Who favored the Balanced Budget Amendment? Raise your hand.

[hgc]

Back in the 90's, when the balanced budget amendment was being debated in Congress, it had near universal support of Republicans and a few Democrats too.

Who here supported the balanced budget amendment back then?

Do you think balanced budgets matter now?

Do you think we'd have a balanced budget now if not for 9/11?

Do you think that Bush will achieve is stated aim of cutting the deficit in half in 4 years (assuming Republican-controlled Congress the entire time)?

 

[aerocontrols]

Back in the 90's, when the balanced budget amendment was being debated in Congress, it had near universal support of Republicans and a few Democrats too.

Who here supported the balanced budget amendment back then?

Do you think balanced budgets matter now?

Do you think we'd have a balanced budget now if not for 9/11?

Do you think that Bush will achieve is stated aim of cutting the deficit in half in 4 years (assuming Republican-controlled Congress the entire time)?

1) I did.

2) I do.

3) Yes.

4) No.

 

[corplinx]

I was all for the balanced budget amendment. At the time it seemed like a good idea. They had a plan to make a balanced budget in 9 years and wanted to keep it balanced after that point.

As we know, tax revenues from the irrational exuberance period far exceeded forecasts. We actually got to the point where some of money from the social security surplus wasn't being used per year.

One of the most common complaints from Gingrich era republicans is the current deficit. You aren't going to find a lot of disagreement on that from republicans.

Unfortunately, the opposition party doesn't have a plan to deal with the deficit either.

 

[CBL4]

Balanced budgets are stupid during recessions. Budget deficits are stupid during booms. The deficit/surplus should be cyclical - or counter business cyclical to be more accurate.

The opposition party had a plan for a balanced budget and it caused a surplus for several years. Then came a conservative who believes in spending more money and always cutting taxes. I prefer tax and spend to spend and cut tax. I really prefer cut tax and and cut spending but then I am a dreamer.

CBL

 

[pgwenthold]

Balanced budgets are stupid during recessions. Budget deficits are stupid during booms. The deficit/surplus should be cyclical - or counter business cyclical to be more accurate.

The opposition party had a plan for a balanced budget and it caused a surplus for several years. Then came a conservative who believes in spending more money and always cutting taxes. I prefer tax and spend to spend and cut tax. I really prefer cut tax and and cut spending but then I am a dreamer.

CBL

It's the old question of a "tax and spend democrat" or a "borrow and spend republican."

Oddly, I'd always considered not spending money you don't have to be a conservative trait. Not any more, I guess...

(actually, that is only the case if you consider the current adminstration to be "conservative.")

 

[Art Vandelay]

CBL4

Balanced budgets are stupid during recessions. Budget deficits are stupid during booms. The deficit/surplus should be cyclical - or counter business cyclical to be more accurate

I'm not convinced that that is true. One argument in favor of budget deficits is that is means the government is taking on debt on behalf of its citizens. While that sounds like an argument against deficits, the government can usually get better rates than can individuals. It also means that investors can automatically diversify: by buying government bonds, they are basically investing in the entire economy, rather than a particular individual or business. In a recession, interest rates are low, so it seems like a good time to take on debt. But in boom times, securing financing is important, so transferring individual debt loads to the government can be useful.

The Keynesian argument is that deficit spending will stimulate the economy, but every dollar spent comes from an investor that otherwise could have spent the money in a private investment. In the end, the real question is whether the benefits from the spending exceed the opportunity cost of capital. Unfortunately, many legislators are more considered with the political cost of their choices than the economic ones, and many wouldn't understand the economics involved even if they cared.

 

[CBL4]

Deficit spending is analogous to running up your credit card debt. It gives additional money immediately but decreases the available money in the future. Next year your credit card (or debt) payment increases. It may makes sense to do this to pay for a war or your own education but, in general, it is simply sacrificing the future for the present.

Bush's 8 years of presidency seems likely to add roughly 3 trillion to the debt. To pay for this, it will cost an extra 90 billion dollars a year forever. (Assuming a very low 3% interest rates.) There are some countries that now need to collect about 5% more than they spend on useful items simply to make the interest payments on the debt. 5 percent of their money is wasted to make up for past stupidity.

Counter cyclical fiscal policies works and are automatic. Government spending and tax cuts provide a short term economist boost - good in a recession. Increasing taxes and cutting spending causes a short term economic drag which holds down inflation - good in a boom.

The nice thing is that spending automatically go up during recession because of additional needs on social programs. Tax revenue decrease during a recession because of smaller profits and income. Everything reverses itself in a boom. Without any action, the government provides a needed counter cyclical policies.

CBL

 

[CapelDodger]

The Keynesian argument is that deficit spending will stimulate the economy, but every dollar spent comes from an investor that otherwise could have spent the money in a private investment.

Keynes concentrated on demand management, including demand for capital. Recessions can be triggered by a fall in private investment, and once a recession is under way investment appears unattractive. Banks may have credit available, but there may not be enough sound demand to take it up. This was the story of the Depression. As you say, the investor could make a capital investment, or could keep it liquid in uncertain times, however low interest rates are. In the latter case, government can make up the difference, and keep the capital-goods segment in business until the wider economy sorts itself out.

 

[Meadmaker]

1) I did. (favor a balanced budget ammendment)
2) yes. (I think they matter now.)
3) No. (I don't think 9/11 is responsible for the deficit)
4) No. (Don't think Bush will cut the budget deficit in half.)

Notes:
1) I usually vote Democratic, and I had some worries about exactly how the mechanics of a balanced budget act would work, but in principle I thought it was a good idea.

4) If he starts to come close, he will insist that one more tax cut will do it, and then he will miss the target.

 

[peptoabysmal]

Back in the 90's, when the balanced budget amendment was being debated in Congress, it had near universal support of Republicans and a few Democrats too.

Who here supported the balanced budget amendment back then?

Do you think balanced budgets matter now?

Do you think we'd have a balanced budget now if not for 9/11?

Do you think that Bush will achieve is stated aim of cutting the deficit in half in 4 years (assuming Republican-controlled Congress the entire time)?

1) Me

2) Yes, although I think the "National Budget" is a bit of smoke and mirrors. I don't believe that the US has had a truly balanced budget since before the Vietnam War.

3) No. Social programs and special interest spending far outweighs any defense or homeland security spending.

4) No. Bush is not a fiscal conservative by any stretch of the imagination. This is the one area where I am unhappy with Pres. Bush.

 

[WildCat]

I did back then, but I was young and naive. Congress would just take stuff off the budget (like Social Security is now) and play w/ the numbers enough to make any such amendment unenforceable because the actual budget would be unknowable.

 

[Art Vandelay]

Deficit spending is analogous to running up your credit card debt. It gives additional money immediately but decreases the available money in the future. Next year your credit card (or debt) payment increases. It may makes sense to do this to pay for a war or your own education but, in general, it is simply sacrificing the future for the present.

The credit card analogy is one that people are very fond of using, but it is a very poor one. There is a HUGE difference between debt financing and just plain going into debt. Most people's mortages are much larger than their credit card balances, yet the former is rarely discussed in such deragatory terms as the latter. Why? Because there are different kinds of debt.

Well planned debt increases current funds AND future funds. Well planned investments provide future benefits that exceed their costs, including debt servicing. Poorly planned investments are bad no matter how they are financed. So it doesn't really make sense to blame the decision to go into debt, when it is the investment decisions that really matter.

Bush's 8 years of presidency seems likely to add roughly 3 trillion to the debt. To pay for this, it will cost an extra 90 billion dollars a year forever.

Is the stuff paid for by this 3 trillion worth 3 trillion dollars? In the answer is no, then it is the spending, not the debt, that is to blame. If the answer is yes, then $90 billion/year is a reasonable price to pay for it.

Government spending and tax cuts provide a short term economist boost - good in a recession. Increasing taxes and cutting spending causes a short term economic drag which holds down inflation - good in a boom.

I'm not convinced this is always true. Government debt is supported by private investors, taking away financing from private projects. And higher debt loads increase the expected future taxes, making development less attractive. In a boom, the reverse occurs.

CapelDodger

Banks may have credit available, but there may not be enough sound demand to take it up.

Demand is a curve, not an amount. It is meaningless, economically speaking, to say that demand is less than the available credit.