Redux: This is NOT your family budget — False Analogies and Faulty Logic

Return with us now to that day not so long ago when the post heading was: This Is Not Your Family Budget.  Indeed, suggestions that a Balanced Budget Amendment is a good idea — as proposed by Senator Dean Heller — are based on a false analogy and very faulty logic.

Faulty Towers

The faulty thinking comes into play as the proponents ignore the fundamental ways in which government spending is different.  There are backstop functions, automatic stabilizer functions, monetary policy functions, and savings functions, which factor into the formula for institutional budgeting that aren’t part of family budgeting.  [DB]*

However, the false analogy extends a bit further. The blithe disregard for the factors listed above results in a proposition that is the complete opposite of the expression: “The government should be run like a business.”  Imagine a business that could not borrow funds for capital improvement projects?  No bond sales?  No ‘running a deficit’ for the purpose of investing in corporate infrastructure with an eye toward future profits? For example, are we to become upset and fearful for Chevron because its balance sheet indicates an increase in long term indebtedness since December 2008?  The bottom line is that a  corporate CEO couldn’t run a modern company under the guidelines suggested by the Republican Study Committee.

The False Analogy

Rather that reiterate all the specifics of the false analogy, here are some useful sources of information demonstrating the point that government budgets and family budgets are two entirely different things.

Economics writer David Nicklaus of the St. Louis Post Dispatch explains how the proposed balanced budget amendment would bust the U.S. economy rather than fix any of our current economics problems, noting the difference between government and family budgets. Robert Greenstein and Richard Kogan (CBPP) explain this argument further.   Robert Greenstein, writing for the CBPP, lists ways in which family budgets DO incorporate deficit spending and are not an appropriate model for government operations.  Greenstein and Kogan explain that the balanced budget amendment is extremely ill-advised, and would create problems for Social Security.

A Solution Worse Than The Problem

What House Republicans, and some Senators like Sen. Dean Heller, are advocating is a solution worse than the budgetary problems we are currently facing.  For those wishing to get into the weeds of this issue, the following articles and posts are recommended:

Richard Kogan, “Program Cuts Under a Balanced Budget Amendment: How Severe Might They Be?” CBPP, November 15, 2011.  Fieldhouse, Pollack, Thiess, “Why spending caps are poor policy…,” Economic Policy Institute, June 22, 2011.  Rebecca Thiess, “Unbalanced Budgeting: Federal Spending Cap May Endanger Social Security,” Economic Policy Institute, June 22, 2011.  Citizens for Tax Justice, “Balanced Budget Amendment Could Double Unemployment During Recessions,” November 17, 2011.

Several writers reference a post from MacroEconomic Advisers LLC  published on October 21, 2011 which concluded:

“The ultimate goal of a balanced budget amendment is to reduce the federal deficit. As we have written elsewhere, we believe strongly that deficit reduction is necessary both to avoid the slow crowding out of private investment and to avert the eventual sovereign debt crisis implied by current policies. A BBA would not necessarily achieve these goals before being abandoned or circumvented. Furthermore, an interesting and growing literature suggests that uncertainty surrounding fiscal policy retards economic growth.   The attempt to enforce a BBA could well end up heightening fiscal uncertainty while magnifying cyclical risks to the economy. It would be far better to achieve a sustainable fiscal policy through considered discretionary actions than under the yoke of a mechanical rule.”

Gimmicks and Games

Since it’s reasonably clear that the Balanced Budget Amendment, in its various forms, isn’t analogous to a family budget, isn’t a policy designed to make government run more like a business, and certainly isn’t a viable solution to our fiscal issues, it must be for political consumption.  It has more to do with the Republican campaign slogan “Cut, Cap, and Balance” than it has to do with economic realities.

And so, while Americans are calling for economic equity and JOBS, the Congressional Republicans continue to debate and “pass” symbolic and ideological bills playing to their own base.  Americans want jobs, the GOP offers attacks on Planned Parenthood and family planning. Americans want jobs, the GOP offers to repeal health care reform and the patients’ bill of rights legislation.  9% of American workers are unemployed, and the GOP offers to remove restrictions on firearms. Americans need jobs, and the GOP offers up a balanced budget amendment.

Nevada’s contribution to this political circus comes from our Wall Street Warriors,  Representative Mark Amodei (R-NV2) and Senator Dean Heller (R-NV), who have evidently decided to Campaign Like Its 1988 — in 2012.

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* See also: Desert Beacon, “Magical Mark’s Unbalanced Amendment,” July 29, 2011.  Desert Beacon, “This is NOT your family budget,” June 3, 2011. Desert Beacon, “How Not To Spend Your Family Vacation,” August 5, 2011.  Desert Beacon, “BBA or Bogus Blather for America,” July 18, 2011.  (Includes references) Desert Beacon, “Heller Still Supporting BBA,” July 11, 2011. Desert Beacon, “Slogans Beat Solutions..,” November 17, 2011.

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