What Do You Think We Should Do about Our National Budget Deficit?

What Do You Think We Should Do about Our National Budget Deficit? January 7, 2013

We all mostly agree that running deficits of over a trillion dollars each year can’t be good. Even the more liberal amongst us aren’t thrilled about it. And I know our kids aren’t going to be happy once they find out about it.

Maybe you agree with me and Senate Minority Leader Mitch McConnell that we have a spending addiction. Or maybe you agree with President Obama that we need to raise taxes more. Maybe both.

But seriously, if it were up to you, what would you do about it. Maybe it would help to think in terms of this scenario:

If you bumped into your congressperson today at the grocery store and he asked for your input on the national budget deficit, what would you say? You’d only have few minutes, so it would have to be concise and memorable because she didn’t bring any paper to jot down your remarks. And the cashier is waiting.

Call it crowd-sourcing, if you will, but I find I learn best when in conversation with others. Maybe you do to. Even if we don’t always agree.

So, if you only had a minute or two, what would you tell your congressperson when he or she asked, “What do you think we should do about our national budget deficit?”


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  • Belief

    Find a way to transition all social support programs back into the hands of local churches and charities and focus the federal budget around defence.

    • I agree with you to a large extent, but the next question your congressional representative asks, “How exactly?”

  • Belief

    Reply: “Have your people call my people and we can talk this thru at length. I have to finish up here and get my kids to swimming class. Here’s my card. Have a nice day.”

  • Aron Utecht

    Step 1:

    Rescind all retirement plans, health insurance programs, and any other congressional and presidential benefits until the budget is balanced and the deficit is gone.

    No questions. No discussion. We should stop rewarding failure. And, if they are going to take (effectively) anywhere from 13-15% of our paycheck for our ‘retirement plan’ and then fritter it away, they shouldn’t get one either. Likewise with health insurance.

    • I’m with you on the carrot-and-stick approach, at least it makes some common sense. But what would you advise them to target for cutting — or raising — while they pick up a second job?

      • Aron Utecht

        Ha! 🙂 My guess is that most of our representatives wouldn’t have to get a second job, just pay for their health insurance and retirement out of their salaries like the rest of us! For me, I see that as a matter of justice more than carrot/stick. With as huge as our or debt is, I realize this wouldn’t be much of a dent, but it would just be right, and a necessary beginning.

        As far as meaningful cuts, I think the low-hanging, across-the-isle fruit would be to get a reign in on the pork spending. So much meaningless junk is wrapped into to almost all of these bills. I think the recent row over the Sandy Aid bill is exhibit A, a necessary package, but bloated exponentially by stuff that is completely ancillary to actual needs. And right after the fiscal cliff showdown! I find that particularly galling.

        That’s my starting point at least…


        • Steve Ruble

          Pork spending was $3.3 billion last year, according to Citizens Against Government Waste. I suppose we could cut that too, but at much less than 0.1% of the total expenditures that’s not really going to do much for the budget. I’m sorry you find it galling, but if I were you I’d blame the people who convinced you to care about such a tiny issue.

          • Steve, you are right about the pork spending. It won’t solve anything, even though we might not always like it.

  • Steve Ruble

    What should we do about the deficit? We should probably increase it, taking this opportunity to put people back to work rebuilding America’s infrastructure and bringing us into the 21st century with national broadband service and – why not – a national rail system to match every other industrialized country. The frequently ignored fact is that the government can currently borrow money at rates near or below inflation; in other words, borrowing money is effectively free. If a CEO had an opportunity to borrow money for free and turned that opportunity down there would be a new CEO in days, but for some reason a big chunk of the electorate is demanding that we walk away from free money.

    Of course, the very idea that the government (which can create money at will) must borrow money back from the people before it can spend it is a relic of the days when people thought that the gold standard was important. With millions of people unemployed and the economy is running so far below capacity the government could simply print money and spend it without causing inflation, but we’re locked into this crazy system where we must give the banks an opportunity to rake off interest on all government expenditures. It’s really frustrating.

    • In my experience, borrowing money for free is only a good deal if a) you can make the payments and b) you can pay it back at all. How would you avoid the inflationary rise due to the the increased printing of money?

      And how is any of that a long-term fix? What’s the end-game in that scenario? Aren’t you creating a permanent cycle of government spending to sustain society?

      • Steve Ruble

        While politicians and pundits may raise concerns about our ability to make our payments and pay back debt, the market in general has an extremely high level of confidence, as demonstrated by people’s willingness to buy Treasury paper even at very low interest rates. Of course, it’s quite possible that the market is making a mistake here, but it’s a little odd that many people who raise concerns about our debt are the same people who urge deregulation and trust in the free market.

        I’m not “creating a permanent cycle of government spending to sustain society”, there /is/ a permanent cycle of government spending which /does/ sustain society. If government is running a surplus, it is taking more money out of the economy than it is putting it; if government is running a deficit, it is putting more money into the economy than it is taking out. Which of those situations do you think is compatible with long run growth? Of course, there can be times when the economy is getting too hot and it’s helpful for the government to run a surplus in order to slow it down, and running large deficits when the economy is doing well is likely to be inflationary, but both of those possibilities are quite a way off in our future.

        So I’m not saying we should /always/ run big deficits, just that right now running a large deficit is low risk (interest rates are tiny) and high reward (millions of people need work, and there’s lots of work to do) which adds up to a compelling case for large deficits for a few more years.

        (It’s also important to note that part of the reason for the current deficit is that tax revenue is low due to the recession while expenditures (for unemployment insurance and similar) are high because of the recession, so the end of the recession will reduce the deficit significantly without any need for legislative action.)

        • Thanks for the rational explanation of your thoughts. I realize what we’re talkng about is essentially the difference between the supply-side and Keynesian approaches, but wouldn’t we be better served by the government leaving the money in the economy in the first place? i.e. lowering taxes, removing barriers for growth, etc. which would leave us in a better position long term? What happens to the debt when rates rise? Is that when the chickens come home to roost?

          • Steve Ruble

            “…wouldn’t we be better served by the government leaving the money in the economy in the first place?”

            I’m not sure what you mean by “in the first place” here, since in the first place money comes /from/ the government, not from the economy. Certainly there are times when we don’t want the government to be draining money out of the economy via taxes – times like right now, in fact – but there are also times where we need the government to inject a lot of money into the economy – again, that’s the case right now. In circumstances like this the only options are a) deficit spending or b) printing money. Printing money is pretty much ruled out by existing law (except for platinum coins!) and because so many people are superstitious about it, so deficit spending is the main tool we have for dealing with demand shortages when monetary policy doesn’t seem to be working.

            I’m not at all sure that lowering taxes and removing “barriers to growth” is a good idea. We’ve spent the last 20 years lowering taxes and deregulating industries and our reward appears to have been a massive recession, stagnant wages, increasing concentration of wealth, increasing corporate profits, severe unemployment, incomprehensible financial markets, and – for those who care – a huge budget deficit. Has it the trade been worth it?

          • Money, as I understand it, is just a placeholder for value. We could use shells as wampum — only Interent sales would decline significantly, I supect. How can government create value? Isn’t value determined by the marketplace based on suply and demand?

            I disgree with you as to the cause of the current recession, of course. It was the federal government intrusion into the housing markets that caused a good chunk of it. But I ssupect we’ll just go round and round on that one.

          • Jennifer

            If value is determined by supply and demand and if government can affect supply and demand (I.e. rent control regulations increase demand and decrease supply) then government can affect value.

          • Steve Ruble

            There are a number of ways the government can “create value”. At the most basic level the government creates value by providing a stable environment in which people can make plans for the future without needing to worry too much about invasion or revolution or catastrophe, by providing a consistent legal framework that supports the enforcement of contracts, and by providing a generally accepted currency.

            One of the things that makes a currency generally accepted is that it is the exclusive currency accepted and spent by the government, which is typically the largest single player in an economy. The government is also the only player which can actually force you to use the official currency, because it can send you to jail if you refuse to pay a tax or a fine in the official currency. In most transactions you can use any marker of value you can get someone else to accept, but if you don’t have enough currency to pay your taxes at the end of the year you’re in trouble. As a result there is a guaranteed minimum demand for units of the official currency.

            Of course, the government gives money “value” in many other ways besides ensuring a minimum demand for it. The FDIC insures deposits denominated in dollars, not in seashells, and than insurance makes dollars a much more attractive storehouse of “value” for the typical household. The government also provides a central bank which provides vital functions for entities managing large numbers of dollars – but not other currencies – and sells reliable debt instruments – denominated in dollars – in which large amounts of “value” can be stored safely for long periods of time.

            Of course, most of “value” created in America /is/ created by the private sector; the operations of the government make up only a fraction of the transactions within our economy. But without the services I just described, value-creating transactions would be much more difficult, risky, and inefficient than they are now. Dismissing the importance of government in the process of creating and exchanging value would be a big mistake.