Balanced Budget Hazards

"Deficits don't matter." -- Dick Cheney

   When hard times hit, consumers struggle to pay for food, clothing and shelter, and sometimes there's little left to pay taxes. That's why it's important for families to try to live within a budget, so there will be some money saved and available for the proverbial rainy day.
   On a national level, however, a balanced budget is a good thing when times are prosperous, but when stormy weather hits hard, government is the spender of last resort to keep an economy functioning.
   It's been said that money is the lifeblood of an economy, so when the flow stops, the body politic no longer functions healthily. When consumers, the prime movers in an economy, cut back on spending, and producers reduce their output in response to slowing demand, that triggers a downward trend called a recession.
   That's the point at which government, another major component of any economy, can step in to increase spending, thus encouraging production, which provides jobs and wages so people can resume their consumption.
   Balanced budgets are important for families, companies and even states. But sometimes the pressure is too much and they must borrow in order to survive. For families, that means a loan. For firms and states, that means issuing bonds as a way to balance their budgets.
   On a national level, however, issuing bonds may not be sufficient or fast enough to generate money for spending. Moreover, if people and companies don't have any funds to spare, they can't lend money to government in the form of bonds.
   So the national government, as the spender of last resort to reboot an economy, starts to spend money it does not have. That, in effect, is a budget deficit.
   There are some, however, who insist that deficit spending is a bad thing, for a national government as well as for families and firms. Therefore, there is a growing movement to amend the U.S. Constitution to require the federal government to balance its budget every year.
   But when government is prohibited from deficit financing as a transfusion to aid a sick economy, the body politic is unable to recover, and everybody loses.
   Nonetheless, that would be the consequence of a plan by conservatives, led by the Koch brothers, pushing for a Constitutional amendment banning deficit spending.
   Every worker knows that when you're in a financial ditch, a loan can help you get out of the muck and move on to your job, repaying the loan along the way. But if you have no job and the financial storm continues, the muck only gets deeper, unless someone comes along with a rescue rope. That's the function of government, hiring and supplying the rescue crew, and paying them wages so they can support their families.
   When the scale of the operation is large enough, an entire nation is involved. Only a federal government can mount such a rescue attempt. And without the ability to operate at a deficit -- briefly, until the economy recovers -- the result would be a disastrous national bankruptcy.
   In theory, a balanced budget is a good idea, especially for individuals, families and businesses. States, too, are required to balance their budgets every year; but they have the ability to issue bonds to cover the deficit. Either that, or they cut spending on education, safety, police and fire protection, highway maintenance, and the myriad other things that government does.
   But if a national government cuts its spending just as every other element of society does the same, the entire money flow stops. During the 1930s, massive federal spending at a deficit, since tax revenues bordered on nonexistent, rescued America from the Great Depression.
   Amending the Constitution and requiring a balanced federal budget would eliminate the possibility of rescuing the nation from disaster. A balanced budget is feasible when tax revenue flows well. But during an economic crisis, when people with no jobs can no longer spend, and companies stop producing because there are no customers, dismissing workers who then have no wages, thus accelerating the downward spiral, only a national government has the resources to help.
   But if government is forbidden to do so, the sick patient -- the economic body politic -- dies.