HERE WE HAVE IT!! The American people have SPOKEN. They're FED UP. They demand that government LIVE WITHIN ITS MEANS (whatever "means" means). Etc. And so you've got the consensus narrative that "explains" what these recent midterm elections were all about. All very dramatic and empowering, except first we gotta expand on that narrative for people whose attention span runs longer than 30-second advertisements. Here goes:
"We" will now cut "the deficit" of the "federal budget." But which one? There are several types of ways to figure out the government's financial position. The idea that there is some single, unified yearly budget for the US government is a myth. Large organizations operate this way - just as corporations produce balance sheets, income statements, and cash flow statements to investors. Each of these provide useful information for analyzing an organization's finances, but they all provide different answers to different questions. Depending on what government budget publication you're reading, and what the time frame is (yearly? biennium? 5 year budgets?), the size of our deficit changes dramatically.
"We" have decided that we can't "tax and spend our way to prosperity." Sadly we forget that when the government "spends" money, it doesn't disappear like it does when you and I spend a buck. That dollar isn't gone, it's just circulating throughout the economy. If the government doesn't spend it efficiently, then the next person who gets it probably will.
Government MUST "live within its means just like families and businesses do!" Sounds like common sense until you realize that neither households nor businesses do. Household debt has exploded in recent decades. Any business must incur debt to successfully invest and compete – that's a fundamental of capitalism, folks! Of the three, the numbers show that government debt as it relates to income has grown the slowest by far than the others. The other problem with that whole idea is the fact that the government is sovereign entity – meaning it creates, administers, and manages the money supply for a country of 300 million people. Go to Zimbabwe and experience 1,000,000,000,000+% inflation rates (no kidding) and then argue that our government has no idea how to manage its finances.
“We” fear that the government is going to “go bankrupt.” Possible, but a nuclear attack on Manhattan is more likely. The United States has the best and longest credit rating of any government in the world. The simple textbook economics that conservatives are so fond of dictate that if people don’t want to lend to us, they will begin to charge us higher interest rates. That’s the automatic mechanism we have to make sure that government lives within its means, and it works (i.e, Greece). C’mon Tea Sippers, if you’re gonna try to talk economics, ya gotta be consistent!
If you’re still reading at this point, I hope I conveyed to you a central point when it comes to debating about the deficit/debt: NATIONAL AND CORPORATE ACCOUNTING IS NOTHING LIKE A PERSONAL BUDGET. It’s like assuming that spiders and lions eat the same thing just because they’re both living things. Okay that’s a stretch, but you get the gist.
So congrats everyone! “We’ve” elected slogans over science, sensation over sensibility, laziness over research, exaggeration over analysis.
I know this isn’t the most spine-tingling thing to read about for most people but this stuff is important. An intellectually lazy fringe group has decided it is entitled to affect the lives of you and I. We don’t have as many guns as they do, so facts and reason are all we have!
*** Regarding government bankruptcy – The single biggest threat that the Tea Party poses is the possibility that they will REFUSE to compromise, and engineer a government shutdown as a form of protest. That can and may happen. If the government “shuts down,” even for just a little while, the government will be unable to make interest payments on our debt. We have never missed a payment in all of American history. If that happens, foreign investors will punish us by downgrading our credit, making it vastly more expensive to borrow ANY money. Two years of superstitious Tea floppers may very well lead to decades of EVEN MORE DEBT (via higher interest rates) PLUS an inability to borrow in a real future emergency. This is why this superstitious nonsense is so dangerous.