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View Diary: Should the Gov't. Balance Budget Like Families Do? (121 comments)

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  •  OK, I'll say Yes - for the sake of argument (0+ / 0-)

    ...just for the sake of exploding the analogy.

    What really happens when the family sits around the kitchen table in a family financial crisis?  We're talking just ordinary tightening the belt here.  What happens when the family decides they can't carry a debt 60% of their annual income any more.  That would be a $36,000 debt for a median income family.

    First they would find out what that minimum payment on the debt was and how much they could afford in their current circumstances to pay above that in order to accelerate the payment of the debt.  OK, that is not doable.

    So they go look at their spending.  What is the frivolous spending that they can cut.  Well, first to symbolize that they mean business, everyone in the family gets half the allowance of discretionary money that they did before (or they give it up altogether depending on what they have been using that money for).

    Then they look at the capital equipment.  Can the car go a little longer?  The washer, the dryer, the dishwasher?  What do we do if one of those fails?   Do we really need to continue our cable subscription of the highest-speed internet connection (notice that this is framed in terms of the types of families that politicians imagine).

    So they go through everything and cut, cut, cut.  So what's left is retirement savings, kids education expenses, healthcare and food.  First they jettison retirement savings for cash flow reasons.  The adults stretch out their healthcare appointments.  If there are routine medications, the adults try to go generic, or if that isn't possible try to reduce frequency or dosage.  Notebooks and pencils for the kids, good clothes for school, fees for extracurricular activities are generally the last to go.

    They've done all that.  And it's still not enough.  They look at lowering their insurance policies by accepting more risk.

    At some point in this process, one of the adults will say, "Why don't we try to get another job?"  Bring in some more revenue to pay for our bills.  And they start working that as part of their plan.

    But there are things they will not do.  They will not willingly let their kids starve or fail to go to school or fail to see a doctor if in their judgment the situation is serious.  They will not refuse to care for a parent.  (Remember we are talking about the "play by the rules" folks in this analogy).

    And they likely will not go out an buy a bunch of guns to "protect themselves if things get bad".  That money can be used to avoid things getting bad.

    Government is not a business.  Government is not a family.  And a business is not a family, despite the CEO's attempt to play daddy or mommy.  The frame of the analogy is plain out wrong.  Keynes laid out why, but we have to modify our understanding of Keynes in the context of a global economy.  If we increase demand through deficits and Europe destroys demand through austerity, neither of us will dig out of the hole but we will wind up with much bigger debts to carry forward.  GDP increasingly depends on the gross global product.  But even this ignores the effects of inequality of incomes between people and between nations.

    But the content of the analogy is wrong as well.  If you follow what folks really do, Congress would cut its salaries and expenses first, reduce subsidies on its own perquisites and lay off a part of its staff.  Military spending would not be off the table and the question would be what risks are prudent to take in order to drastically reduce the cost of the military.  There would be a clear idea of how fast they needed to pay down the debt in order to satisfy creditors.

    But there would also be a serious effort to increase the revenues coming in.  Buying that sewing machine so that mom could start an alterations and dressmaking business might be an reasonable expense for a family.  Repairing and improving infrastructure to lower the cost of doing business (wear and tear on trucks and cars, road closures, high-risk intersections, wasted time being stuck in traffic instead of using transit, and on an on)  would offset the cost to businesses and individuals of the additional taxes to pay for them.

    In short, the family that politicians parade forth in their analogy is as dumb as the politicians themselves.  And they show how out-of-touch these politicians are from the sorts of decisions that folks making the median family income face.

    It's not a failure to understand economics, it's a failure to get real.

    50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

    by TarheelDem on Sun Jul 03, 2011 at 12:10:04 PM PDT

    •  That was pretty much my point. (0+ / 0-)

      That what they mean when they say the gov't.  should act like a family is not at all how a family really acts. And that to the degree that they are the same, the gov't should be investing in the future and in ways that increase revenue like American families do.

      You can't scare me, I'm sticking to the Union - Woody Guthrie

      by sewaneepat on Sun Jul 03, 2011 at 12:20:18 PM PDT

      [ Parent ]

      •  Certain American families do (0+ / 0-)

        Actual behavior is all over the lot, regardless of income level.

        50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

        by TarheelDem on Sun Jul 03, 2011 at 12:43:38 PM PDT

        [ Parent ]

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