Balancing the Budget Debate
In order to pass his version of a debt-ceiling bill, Speaker Boehner reintroduced an idea with a long history in the American popular consciousness—a balanced budget amendment. It’s a bad idea for any number of reasons. But what struck me most was how strongly it contradicted the most common rhetoric associated with the whole debt ceiling debacle: the repeated analogy that compared the American government to American households, which are expected to keep their budgets in order. When you consider the importance of debt to the average American household, the balanced budget amendment is revealed as absurd.
Houses, after all, are primarily bought with mortgages—that is, debt. In fact, according to an Oprah magazine article, a family making 54,000 dollars a year may reasonably take out a 200,000 dollar mortgage, establishing a household "debt-to-GDP ratio" of just under four hundred percent, more than quadruple than the highest ratio the U.S. has ever had. That’s before credit card debt, student loans, car loans, or any of the other sorts of debt that are the subject of discussion at kitchen tables across America, as families figure out their household budgets. It’s only very wealthy families that can afford to buy homes and cars for cash, or pay off their loans in just a handful of years. It’s only very wealthy families that can afford to send their children to school without taking on debt.
Of course, Congress is composed of very wealthy people. Perhaps they are genuinely ignorant about the debt that any ordinary American family works under. But then Speaker Boehner gave a speech where he compared the U.S. government to his small business back in Ohio. Small businesses, of course, are typically started with small business loans. Any actual small businessman would understand the importance of debt to get a new business running, or to steer it through a rocky patch. If Boehner never needed to take out a loan to help his business begin, survive, or grow, he’s no small businessman. He’s just a wealthy dilettante.
But wealthy dilettantes understand the importance of debt too. The Koch brothers, the moneymen behind the Tea Party, aren’t small businessmen at all. They’re billionaire industrialists. But in that role, they too appreciate the proper use of debt. Koch Industries brags of its impressive AA+ credit rating (the same rating as the downgraded U.S.), because the Koch brothers know that businesses, too, have to borrow money to keep operating, expanding, and improving. Just like the government.
The balanced budget amendment doesn’t just ignore the rhetoric coming out of Washington. It ignores American history in its entirety. The Revolutionary War was funded with borrowed money—so much of it that in 1790 the first Confederation de facto defaulted on its debt. The Civil War was financed with debt. That’s why the 14th Amendment says that the debt of the United States cannot be questioned. In World War II the government sold war bonds, so many of them that advertisements promoting them still permeate our culture.
None of the above examples of the importance of debt was somehow secret or obscure. I didn’t have to take a course in economics, business, or history to learn any of the above. I’ve never bought a house, started a business, run a corporation, or financed a war, and I still knew about each and every one of those examples. (You probably did too, and find my pedantic tone a little condescending.) Yet a significant portion of Congress today acts as though they’ve never heard of mortgages, small business loans, corporate bonds, or any major American war.
The reason the balanced-budget argument gets it so wrong is that it’s trying to make something inescapably complex unbearably simple. The truth is it is impossible to draw a hard and fast line demarcating how much debt or deficit is too much. There’s no simple rule ("balanced budget!") or single number ("debt ceiling!") that tells us how much our government should borrow. Yes, it is possible to borrow too much, and yes, it’s looking more and more like the past thirty years of debt has crossed that hazy divider. (It should be noted that this expansion primarily occurred under the tax-cut-and-spend policies of Reagan and Bush II. Clinton’s tax-increasing administration shrunk the debt.) But just because we’ve occasionally steered the ship of state poorly doesn’t mean we should set fire to it.
The American people can’t rely on grandiose, meaningless slogans when it comes to making debt decisions. Instead, we have to think seriously about what debt we can manage and what we can’t, when borrowing will help our country prosper and when it will hurt us too much down the road, and act accordingly. You can’t fit that principle onto a Constitutional amendment. But when it comes to the federal debt, it’s the only principle worth living by.
Louis R. Evans ’13, a Crimson editorial writer, is a social studies concentrator in Currier House.