• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

Five Reasons Why A National Balanced Budget Amendment Is Lunacy

David_N

David_N

DP Veteran
Joined
Sep 26, 2015
Messages
6,562
Reaction score
2,769
Location
The United States
Gender
Male
Political Leaning
Liberal
Building off of my other thread: http://www.debatepolitics.com/gener...publicans-and-balanced-budget-amendments.html
John T Harvey has some really good things, and this piece on the lunacy of "a balanced budget amendment" is quite a show stopper.
Forbes Welcome
The U.S. can never be forced to default on debt denominated in dollars:

It’s completely and totally impossible. If the debt were in euros, then we’d need to find some way to earn euros in order to repay. That’s the problem in Greece. But our debt is 100% in dollars, our very own currency, and for that reason we can always make the payments. This isn’t an opinion, it’s a fact. Here is a small sampling of statements on the subject by other experts so you don’t have to take my word for it:
Click to expand...
This is obvious. People don't seem to understand this though, and fear monger.
Deficit spending alone cannot cause inflation, crowding out or capture of resources:

Some may say that, even if the U.S. cannot default, there may be other consequences. Absolutely right. Indeed, deficit spending can cause inflation, crowding out of private investment and higher interest rates, and capture of private sector resources–but not if we are at less than full employment. All three of those negatives occur only when the economy is already producing as much as it can.
Click to expand...
Deficit spending is needed so the private sector can save as well.
The economic expansion of the 1990s caused the budget surplus and not the other way around:
Consider this, too. If the “Surpluses => Economic Growth” camp was right, then the Clinton surplus would have come before or at the beginning of the 1990s expansion. It didn’t, it was at the very end. The expansion covered first quarter 1991 through first quarter 2001, while the surpluses were 1998 through 2001. Likewise, we all know very well that the recent very large budget deficits occurred after the Financial Crisis, not before.
Click to expand...
Why would anyone want the government taxing dollars and spending less then it's taxing? Also, why would people want the private sector to take on more debt?
Unbalanced budgets serve as economic stabilizers
Click to expand...
I don't even need to explain the success of Keynesian recession management.
The government’s deficit is our surplus
Click to expand...
I will let Harvey explain this one:
But there’s even more to it than that. Basic accounting tells you that in a closed system with two people, if Person A spends more than she earns then Person B earns more than she spends. Now substitute Federal Government for Person A and Private Sector for Person B. Whenever the governments spends more than it earns, WE EARN MORE THAN WE SPEND!!! On the flip side, what does a government surplus really mean other than the fact that they taxed us more than they gave us back? That anyone is in favor of such a thing is beyond me. Want to reduce the deficit? Be prepared to reduce household income. Want to reduce government debt? Be prepared to reduce household saving.

Those who want to reduce the debt and the deficit want to reduce private sector income and assets. They don’t realize this, of course, but that doesn’t make it any better. And don’t let anyone tell you that there’s nothing to worry about since we are going to cut spending rather than raise taxes–the impact on the economy is exactly the same.
Click to expand...
 
David_N said:
Building off of my other thread: http://www.debatepolitics.com/gener...publicans-and-balanced-budget-amendments.html
John T Harvey has some really good things, and this piece on the lunacy of "a balanced budget amendment" is quite a show stopper.
Forbes Welcome

This is obvious. People don't seem to understand this though, and fear monger.

Deficit spending is needed so the private sector can save as well.

Why would anyone want the government taxing dollars and spending less then it's taxing? Also, why would people want the private sector to take on more debt?

I don't even need to explain the success of Keynesian recession management.

I will let Harvey explain this one:
Click to expand...

I do not think you should stray into economic debates. ;)
 
There is only one argument that needs to be made here, there is no economic stabilization principle known to humanity that suggests a government should always balance the budget.

That's it. As in none... zero zip zilch nada... it simply does not exist.
 
This idea stems from the incorrect idea that a balanced budget means "never any debt whatsoever". When I think of a balanced budget, I'm thinking of a budget that has a plan for paying off necessary debt as quickly as possible and that has tight controls on spending (such as a Constitutional limit on the amount of debt that we can accrue). Any intelligent person understands that there are times when debt is necessary, but it shouldn't be the primary financial operating principal of our gov't. Debt should always be looked at as a necessary short-term evil and not just business as usual.
 
faithful_servant said:
This idea stems from the incorrect idea that a balanced budget means "never any debt whatsoever". When I think of a balanced budget, I'm thinking of a budget that has a plan for paying off necessary debt as quickly as possible and that has tight controls on spending (such as a Constitutional limit on the amount of debt that we can accrue). Any intelligent person understands that there are times when debt is necessary, but it shouldn't be the primary financial operating principal of our gov't. Debt should always be looked at as a necessary short-term evil and not just business as usual.
Click to expand...

Money is debt. The whole world runs on debt, and it works very well. The money in your bank account is only there because somebody else owes the bank for their loan, and because the government has chosen not to tax some of their dollars back.

Banks can fail, we have all witnessed that spectacle unfolding a few years back. It was only the government's unlimited ability to create dollars that saved our butts. Without that government bailout, bank failures mean that we all lose our money. So I don't think we really want to shackle our government with any kind of legal limit on what they can do.
 
faithful_servant said:
This idea stems from the incorrect idea that a balanced budget means "never any debt whatsoever". When I think of a balanced budget, I'm thinking of a budget that has a plan for paying off necessary debt as quickly as possible and that has tight controls on spending (such as a Constitutional limit on the amount of debt that we can accrue). Any intelligent person understands that there are times when debt is necessary, but it shouldn't be the primary financial operating principal of our gov't. Debt should always be looked at as a necessary short-term evil and not just business as usual.
Click to expand...

I disagree, and it took me time as well to get to this point.

Deficits and Debt should always be looked at by trend as it relates to GDP by trend. It is the only way to know with some degree of certainty that we are on a healthy or unhealthy trend of adding Debt to help economic stabilization.

Understand I am not accusing the government (and/or the Fed) of always making the right economic and monetary stabilization decisions here, just saying that in our economic model and money type it does not make sense to look at things purely in balanced budget terms. What makes more sense is understanding the condition of the economy at any point in the cycle, and making potential debt spending decisions based on those underline factors and conditions.

That is the core reason that "balanced budget amendments" are effectively useless in economic terms. Even with an out, or bypass, to the amendment for some extreme economic condition that still misses the point on deficits and debt as it relates to GDP over a trend.

Again, there is no known *economic stabilization principle* that suggest a balanced budget amendment. None, I cannot make that anymore clear.
 
Last edited:
JohnfrmClevelan said:
Money is debt. The whole world runs on debt, and it works very well. The money in your bank account is only there because somebody else owes the bank for their loan, and because the government has chosen not to tax some of their dollars back.

Banks can fail, we have all witnessed that spectacle unfolding a few years back. It was only the government's unlimited ability to create dollars that saved our butts. Without that government bailout, bank failures mean that we all lose our money. So I don't think we really want to shackle our government with any kind of legal limit on what they can do.
Click to expand...
I tried to explain to my friend some basic things about debt and he just doesn't get it. He's pretty well educated, so it's a struggle to get Americans to understand the reality of the modern economy. We have people that believe the government needs to be "kept out of money." I don't need to explain why this is absolute insanity, but millions of people think this way. Making people understand that money is debt is a good way to start changing people's opinions.
 
David_N said:
I tried to explain to my friend some basic things about debt and he just doesn't get it. He's pretty well educated, so it's a struggle to get Americans to understand the reality of the modern economy. We have people that believe the government needs to be "kept out of money." I don't need to explain why this is absolute insanity, but millions of people think this way. Making people understand that money is debt is a good way to start changing people's opinions.
Click to expand...


A 400-450 billion dollar annual interest payment takes away from productive government spending.....does it not?

I'm just a layman on the matter...so go easy ;)
 
RetiredUSN said:
A 400-450 billion dollar annual interest payment takes away from productive government spending.....does it not?

I'm just a layman on the matter...so go easy ;)
Click to expand...

No, it doesn't. Not unless politicians deluding themselves into thinking we're not an issuer of our own currency want to do so.
 
David_N said:
No, it doesn't. Not unless politicians deluding themselves into thinking we're not an issuer of our own currency want to do so.
Click to expand...

The problem with "just print more money" is that there is a ceiling of failure. No economist seems to know what that ceiling is but owning the USD ourselves does not protect us from any possible consequence to our spending.
I don't know what the answer is but it isn't as simple as burying our head in the sand and spend spend spend with no responsibility whatsoever.
 
RetiredUSN said:
I think I'll make this a study topic over the next couple days.

Thank You.
Click to expand...

I actually have always Thought the national debt was bad/ deficits were always bad. Thanks to John, I have been delving into modern monetary theory and it makes a lot of sense.
 
Ntharotep said:
The problem with "just print more money" is that there is a ceiling of failure. No economist seems to know what that ceiling is but owning the USD ourselves does not protect us from any possible consequence to our spending.
Click to expand...

So the government exchanges bonds, what exactly causes the failure?
 
David_N said:
So the government exchanges bonds, what exactly causes the failure?
Click to expand...

Go over to the thread on debt as I've explained it there.
In the nutshell. If the creditors of the USD decide we are not credible loaners/lenders, they have the ability to discredit the USD. If the USD is discredited then, especially on the world stage, we begin to fail.
Thus, a ceiling of failure. How big a ceiling and how deep the failure is minor to disastrous but it is worth not ignoring completely.
Is there really a theory in modern economics that says you can spend without any consequence whatsoever?

Edit Edit: Not saying the Republicans are offering a good plan, I am just saying there is value added in working on a plan of some sort.
 
so let me ask this one question then

you are saying that at NO point does the debt ever become a problem?

just a yes or no will suffice
 
Ntharotep said:
Go over to the thread on debt as I've explained it there.
In the nutshell. If the creditors of the USD decide we are not credible loaners/lenders, they have the ability to discredit the USD. If the USD is discredited then, especially on the world stage, we begin to fail.
Thus, a ceiling of failure.
Is there really a theory in modern economics that says you can spend without any consequence whatsoever?
Click to expand...
We don't need the creditors you know. In the very unlikely chance that does happen in the future, we have another option. :)
There isn't a theory that says you can spend without consequence, however, spending by itself does not cause inflation. When output is not at its maximum, inflation will not occur. And I mean real inflation, some price increases from 10 years ago isn't "inflation."
 
gdgyva said:
so let me ask this one question then

you are saying that at NO point does the debt ever become a problem?

just a yes or no will suffice
Click to expand...


When we issue our own currency and have so much potential output, with our economy growing, I doubt it. Besides, it's not like the debt will ever be "cashed in." The debt is simply government bonds by the way.
 
David_N said:
We don't need the creditors you know. In the very unlikely chance that does happen in the future, we have another option. :)
There isn't a theory that says you can spend without consequence, however, spending by itself does not cause inflation. When output is not at its maximum, inflation will not occur. And I mean real inflation, some price increases from 10 years ago isn't "inflation."
Click to expand...

Well since you use an abstract definition of inflation then I'm not sure how to respond.
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services.
According to the US Inflation Calculator if I bought an item for $20 in 2005, then that item now costs around $480 today.
That is a significant increase for the average, not independently wealthy American.

As the USD lowers in value prices do increase as well. So far there is no indication that supports the theory that the USD would not lower in value if we printed more money. Economic historical trends tend to fly in the face of this theory.
 
Ntharotep said:
Well since you use an abstract definition of inflation then I'm not sure how to respond.
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services.
According to the US Inflation Calculator if I bought an item for $20 in 2005, then that item now costs around $480 today.
That is a significant increase for the average, not independently wealthy American.

As the USD lowers in value prices do increase as well. So far there is no indication that supports the theory that the USD would not lower in value if we printed more money. Economic historical trends tend to fly in the face of this theory.
Click to expand...
You ignore the fact that the "inflation calculator" looks at specific items and tends to ignore the fact that we've added more dollars to the economy to compensate. The USD will not lower in value if we're not at full output.
Forbes Welcome
 
Ntharotep said:
Well since you use an abstract definition of inflation then I'm not sure how to respond.
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services.
According to the US Inflation Calculator if I bought an item for $20 in 2005, then that item now costs around $480 today.
That is a significant increase for the average, not independently wealthy American.

As the USD lowers in value prices do increase as well. So far there is no indication that supports the theory that the USD would not lower in value if we printed more money. Economic historical trends tend to fly in the face of this theory.
Click to expand...


Wait a minute. That's 20.00 in 1913 to 2016. That's so silly, dollars have to be added to the economy at some point, and prices will inevitably rise to adjust to the dollars being added. This doesn't mean people are suffering because of it.
 
David_N said:
Wait a minute. That's 20.00 in 1913 to 2016. That's so silly, dollars have to be added to the economy at some point, and prices will inevitably rise to adjust to the dollars being added. This doesn't mean people are suffering because of it.
Click to expand...

Fair enough. I am still looking for your evidence of when we have printed money that the USD did not lose any value whatsoever.
 
Ntharotep said:
Fair enough. I am still looking for your evidence of when we have printed money that the USD did not lose any value whatsoever.
Click to expand...

I mean, I suppose "one dollar" isn't as useful for spending purposes now then it was 75 years ago. Not sure how this is bad. I recommend reading my Forbes article by Harvey and his article he links within.
 
David_N said:
I mean, I suppose "one dollar" isn't as useful for spending purposes now then it was 75 years ago. Not sure how this is bad. I recommend reading my Forbes article by Harvey and his article he links within.
Click to expand...

Actually a great article on inflation. That addresses the USD at home (and a tiny bit on the world stage). But the fact still remains that as you print more money you decrease the value of the USD. This is not a good thing unless you want America to not be able to compete in the world market.
Now, to be fair, and as I said in the adjoining thread, there is no economist that I have found that can tell you what number would cause the "USD decreased value bubble" to be a real danger.
In some ways it is very umbral.
I, personally, don't believe its insignificant and should be ignored as a possible consequence. Opinions vary.
 
You must log in or register to reply here.
Back
Top Bottom