Deficit Jumble
I missed this earlier, but here’s an interesting statement – part of an interview in early May given by John Boehner on Bloomberg TV:
“We have spent more than what we have brought into this government for 55 of the last 60 years. There’s no business in America that could survive like this. No household in America that could do this. And this government can’t do this.”
There are two crucial errors in this statement. Errors that indicate Boehner doesn’t understand, or chooses to misstate, the facts about debt.
First: it leaps off the page that if the US has managed to run Federal budget deficits for 55 of the past 60 years, and has managed to grow fairly consistently throughout, then those deficits weren’t much of a problem. How can they have been? Evidently that constant red ink did not impede us much, if at all.
Second: his knowledge of business is out of whack. There are plenty of businesses accumulating debt relentlessly. Adding to an existing pile of debt is not a predictor of doom the way Boehner wants us to believe. The crucial factor is whether that debt can be sustained. Can the business grow its income faster than its debt so that it can pay the interest?
So Boehner is flat out wrong.
There are many businesses in America that survive well even thought they pile up debt. And, yes, the government can do this too. Indeed, as history suggests, it isn’t difficult at all.
So Boehner’s objection to our current deficit cannot be based on this reference to history. Besides, Boehner voted repeatedly in support of budgets that oozed red ink during the Bush administration, so his sudden concern is a tad odd. We all know by now what his issue really is. He wants to slash social spending. Since to say this out loud is political suicide, he slides into an alternative: he complains about the debt in order to make it appear we cannot afford those social programs he hates so much.
But we can. We really can. As he inadvertently points out in the quote above.
It’s not just Boehner in this deficit jumble. The entire Republican party is as well.
Which makes for fun reading but gridlocked politics.
If only they’d say what they really mean. Perhaps then their jumble would go away.
Verde
May 30, 2013 @ 2:29 pm
Speaker Boehner’s fundamental error is that, unlike a business or household or even an American state, the U.S. issues its own sovereign currency.
All Federal debts are payable in that (fiat) money, whose exchange rate floats, i.e., is not tied to gold (or anything else). Therefore, the U.S. can use its currency-issuing power to speed or slow growth without inflation (the restraint is the country’s productive capacity).
Given these circumstances, the word “debt” (“deficit” as well) has very different meanings* when applied to businesses and other currency _users_ on the one hand and the Federal government, the currency _issuer_, on the other. (One writer has suggested using “contribution” to the economy in the Federal context.)
When the U.S. fully dropped the gold standard in 1971, the fiscal world changed. Most progressives, let alone politicos of Mr. Boehner’s persuasion, have yet to acknowledge this new reality and the opportunities it makes possible.
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* This linguistic quirk isn’t unique: for example, “sanction” means to disapprove … or to approve!