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NYT: It’s Foolish To Try To Balance The Budget

From the New York Times:

Dispute Over a Balanced Budget Is Philosophical as Much as Fiscal

By ANNIE LOWREY | March 12, 2013

WASHINGTON — What is so special about a balanced budget?

What a coincidence! Obama says a balanced budget doesn’t matter, and lo and behold, the New York Times says the very same thing.

That question is at the heart of the warring Republican and Democratic budget plans coming out this week — with Representative Paul D. Ryan of Wisconsin vowing to eliminate the federal deficit within 10 years, and Senator Patty Murray of Washington State setting a more modest goal of bringing spending closer in line with revenue over time.

Ms. Murray’s "more modest goal" also entails $1 trillion dollars more in higher taxes while increasing spending.

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. 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.

You see? Trying to reduce our runaway spending will just increase the debt. This is Orwellian math.

“There’s nothing magic about exact balance,” said Alice M. Rivlin, a Democratic economist at the Brookings Institution who has worked with Republicans like former Senator Pete V. Domenici on bipartisan deficit-reduction proposals. “The really important thing is to keep the debt from growing faster than the economy.”

Because we have struck a perfect balance right now, when we borrow 47 cents for every dollar we spend. The important thing is to maintain that ideal ratio. Which we can do by raising taxes by another trillion dollars. That will grow the economy like gangbusters.

The question of whether to balance the budget and when is a new staging ground in the long-running fiscal fight between Republicans and the White House. Mr. Ryan, whose previous budget proposals did not bring spending below revenue for decades, vowed this time to do so by 2023, in part to satisfy the demands of the more conservative members of the Republican Caucus.

What’s this? Ryan’s budget is different this time around? That’s not what Obama and his other media minions are saying?

Democratic proposals — both the Senate Democratic plan to be released on Wednesday and the White House budget coming next month — are both expected to narrow the deficit substantially without balancing the budget or running a surplus.

But both include at least $1 trillion dollars in new taxes, which will surely boost the economy and grow jobs.

Democrats argued that Mr. Ryan’s budget would balance only on the backs of the poor, cutting taxes for the wealthy while eviscerating the social safety net. Mr. Ryan’s plan does not “plausibly deal with deficit reduction,” Jay Carney, the White House press secretary, said Tuesday. “It is important to bring our deficits down and to reduce our deficit-to-G.D.P. But they are part of — those goals are part of the broader purpose here, which is to grow the economy and strengthen the middle class.”

Which is best done by yet another tax increase.

Economists offered more nuanced views. Closing the budget gap over the longer term could be vital to sustaining economic health, some stressed, by ensuring that the government did not crowd out private investment and by helping to keep interest rates low. But that does not make it an immediate necessity

Apparently, these economists have never heard of credit ratings. Which were the reason for last summer’s attempt at a grand bargain, and when that failed, the sequester.

Last summer, all of the credit rating firms declared they were going to reduce the US credit rating even further if we do not do something very soon to reduce our debt to GDP ratio. And if our rating is reduced again, the interest on our astronomical debt will be astronomical.

And we will probably not even be able to borrow any more money. And we will go bankrupt, like Greece. Except no one will be able to bail us out.

As sensible as a balanced budget might sound — much like a balanced checkbook for a family — countries are generally able to run modest deficits for years on end while still keeping debt stable as a share of economic output. One year’s deficit is effectively paid off by later economic growth, especially if a government is investing in public goods like roads and schools…

You see? It’s silly to try to balance our budget. Our economic growth will easily pay for whatever debt we have now. Including out $87 trillion in unfunded liabilities. We are foolish to even worry about it.

The Senate Democratic proposal does not balance the budget, but it does reduce deficits to below 3 percent of economic output — a level that would stabilize the debt, economists said. During the 10-year budget window, the debt would start to shrink as a proportion of the economy…

Because raising taxes and increasing spending has always boosted the economy and reduced the size of the national debt.

The handful of balanced budgets achieved in the past four decades have tended to be the result of a strong economy. The surpluses of the late 1990s, for instance, came about in no small part because of unexpectedly strong economic growth and a bubble in the stock market, as well as tax increases and spending cuts during the Clinton administration.

Now, how and whether to get back to a balanced budget seems to be a new fight between Democrats and Republicans…

And never mind that Obama and the Democrats praised the Clinton years to the skies when they were pushing for ending all of the Bush tax cuts. Now, none of that matters.

All that matters is that we ‘stabilize the debt’ at this perfect ratio, where we are borrowing 47 cents on every dollar we spend.

This article was posted by Steve on Wednesday, March 13th, 2013. Comments are currently closed.

4 Responses to “NYT: It’s Foolish To Try To Balance The Budget”

  1. Petronius says:

    Sometimes it’s fun just to kick back and watch Rome burn.

    Of course the Emperor Nerobama and the Sandinistas in Congress are playing with fire.

    Because all of Nerobama’s fiddling, and all of their shenanigans, are increasing the risk of a selloff in the bond market, particularly if the foreigners who buy US Treasuries to finance our budget deficits back away.

    We need those foreigners to buy billions every single day just to keep Nerobama’s giant cornucopia and spending machine running.

    As such, the Chinese or Japanese don’t need to dump their bonds for the market to turn south. They just need to stop buying.

    And to a large extent they already have. The Fed currently buys about 70 percent of new government debt. And the bond market is beginning to slide as long-term interest rates creep up. The 30-year rate was 3.03% in January; today it is 3.23%.

    The Fed is trying to suppress interest rates, but that’s like trying to keep the lid on a boiling pot. Sooner or later the bond vigilantes will have their day. And they probably won’t wait for the credit rating agencies to act; by the time the credit rating agencies issue another downgrade of US debt it will probably be too late.

    A selloff in the bond market could even be triggered by a positive event, such as an uptick in economic growth –– because interest rates tend to rise in anticipation of economic growth, and as rates rise bond values fall.

    And in that case it doesn’t even matter what the Chinese and Japanese do. Or what the credit rating agencies do. Or what the Fed does. Any significant rise in long-term interest rates will immediately impair the government’s ability to borrow, making it apparent to everybody on the planet that Nerobama’s deficits are unsustainable and the fun is over.

    A collapse in the bond market will bring down the US dollar. The value of paper assets will crumble. And the pain will be unimaginable.

    And what happens then to all the disabled kids, the starving students, the poor and the old weepies, to the immigrants, moochers, looters, freeloaders, and assorted remoras who suckle at the government teat?

    Yes, what happens to them then? Will anybody still care about them when the country is bankrupt?

    • Rusty Shackleford says:

      All true.

      But it won’t be seen as his fault because it will happen at the end of his term and the very worst will happen while the next president is in office, thus indicating to the low information types that it’s the fault of whoever is in office at the moment.

      The only saving grace to that, if it can be thought of that way, is if Hitlery is president, the low information pukes will have no choice but to choose to blame her.

      After all, Obama (or one of his butt-kissers) continues to blame Bush even now. Or, is it possible that Hitlery will be able to formulate a narrative whereby she hangs Bobo out to dry?

      Oh, the quandary the media will have. The divisions internally will be huge. Hang Hitlery or the magic negro? How to be “fair” and “balanced” when there isn’t a republican in sight. Or….will they just find the most convenient republican and blame them, which seems the most likely scenario, given their track record.

      In any case, I’m betting that the next economic crash will never be labeled as belonging to captain a-hole; Jackson and Sharpton just won’t stand for it.

      On another note, I’m enjoying how the low-info voters are now having to eat their own cooking and they’re getting stuck with all that stuff that this thing called a president has bestowed upon this nation. Huzzah! National socialist….meet the truth. What’s that? You don’t like it much. Too bad! It’s what you ordered….It’s what you demanded, remember? You got it, Toyota…you own it…..it’s all yours and much, much more. Oh how happy you must feel while “sticking it to the man”, eh?

      How’s that kid doing in school now? Got a trophy you say? But he still can’t read and he’s 12, you say? You gave him five dollars to go get a gallon of milk and he said “day didn’t have none” when he got back and that fiver is missing as well but he won’t tell you what he spent it on?

      Oh…yeah….Ain’t it great to be livin’ in these times? The government was gonna take it all and fix it, right? Yet, the maw of the abyss has strangely grown larger. You noticed, didja? That life of livin’ easy and gettin’ money and free stuff for doin’ nothing is rapidly vanishing? What’s this? You said you actually couldn’t AFFORD to put gas in your Caddy? Damn shame, that. Look, I drew a picture of how much I care. (see below)

      Like it?

      House of cards comes crashing down, crashing down, crashing down……..

  2. Liberals Demise says:

    Anyone notice the “Bridge Out” sign 3 miles back?

  3. untrainable says:

    Mr. Ryan’s budget would balance only on the backs of the poor… because we all know that the greatest bulk of taxes are paid by the poor… wait a minute…

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