user since
Thu Aug 9 2001 at 19:05:50 (16.1 years ago )
last seen
Fri Nov 8 2002 at 19:00:47 (14.9 years ago )
number of write-ups
1 - View fuzzyfrog's writeups (feed)
level / experience
0 (Initiate) / 7
mission drive within everything
increase the size of my milkshake with my brea
specialties
getting c++ code to dump core
school/company
ain't got much ejamucation
motto
We don't need no stinking Badgers
most recent writeup
Atom and His Package
Send private message to fuzzyfrog

(Montreal) (Motorola) Balanced Budget

The Federal Budget was at one point, always balanced. The prevailing wisdom of economists in the early half of the 20th century was that nothing could be done to help the economy, so there was no point in trying.

Then came John Maynard Keynes. The basic idea in his large and somewhat incomprehensible tome The General Theory of Employment, Interest and Money was that in times of economic recession, the government would have to run budget deficits to stimulate the economy, by providing aid to the unemployed, and in extreme cases, through public works projects. This in turn ensures that consumers have enough money to buy things, and brings the country out of recession.

This runs in direct contrast with supply-side economics, which stipulates that the correct fiscal policy in a recession is to cut taxes, which will free up more private capital (especially among the wealthy). The beneficiaries of these tax cuts will invest in business, create jobs, ensure consumers have enough money to buy things, and bring the country out of recession.

Recently, however, variuos politicos have portrayed budget deficients as A Bad Thing. Breifly their arguments are as follows:

even going so far as to propose a Balanced Budget Amendment to the Constitution.

Who wouldn't want a balanced budget? People obviously wouldn't run an unbalanced budget, nor would corporations, right? Wrong! Ever bought a house? Seen companies buy other companies? Only the extremely lucky get to pay cash for those. Mere mortals must borrow.

No matter which policy you espouse, deficits are quite natural in a recession. In both policies, government income (mostly the result of taxes) is directly proportional to GDP. In a recession, GDP contracts, and tax receipts are lower than projected. It is quite likely that the governments actual income will be less than its expenditures, regardless of what fiscal policy you employ to jumpstart the economy. Tax cuts will further reduce income, and government spending to stimulate the economy will further increase expenditures.

Another salient point is the way about which this balanced budget should be brought about. Not by increased taxes, but by reduced federal spending. The balanced budget, while it appears to be solely about fiscal responsibility, is actually about reducing government.

who owns the debt? almost entirely the us citizen


References

http://www.theatlantic.com/unbound/flashbks/budget/budgint.htm
http://www.nathannewman.org/nbs/ (budget calc)
http://www.commondreams.org/views02/0110-06.htm (a little light on fact)
http://maxspeak.org/gm/archives/00000232.html
-- little useful http://maxspeak.org/Research/federalbudget/upfrom.pdf -- big paper
http://www.time.com/time/time100/scientist/profile/keynes.html
http://www.mit.edu/people/irons/bba/bba.html
http://www.cbpp.org/bba.htm