About Federal Budgets…

United States deficit or surplus percentage 1901 to 2006 (Photo credit: Wikipedia)

Okay let’s get something straight right off the top. A national government’s budget has NO resemblance to either a family OR business budget. PERIOD. Yes, state, city, and county government budgets might be comparable, but NOT the federal. For several reasons.

First, the federal government can print money. It’s the ONLY organization that can.

Second, it’s the buyer of last resort. When the economy fails to create enough demand to get the nation out of a recession or depression, it’s up to the federal government to create that demand. In other words, if people cannot purchase enough goods to create the conditions needed for business to hire more employees, the government not only has the resources, but the implied duty to create the demand needed by federal projects.

Third, the conditions that are needed for the federal government to have a balanced budget is NOT dependent on cash flow like families, businesses, and lower governments, IT’S DEPENDANT ON FULL EMPLOYMENT (about 3%). If there is NOT full employment, the federal government not only should, but has an implied duty to run a deficit until full employment is attained.

I did say implied. Where? In the preamble to the Constitution:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

You CANNOT do ANY of the prescribed items WITHOUT having a nation that is at or very near full employment…OR has a national debt that is created to fund ways to acquire full employment. If people desire a balanced federal budget, they need to create policy and projects to move the nation to full employment, NOT cut funding and federal jobs.

It runs counter to what those pundits and ‘experts’ are spouting, but it’s the way things are designed. The ONLY way to create a balanced budget…and possibly lower taxes…is to create the demand needed to start the cycle on an up curve.

Right now, the ONLY demand creator that has the ability to do so IS the federal government. THAT requires more spending and yes, MORE debt, NOT less in the short turn. It ALSO requires the wealthy to be taxed at a much higher rate FOR THE SHORT TERM. The tax code needs an overhaul to make it more progressive and close all of the loopholes for individuals and businesses.

It also requires politicians that work in the interest of the ENTIRE nation, not just those with money and apparent ‘power’. We need to stop crippling this nation but foolish, false economies and get back to things that work.

Related articles

• Balanced budget laws a double-edged sword (metronews.ca)
• Bloated Government? Federal Employment at 47-Year Low (economix.blogs.nytimes.com)
• Budget Battles Highlight Importance of Federalism (cato.org)