5 ms·

We need something similar to the Balanced Budget Amendment (BBA). Our system rewards short-term thinking. However, the BBA should take into account stimuluses d

by tabtab 7y ago

We need something similar to the Balanced Budget Amendment (BBA). Our system rewards short-term thinking. However, the BBA should take into account stimuluses during slumps. It would probably have to kick in slowly to avoid hurting the representatives who sign it.

hcknwscommenter 7y ago
Why? Do you think it would reasonable to require that all homes be paid in cash? Should we ban auto loans? Why is the government different in this regard? There is nothing wrong with using debt responsibly. I enjoy the opportunity this affords me to buy the debt. it's a good investment for me. When mixed in the proper ratios with the remainder of my portfolio in combination with reasonably applied leverage US debt provides a safe, stable, and inflation protected place for a great many of us to store excess earnings.
- jfengel 7y ago
  Government debt is different from personal debt. People don't work forever, or live forever. Buying a home on debt is a good choice for a person, since it lets them have a place to live after they stop working. And that debt is backed by the house: if the person dies before the house is paid off, they get the house rather than coming after the heirs for debts. The government never retires, and never has to pay off its debts. That gives it a lot of leverage, but it also obligates new citizens to a share of the debt as soon as they're born. Your parents can't pass their mortgage debt to you, but they do pass on their share of money that the government has borrowed. So the government can safely borrow money, but at some point it will accumulate so much debt that people begin to doubt its ability to pay it back. Whoever is left holding the bag at that point will be in very deep trouble. I don't know what point that is. Interest rates are still low, so the answer appears to be "not today" (and "not imminently"). But the article points out that the low interest rates may be something of a false indicator. So as you say, responsible debt is good. But decreasing revenue via tax cuts, and increasing debt accumulation, at a time when the economy appears to be booming doesn't appear to be responsible. It reduces the ability to borrow in the future, at precisely the time you could be increasing that ability by paying down old debts. Especially if you're then covering it up by borrowing in a way that's hard for people to see.
  - RockIslandLine 7y ago
    "So the government can safely borrow money, but at some point it will accumulate so much debt that people begin to doubt its ability to pay it back." Currency issuers can always pay any debt denominated in the currency that they issue. It is literally impossible for a currency issuer to be forced to default. "But decreasing revenue via tax cuts, and increasing debt accumulation, at a time when the economy appears to be booming doesn't appear to be responsible." That's a sane position, but the argument against a Federal Balanced Budget Amendment comes from the opposite case. You want the capability to deficit spend during recessions. The Federal Balanced Budget Amendment forces you to make the wrong decision of cutting spending during recessions, driving the nation deeper into recession. When factories are idle and unemployment is high, it is vicious to claim that the best policy is to choose to throw more people out of work. Federal spending should be explicitly countercyclical.
wombatpm 7y ago
Illinois has one of those. It just means they explicitly call out the amount of debt they will take on, not that they will have a true balanced budget. Problem is that no legislative body can pass laws dictating the future actions of a legislative body- - they will just pass new laws if they need to.

by tabtab 7y ago

hcknwscommenter 7y ago

Why? Do you think it would reasonable to require that all homes be paid in cash? Should we ban auto loans? Why is the government different in this regard? There is nothing wrong with using debt responsibly. I enjoy the opportunity this affords me to buy the debt. it's a good investment for me. When mixed in the proper ratios with the remainder of my portfolio in combination with reasonably applied leverage US debt provides a safe, stable, and inflation protected place for a great many of us to store excess earnings.

jfengel 7y ago
Government debt is different from personal debt. People don't work forever, or live forever. Buying a home on debt is a good choice for a person, since it lets them have a place to live after they stop working. And that debt is backed by the house: if the person dies before the house is paid off, they get the house rather than coming after the heirs for debts. The government never retires, and never has to pay off its debts. That gives it a lot of leverage, but it also obligates new citizens to a share of the debt as soon as they're born. Your parents can't pass their mortgage debt to you, but they do pass on their share of money that the government has borrowed. So the government can safely borrow money, but at some point it will accumulate so much debt that people begin to doubt its ability to pay it back. Whoever is left holding the bag at that point will be in very deep trouble. I don't know what point that is. Interest rates are still low, so the answer appears to be "not today" (and "not imminently"). But the article points out that the low interest rates may be something of a false indicator. So as you say, responsible debt is good. But decreasing revenue via tax cuts, and increasing debt accumulation, at a time when the economy appears to be booming doesn't appear to be responsible. It reduces the ability to borrow in the future, at precisely the time you could be increasing that ability by paying down old debts. Especially if you're then covering it up by borrowing in a way that's hard for people to see.
- RockIslandLine 7y ago
  "So the government can safely borrow money, but at some point it will accumulate so much debt that people begin to doubt its ability to pay it back." Currency issuers can always pay any debt denominated in the currency that they issue. It is literally impossible for a currency issuer to be forced to default. "But decreasing revenue via tax cuts, and increasing debt accumulation, at a time when the economy appears to be booming doesn't appear to be responsible." That's a sane position, but the argument against a Federal Balanced Budget Amendment comes from the opposite case. You want the capability to deficit spend during recessions. The Federal Balanced Budget Amendment forces you to make the wrong decision of cutting spending during recessions, driving the nation deeper into recession. When factories are idle and unemployment is high, it is vicious to claim that the best policy is to choose to throw more people out of work. Federal spending should be explicitly countercyclical.

wombatpm 7y ago

Illinois has one of those. It just means they explicitly call out the amount of debt they will take on, not that they will have a true balanced budget. Problem is that no legislative body can pass laws dictating the future actions of a legislative body- - they will just pass new laws if they need to.