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Should the government create a law that requires Congress to balance the budget?
- Thread starter EconGuy
- Start date
Yes.
EconGuy
Active Member
Why?
It would be meaningless. If Congress did pass such a law, the next Congress could amend or repeal it.
No. There are circumstances such as wars and natural disasters that would result in ugly outcomes.
Even if we had such a law, the right would falsely claim that a tax cut benefiting mostly the rich would reduce deficits, such a law would be ignored in practice in any event.
Even if we had such a law, the right would falsely claim that a tax cut benefiting mostly the rich would reduce deficits, such a law would be ignored in practice in any event.
EconGuy
Active Member
Fair, but many members of Congress are calling for a Constitutional amendment. Would that change things for you?
EconGuy
Active Member
A balanced budget has has zero deficit. Lower taxes would just mean lower spending.
It's not a law that could be ignored. Now the question of who the burden would fall on is a fair one, but let's be honest, we already know the answer.
So for or against?
Absolutely not.
Fiscal feedback,
I envision that if Congress wants to spend more
than it takes in, they'd have to get approval
for a tax increase. People would notice the
effects of spending directly & immediately.
This would affect voting.
EconGuy
Active Member
So wait, I'm confused. You are for a balanced budget?
If so, how does any of what you responded with explain why?
Respectfully,
EG
Heyo
Veteran Member
I'm of two minds on this one. A balanced budget would have benefits but I wouldn't trust the politicians to be fiscally responsible enough to really pull it off. (And they are bribed to overspend anyways.)
#1 is that having a balanced budget saves money. Borrowing costs. Interest payments are a big position in the budget. It is also unfair as one legislation is stifling the freedom of the subsequent legislations.
But sometimes borrowing can save money. When a project brings more revenue than the costs of interest, borrowing is good. And sometimes one has to borrow to prevent even higher cost in the long run. Disaster relief is such a case.
Putting aside money for disasters is not always the best way to go as this may become "dead money" if no disasters occur.
Having said that I think those should be exceptions with well established rules for investing and a mixed plan for setting money aside as an insurance (or buying insurance) and borrowing in emergency. An otherwise balanced budget would be a good idea. The banks wouldn't like it though and such a law will never get through against their lobbying.
#2 A law for a balanced budget incentivizes the sale of valuable assets. A government may have plans for spending that exceeds the budget and they may finance that by selling assets that produce revenue in the long run. This is shortsighted and again unfair as it robs the future governments of that income.
#3 A law for a balanced budget incentivizes raising taxes. Nobody likes to pay higher taxes and a party which promotes that has little chances to win an election. Thus the government is limited in its power and nothing will be done. People like to have their benefits today and their children to pay for them.
#4 Borrowing from foreign nations can be an even more crippling dependency than the dependency on local banks and afaik most nations are in debt to other nations.
mikkel_the_dane
My own religion
#3 A law for a balanced budget incentivizes raising taxes. Nobody likes to pay higher taxes and a party which promotes that has little chances to win an election. Thus the government is limited in its power and nothing will be done. People like to have their benefits today and their children to pay for them.
Well, that is too simple.
If we include the rest of the world, since we are in general and not North American politics, then you will find populations who in general accept taxes as such. Not that they don't want lower taxes, if possible, but that lower taxes are not good if you believe in a welfare state.
Heyo
Veteran Member
You are right (and I am also).
We are used to a high tax, high service government and we are usually contend with it. But try to raise taxes even further and you have difficulties to win an election, even in Europe. But what makes people most angry is wasted money.
I recall posting "Yes".
To balance a budget spending must match income, yes?
Assume it's balanced. If spending increases, then so
must income, meaning an immediate tax increase.
This is useful because voters will receive immediate
feedback about the effects of spending.
I know I'm repeating myself, but I don't see another
way to say it.
EconGuy
Active Member
Ok, fair enough and thank you for explaining, but the question I'm asking is, would that be a good thing and why?
Now let me address a few things.
I mean, not as a rule. You could increase taxes to match current spending which is in excess of taxes, or you could reduce spending.
I see what you are saying, but I think you've worded it incorrectly. Raising taxes to match spending would increases the costs not demonstrate effects. The effects of spending are apparent in things like roads or larger military etc. Now I assume what you mean is that raising taxes will demonstrate the costs of the effects, but I don't want to put words in your mouth.
But my question is, do you think this would result in a healthier economy? If yes why?
Respectfully,
EG
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EconGuy
Active Member
[emphasis mine]
But is this true? since 1900 the government has run a surplus 9 times totaling just over $17 billion or if we change each total to account for inflation, in the last 123 years the government has run a surplus of about $1.6 trillion.
Now measured against the deficit over the same time:
$15.3 trillion in nominal dollars and $19 trillion in adjusted dollars.
The point here is that we were both children at some point and "people" had their benefits in the past and did they make their children "pay for it"?
I'm not trying to be snarky here, I just want to see if we can agree this isn't a true statement.
I thought I explained why it would be good.
I've nothing to add.
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mikkel_the_dane
My own religion
Sorry, that was from @Heyo. I should have made that clear. Again sorry.
So as for me answering, I am a bit thick for some aspect of economy, so I will leave it to Heyo, as I am not certain I understand your post.
Heyo
Veteran Member
As @mikkel_the_dane already pointed out, that was my statement.
I admit that it is a bit hyperbolic and depends on the runtime of the credits. But the gist is true, living on credit is having the benefits now and having someone else ("future me") pay later - and pay interest and compound interest on top.
As I laid out in my original post, that can make sense sometimes but usually it is bad (and expensive) to live on credit all the time.
P.S.: Many experts will tell us that government debt can't be compared to private debt and that government debt is a good thing. Those "experts" are also working for (or have been) big banks.
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