During an interview with ABC’s George Stephanopoulos this week, United States President Barack Obama declared that he isn’t interested in balancing the federal budget. Even though he did pledge throughout the 2008 presidential campaign to balance it, now he is not going to balance it for the sake of balance.
As of late, there have been quite a few economists, analysts, pundits and members of the press asking a question that perhaps should have been answered in elementary school: what is so special about a balanced budget?
One of the latest culprits of pegging such a question is New York Times economics reporter Annie Lowrey, who published an article Tuesday titled “Balanced Budget Dispute Is Fiscal and Philosophical” that essentially downplayed the enormity and dangerous national debt. In the report, she also called the sequestration, which was cuts to future automatic spending increases, “painful and stupid.”
The question began the article but then she cited Wisconsin Republican Congressman Paul Ryan’s recent budget proposal that claims to balance the federal budget within 10 years. She also noted Washington State Democratic Senator Patty Murray’s “modest goal of bringing spending closer in line with revenue over time.
“While economists generally agree that narrowing the government’s deficit and limiting the size of the debt are necessary in the long run, most argue that balancing the budget would not restore the nation’s still-weak economy to health in the near term,” wrote Lowrey. “Indeed, rushing to do so with unemployment still elevated and the economy growing at only a sluggish pace could even set back the effort to reduce the deficit.”
Of course, this is akin to former Vice President Dick Cheney’s comments during his reign that “deficits don’t matter.”
The U.S. national debt exceeds $16.5 trillion, but a Washington Post article reported that the real national debt could actually be nearly triple the original estimate: $31 trillion. The figure is calculated by reflect explicit and implicit off-budget federal loan guarantees, which, as the author explained, could damage the current bloated deficits.
Although the budget deficit will dip below $1 trillion in this fiscal year and remain that way until the end of the president’s second term, the Congressional Budget Office (CBO) projects the deficit will surpass the $1 trillion mark in 2016.
Why does a balanced budget matter so much? Why have Austrian Economists, former Texas Republican Congressman Ron Paul, some Republicans and even the president when he was an Illinois Senator called for balanced budgets? Well, there are a slate of reasons why proponents of getting out of the red are indeed correct.
If Washington was ever to produce a legitimate balanced budget (not raiding the pension fund like a certain 1990s president) and have surpluses then this could be used to pay down the national debt.
Republicans, Democrats and Independents enjoy spending other people’s money on themselves and other people. However, these politicians are supposed to be held accountable to the taxpayers. By balancing the budget, it shows that politicians are prudent, respectful and are not going to increase taxes.
When a government spends more money then it receives, there are a few options: tax, borrow, cut, inflate or ignore the matter. Usually, the federal government just issues a few tax increases, borrows the money from Japan and China, turns on the printing press and ignores the issue entirely, much like Bush administration did. It will evade the aspect of cutting, though.
Each year when the federal government posts a budget deficit it goes right into the national debt. This means that Washington has to pay a certain percentage of interest on the national debt. In 2011, the U.S. government paid $227 billion in interest. For those looking for more government programs, the interest payments take away from funding to healthcare, education and welfare.
In the article, the reporter cited economists who don’t believe a balanced budget would grow the economy. This is completely fallacious because the government has to take money from the private sector in order to fund the present state of the federal government. With less interest payments and an increase in savings and investment then the government needs less of the taxpayers’ money.
A budget deficit is generational theft. An imbalanced budget passes the issue onto the next generation and allows them to deal with it and forces them to live beneath their means. Yes, Ms. Lowrey, the budget deficit is a philosophical argument.
“As Milton Friedman famously argued, what we really need is a constitutional amendment to limit taxes and spending, not simply to balance the budget,” Paul said in a speech to the House of Representatives on a bill. “If we achieve this, a balanced budget will take care of itself. We need to cut back at least to where spending was a decade ago.”
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