Should governments be forced to create a balanced budget?

May 2013
100
NY, USA
When I do a budget, (a truly shocking habit I know) I am forced to choose what I spend my finite resources on. If I end up in the read by the end of the month, I need to recalculate what I spend. Shouldn't the government have to do the same? Do you think it would be positive or plausible to establish some sort of amendment or regulation that Congress must be forced to run a budget that will run on its revenues?
 

RoryOMore

Ad Honorem
Mar 2012
3,398
USA
Yes. It's unfortunate, but in democracies deficit spending almost inevitably leads to uncontrollable spending.
 

Mike McClure

Ad Honorem
Nov 2010
6,231
Indiana
Most people have credit cards. The problem is, with the government, they set their own credit limit.
 

spellbanisher

Ad Honorem
Mar 2011
4,136
The Celestial Plain
If a country is monetarily sovereign*(issuer of its own currency), it makes no sense to think of it like a household, since a household is a user of currency(meaning it has to get money from an outside source), whereas a monetarily sovereign government is the issuer of the currency(meaning it is the source). Just to illustrate this point, if you were to walk into the fed or treasury and give them a million dollars in cash, they would simply take the cash to the back and shred it. The government doesn't need money that itself has created. The government spends simply by marking up accounts, and taxes by marking down accounts. The issuance of treasury bonds is an artificial legal restraint on government spending, not an actual spending constraint such as a household faces when it runs out of money.

Balanced budgets are simply a nonsequitur when it comes to monetarily sovereign governments, more political talking points than a relevant political-economic problem. There are really only two issues we should be concerned with when it comes to government spending.

1.Public goods--What services are best provided by the government, how should those services be provided (such as public-private partnerships, subsidization, or direct government control), and how much of those services should be provided?

2. Inflation--This is the only real constraint on a monetarily sovereign government. If government spending is pushing up inflation, provided that the spending is on essential public goods, then taxation becomes necessary(taxation in a monetary regime is just another way of saying reducing some peoples purchasing power). Then you have to ask, who do you tax and how much do you tax? If you tax even when government spending is not causing inflation, you are destroying purchasing power in the private sector for no good reason.

*Examples of monetarily sovereign governments include the US government, Japan, Canada, Australia, China, and the United Kingdom. Countries in the EU monetary union are not monetarily sovereign(such as Greece, France, Italy, and Germany), nor are individual US states. Like households, they are users of currency rather than issuers, and thus subject to the same constraints as households.
 
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tjadams

Ad Honoris
Mar 2009
25,362
Texas
Yes. It's unfortunate, but in democracies deficit spending almost inevitably leads to uncontrollable spending.
Yes, in a perfect world, all of the US Congress would not draw a salary as
all of them are millionaires to begin with. If the US government would stop
spending billions of dollars on foreign nations to be our friend, and take that
same money and invest it back into the needs of the US, our nation would
be better for all. A balanced budget demand, which a great many of
Americans have to live an function within, would keep spending down to
a manageable amount and cause the government to spend in order to
be able to afford a greater plan the next year.
 
Dec 2012
1,130
Savannah, GA
It's all a matter of wording. Debt is bad. Another word for debt though is credit. Credit is good.

I have student loans. Bad debt but good credit. It really depends what you're spending money on.
 
Jul 2012
555
San Diego
You don't have a balanced budget, OP, unless you're paying off all your debts. Keep in mind your mortgage, your car and any other loans you may have by the end of this month. I know for me, personally, having debt of some sort is invaluable. If I was blackballed by traditional debt financiers I would not have an education, car, house or health. If I can't do it my government, needless to say, should not have to.
 

Von Ranke

Ad Honorem
Nov 2011
6,377
Thistleland
When I do a budget, (a truly shocking habit I know) I am forced to choose what I spend my finite resources on. If I end up in the read by the end of the month, I need to recalculate what I spend. Shouldn't the government have to do the same? Do you think it would be positive or plausible to establish some sort of amendment or regulation that Congress must be forced to run a budget that will run on its revenues?
Governments like individuals should live within their means and I have no problem with them balancing the books. What really gets up my nose is when huge corporations and wealthy people run rings round the tax laws resulting in a disgusting attack on the hard working low paid ordinary Joe who ends up paying the bill for the economic mess caused by these parasites, who have been consistently protected by governments of all political hues. So let's get a fair tax regime for all and balancing the budget, which would include a reasonable welfare policy protecting the unfortunate and sick, is easily attainable.
 

spellbanisher

Ad Honorem
Mar 2011
4,136
The Celestial Plain
You don't have a balanced budget, OP, unless you're paying off all your debts. Keep in mind your mortgage, your car and any other loans you may have by the end of this month. I know for me, personally, having debt of some sort is invaluable. If I was blackballed by traditional debt financiers I would not have an education, car, house or health. If I can't do it my government, needless to say, should not have to.
These are good points. People often assert that the government is less disciplined in its spending than households because the government "sets its own credit limit." Yet the facts indicate otherwise. Private sector debt dwarfs public sector debt.


This should probably be the case, as we want the private sector to be larger than than the public sector, but many people believe that because the government isn't disciplined by the same conditions as households, its debt must dwarf the more responsible public sector. That belief is false.

Also should be kept in mind that the government never has to pay the principal on its debt, just the interest. So long as debt grows slower than GDP (which has been the case throughout US history except during economic downturns and wars), it doesn't become a burden on the economy.
 
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