There are moments
when a saying is repeated so often that it becomes common
sense, irrespective of whether it is true. Most of us
have heard, repeated ad nauseum, a critique of
government deficit spending and debt that takes the form
of: “If my family has to balance its budget and live within
its means, why shouldn’t the government?” The political
Right is very fond of rhetoric and many regular people
repeat it without ever thinking about its supposed accuracy.
In point of fact,
I know of few, if any, families that balance their budgets
or actually live within their means. How can I say this?
Well, think about credit cards; home mortgages; or auto
loans. The reality is that every time you purchase based
on credit you are not living on a balanced budget; you
are going into debt; and you are engaging in deficit spending.
If regular people were to live on a balanced budget, the
reality is that the economy would collapse.
The problem with debt
is not the existence of it, but rather your ability to
repay the debt. Think of it this way. If you go to a store
and purchase a new television for, let’s say $300, you
usually have the option of paying cash (sometimes meaning
a check) or using credit. Your choice to use a credit
card, if you are thinking rationally, will be based on
whether you believe that you have a good chance of new
money coming into your possession, i.e., that you are
going to get paid in the next cycle and not have to use
up all the cash reserves that you may have. Let’s go further.
If you go to buy a car, you can certainly pay cash for
it, but most people don’t. They use credit based on the
assumption that they will be able to pay the car off over
time with their income.
Governments go into
debt all the time. The question is not whether there is
a debt, or whether they engage in deficit spending. The
question is also not whether the debt is big or small.
The question is whether the government anticipates that
it will have the ability to repay the loans that it takes
out. When governments have been suckered through various
financial schemes, their ability to repay will be hurt,
but that is not because of the debt but because of the
financial schemes that they engaged in or were tricked
is a critical point for us to get, particularly when you
are watching TV and you see that commercial of the kids
repeating an anti-debt message in a chorus that sounds
like the Pledge of Allegiance. The political Right is
trying to put the fear of God into the public around debt,
but what is noteworthy is that when Ronald Reagan was
in office and engaged in the largest peacetime military
build-up in US history, thereby creating a massive debt, the
political Right said almost nothing. When George W. Bush
launched the US
into two wars, thereby destroying the surplus that Bill
Clinton had built up, the Tea Party crowd was nowhere
to be seen.
So, as the cartoon
character Bugs Bunny asks: what’s all the hubbub, bub?
The concern for the political Right is not debt but what
the expenditures are going towards. With the exception
of certain right-wing libertarians, the political Right
never sees a military build-up that it can or wants to
oppose. But efforts that go towards any degree of redistribution
of wealth and the expansion of social programs are automatically
condemned as reckless spending. It’s really as simple
In the context of
a significant economic crisis - whether one calls it the
Great Recession or a depression - the reality is that
what is called for is deficit spending. That means that
the government will need to put out more than it is currently
bringing in. This is necessary in order to get the economy
moving and, in fact, to encourage other spending. Obsessions
with deficits and debts do nothing to address the economic
crisis except prolong it, if not make it deeper.
So, the next time
you hear anyone repeat the mantra about how their family
has to balance their budget, ask them:
the answer to any of these questions is “yes,” then you
should point out that they, if even for a moment, were
living outside of their means. Ask them, then, to think
of the implications of that reality for them and for government.
Did they need that car, or were they prepared to wait
until they had accumulated $20,000 in cold cash in their
savings account so that they could put it all in a nice
bag and bring it to the auto dealer?
Just because a saying
sounds good does not mean that it is in the least bit
accurate. It just happens to be cute.
Board member, Bill Fletcher, Jr., is a Senior Scholar
with the Institute for Policy Studies, the immediate past president of TransAfrica Forum
co-author of, Solidarity Divided: The Crisis in Organized Labor and a New Path
toward Social Justice(University
of California Press), which examines the crisis of organized
labor in the USA. Click here