stimulus injection (Biden) along with tax cuts (Trump). It’s like our family won the lottery in 1998 and spent the money on stuff they all needed (or at least wanted), but never thought about their finances in a serious way ever since. Sure, the relatives were (mostly) working, but that didn’t come close to covering the bills. And everyone was getting older and some relatives were retiring. So, the credit card came out every year, and the bill got larger.
As long as we have a deficit to fund, Congress must pony up the money to do so. This is probably a bad system, but we’re stuck with it. The problem is that the typical congressman or woman wants to bring home the bacon so to speak. It’s political suicide to tell constituents “Hey I’m going to Washington to raise your taxes and cut your benefits!” No one wants to hear that. But when they say, “We need to stop the runaway spending in Washington!”, that resonates with the voters! But guess what? They’re really saying the same thing. Someone’s sacred cow is another’s ox to gore. Both parties have been guilty of running up the deficit, and both parties need to figure out ways to cut spending and raise revenues (i.e., taxes). In the long run, there really is no other solution.
A close look at the budget reveals that if Social Security, Medicare and defense aren’t touched, 70% of all other spending would need to be cut to reach a balanced federal budget in 10 years. That’s not feasible according to the Committee for a Responsible Federal Budget, a group that backs deficit reduction. It will really need to be a combination of tax increases and budget savings across the board just to cut the deficit in half by 2032. That would stabilize the ratio between federal debt and the nation’s GDP, which they say should be the real goal.
This group’s conservative credentials and broad support shows how many politicians and economists reject the idea of a balanced budget in 10 years. Only the ultra-conservative faction of the Republican party thinks a balanced budget in 10 years is necessary. Others don’t really support it, but are using it as a political weapon against Biden. It sounds good because it resonates with the idea of a family living within its means.
Meanwhile, some legislators have decided they can get re-elected regularly by becoming drama queens and kings instead of politicians. If they can deliver a tirade against raising the deficit ceiling and threaten to stiff paying the bill, that also resonates with many voters. “I’m mad as hell and I’m not gonna pay it, anymore!” But that only works in the movies. In the real world our “family” goal should be to keep working to get its household budget in order so that the bill that comes due isn’t always rising (note: It actually went down last year) while at the same time, paying the bills we’ve already incurred.
(Glenn Duer lives in Waynesville.)