On the surface this may sound pretty good. The GOP regularly suggests that the federal budget is just like a household budget, but bigger. So, since families “have to balance their budgets”, so should the Federal Government. But let’s look a little closer…
A Constitutional amendment to balance the budget means that the Federal Government could NEVER, ever have expenditures that outpace income. Not in time of war, or natural disaster, not ever. A balanced budget amendment might help keep us out of unnecessary wars, like, say, Iraq. No more butting into other countries’ business. But how would we pay for any war? Selling war bonds like during World War II? Those war bonds went to building bombers and tanks and making bullets — bonds along with rationing any raw materials that went toward manufacturing war materiel. Under the GOP’s anti-tax mantra, raising taxes to fund a war would be off the table. Or would it…?
Since the GOP is so fond of using household budgets as the analog for the federal budget, let’s look at how a balanced budget amendment compares to a household budget.
Do you have a mortgage on your home? Do you have a car loan? Do you use credit cards? Do you or your kids take out loans to help finance college expenses? Do you refinance your home or take out a second mortgage to pay for remodeling or renovating it? All those borrowing options would be off the table if you used the rubric of a balanced budget amendment.
Raising the debt ceiling doesn’t represent new spending. Rather, it is borrowing to cover past spending — like the Bush tax cuts, Medicare Part D, and the wars in Iraq and Afghanistan. To default would be like deciding to default on your mortgage or to refuse to pay on your credit cards. So, your house would be foreclosed and auctioned off on the courthouse steps. Your car would be repossessed. Your credit cards would be canceled — but you’d still owe the remaining balance. And your credit rating would drop like a rock. And when you finally paid them off, you’d find that your interest rate would be sky high should you apply for a new loan or new cards. And if those consequences weren’t challenging enough, the black marks on your credit rating would remain for years after you paid your bills and paid any future bills, such as rent on a place to live, on time. To make matters worse, the rent you’d have to pay would likely be higher than if you had an excellent credit rating. If those acts kill your personal credit rating, just imagine what it would do to a country’s credit rating!
Some members of the GOP don’t think that default would be so bad. They don’t believe what the economists and the Treasury Secretary and the Chamber of Commerce or the bankers are telling them. They only pay attention to the voices in their heads or on Fox News. They don’t look into the ideology of the Koch Brothers or of the supposedly non-partisan think tanks that spout Milton Friedman’s version of economics. One GOP legislator allowed as how stiffing China and Saudi Arabia might be a pretty good idea. What he fails to realize (or perhaps he just doesn’t care) is that American pension funds are a very significant holder of treasury notes. So, along with stiffing the Chinese and the Saudis, a lot of Americans would also get stiffed — and not all of them would be those hated public employees. They might even include Congress… along with aerospace retirees among others.
More Light Than Heat 