So it was a huge reduction in revenue by, arguably, helping out the upper brackets while also spending more at the same time? Has this only resulted in a yearly problem due to time value of money?
Well, it “helped out” everyone (in the sense of cutting their taxes). The problems weren’t as large during most of the Bush years (although the debt ceiling was raised seven times) because the economy was doing reasonably well until 2008. That proved unsustainable, and with already decreased tax rates federal revenue cratered.
The time-value of money doesn’t really come into it, unless I’m misunderstanding your question. The problem is that we have a certain level of spending budgeted, and a lot of it is in automatic payments (Social Security and Medicare primarily). We either need more revenue to pay for those, or we need to cut them. Or both.
The political problem is that one party has taken a “no new taxes, ever” pledge and the other has a base that sees SS and Medicare as their lasting legacy, and will not vote for reductions in benefits. The BBA being discussed in this thread is an attempt by the GOP to get their preferred budgetary scheme enacted in the Constitution itself.
Realistically speaking, can consensus be reached without increasing taxes and without chopping away benefits from SS/Medicare, or will one side/both have to budge? Are there other places we can balance things instead?
Nothing at all has to be done in regards to balancing the budget in order to raise the debt ceiling. Congress can just pass a bill to raise the debt ceiling with nothing else attached. Congress is just using this as a convenient time to cut spending and possibly raise taxes.
Government budgets have income, family budgets have income.
Government budgets have expenses, family budgets have expenses.
Government budgets can include borroing and repaying, family budgets can include borrowing and repaying.
Government budgets involve choices and tradeoffs, family budgets involve choices and tradeoffs.
So we can skip all of your comments on budgets since you think there is no relationship. Of course there are differences but there are definitely parallels in guiding principles.
Out of curiosity, do you think family budgets should be run like business budgets?
Like, perhaps families should sell fractional ownership of their assets to the public? Should families subdivide into smaller social units to allow for bankruptcy and reorganization of assets owned by, say, a spouse, without affecting the larger family unit? Should mothers and fathers be free to decide that children are unprofitable assets and therefore end investment into that sink-hole of Gerbers, diapers and babysitters that might otherwise cost Father the lease of the new BMW he’s been eyeing?
After all, both families and businesses have budgets, revenue, expenses, and so on.
Of course. When I set up my will I established a separate trust for each child so a catastrophic medical situation with one would not wipe out the other. I have coworkers who incorporate their families for tax benefits. I wouldn’t outsource under performing family members. I did stop funding one son’s college when it became clear that he wasn’t making an effort.
Do you understand that parallel principles and analogies do not lose their value because you can think of extreme exceptions.
This thread would be more productive if you addressed the key point of current versus investment accounts for the federal government. Or perhaps the idea that the current generation will pass on both debts and assets?
The key point is that some government use capital budgets, others do not.
But different accounting practices have no impact on deficits. Budget policies do.
By the way, can I buy stock in your family? With your business savvy, I think your family could be a good investment, and I’d like to get in on the ground floor. Are you planning an IPO?
I’ll try this one more time. In a discussion on debt ceiling and balanced budget, I suggested that I would support a balanced budget if the accounting process redefined a deficit. I used an analogy to paying for a house over it’s life versus all up front while the government pays for a tank up front and uses it for years.
There is good use of debt - for governments, businesses and yes even families. There are bad uses of debt for all of those. Because of our federal accounting, we can’t tell which we are doing.
The response that governments and families are different and that not all governments use capital accounting are factually true and irrelevant to my post.
So there are House members who refuse to raise the debt ceiling without a balanced budget amendment. Doesn’t a Constitutional amendment take years to pass? And given the long term implications, shouldn’t it take a long time to frame and discuss such an amendment, vet it, and debate it? I’m a bit unclear on how they expect to do this within the two week time frame between now and August when things go badly to hell.
Balanced budget amendments are usually a bad idea because (wait for it) they cut both ways. They not only forbid deficits, they forbid surpluses. Want to run a rainy day fund? Want to pay off the debt? Both of those are arguably “unbalanced” from a certain point of view.
We’ve seen this happen. We ran surpluses in the last decade due to a boom economy, and the GOP decided to give everyone refunds. We ran into an economic downturn, & the GOP decided not that we should impose a surtax to reach balance, but that we had to cut taxes and spending both. What?
We dont’ need an amendment because balancing the budget is really not that big of a deal
Has there ever been a balanced budget amendment? How can you talk about how balanced budget amendments usually are, when none have existed in American federal history? And why in the world would legislators write a budget amendment that forbids surpluses?
The deal is that the BBA passes Congress. What the states do with it is not part of the deal.
We’ve had state balanced budget amendments. The one proposed is based on California’s. And yes, some states in practice effectively forbid surpluses; if excess taxes are collected, the difference is refunded. This is not spelled out in the amendment, but the political culture that “needs” a BBA to avoid deficits is a culture incapable of keeping a Rainy Day Fund.
I think that this is an inherent flaw in representative democracy. Too many people will vote for the person who will promise them massive spending and lower taxes, even if it means putting it on the credit card.
Republicans want to make modest cuts to social programs: They are starving granny!
Dems want to have modest tax increases: They are socialists! They will stifle the economy and take more of YOUR money!
Forget about any serious progress towards a balanced budget. Even the modest steps are demagogued.
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It may be an inherent flaw in US representative democracy, but other representative democracies have been able to handle this issue better.
Just look north to Canada. Our federal and provincial debts and deficits were out of control in the early 90s. So our governments acted on it, at both the federal and provincial levels: cut spending, increased taxes, and brought the deficits under control. Then they began working on the accumulated debts, paying them down. (And this was across party lines: the socialists in Saskatchewan and the conservatives in next-door Alberta were both equally committed to financial discipline; not surprising, they took different approaches to the ultimate target, but both did it.)
Result: Canada was generally running balanced budgets prior to the recent recession, and therefore had the resources to spend, in a classic Kensyian way, to help the economy recover. The spending programs were time-limited, again as recommended by Kenysians, and are winding down. We’re still in a deficit at the federal level, but all parties seem to be committed to bringing it down again within five years.
The Canadian economy has generally performed the best of all the G8s over the past four years, partly because of the financial discipline of the 90s.
The Canada system can’t work in the US as both political parties seem to be willing to allow the country to suffer short term harm as long as the other party gets blamed.
This. With parliamentary form of government, you never have gridlock or filibustering. The party in power gets the chance to do what they want.
Plus, Canada is a different beast than the US. You all don’t have massive defense spending for one. Your friendly neighbor to the south helps you out with that. 
The banks were saved to get the economy going again with lending especially to small businesses .. They did the opposite. They made loans very difficult to obtain. They jacked up credit card rates , penalties and fees. Then invested most of the tax money in Tbills which guaranteed interest. They paid us back with our own money.
The auto companies which were saved ,paid us back with profits that were made by actual work and job creation. Repubs still hate the auto bailpouts but love the bank bailouts.
I’m not sure that signifies. Reduce the US defense budget to zero and we’d still have a deficit. I guess if you went back and reduced it to zero in 1980 and we no longer had to make interest payments on the borrowing that financed it then, we’d have a nice surplus, but (1) we can’t because of physics, and (2) we couldn’t pass a budget with no defense spending even if we solved the time paradox.