Myths/the federal budget should be balanced

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Budget Crisis Propaganda
Myth: The federal budget should be balanced.

Myth

There is a widespread belief that federal debt is a serious problem, and that the federal budget must ultimately be balanced in order to have a healthy economy.

Reality

This is, at best, a reversal of cause and effect; at worst, it confuses two different types of expenditure.

When the economy is booming, revenue will exceed expenditure, and the budget will balance or have a surplus. It's good when that happens.

When the economy isn't doing well enough to balance existing expenditures, there are several things which can be done to improve matters:

  • increase taxes on the wealthiest – up to a point, this will increase revenues
  • decrease unnecessary spending – such as wars, some kinds of corporate tax incentives, and other things that don't benefit the economy
  • increase investment in the economy – this can include:
    • repair or build infrastructure
    • provide aid to those who have fallen off the economic ladder (social safety net)

What might balance the budget in the immediate present but will in the long run make it worse – thus making budget-balancing even harder the next year, and leading to a sort of economic death-spiral:

  • decreasing investment in the economy – cutting social spending, cutting infrastructure maintenance

What would be sheer idiocy:

  • cutting taxes to the wealthy - unless upper-tier tax rates are too high (they're too low right now), this decreases revenue

Posts

  • 2015-03-13 Balancing the Budget in Ten Years and No New Revenue Are Flawed Budget Goals "A budget that adheres to the balanced-budget mantra while ruling out any deficit reduction from the numerous tax expenditures that disproportionately benefit well-to-do Americans will almost certainly place the onus of deficit reduction on programs disproportionately serving Americans with modest incomes."