Sunday, March 23, 2014

DEBT DREAD: PART I

Now there is an erroneous opinion that a statesman, king, householder, and master are the same, and that they differ, not in kind, but only in the number of their subjects. For example, the ruler over a few is called a master; over more, the manager of a household; over a still larger number, a statesman or king, as if there were no difference between a great household and a small state.
 
                                                                              - Aristotle, Politics, Book I

Is the government of a country like a family? American politicians like to say so.
For several decades we have been told by our political leaders that the federal government should conduct itself as if it were a family household. Specifically, they have a penchant for saying that the government should "live within its means" and not spend more each year than its annual tax revenue. Is that true? Is the federal government analogous to a family household? Does the federal government face the same financial constraints as an individual family? Should the federal government be required to balance its budget?

Americans have been increasingly worried about the national debt recently. There have been proposals to amend the Constitution to require the government to maintain a balanced budget, and there has been an increase in public expressions of concern about the debt during the years since 2008. Talk radio, cable news, movies, print media, blogs, and the "debt clock" in New York have kept discussion of the national debt in the public eye. In the financial media during the years 2009 to 2012, CEOs, economists, investors, and journalists warned constantly that the U.S. faced an "unsustainable" debt path which would certainly bring about an inevitable economic Armageddon. Debt dread became a prominent part of Tea Party rallies during 2009 and 2010, and has featured in the annual budget battles between the Republican Party and President Obama over the debt ceiling vote. This dread of the debt is not the exclusive concern of the right however. Many Democratic Party politicians have recently stated that the national debt is far too large and needs to be slashed. Barack Obama himself has publicly expressed the view that the national debt is a very bad thing, even including the concept of "unsustainability" in his State of the Union addresses. So there seems to be a consensus, left and right, that the national debt is not just bad, but positively scary.

What is the national debt? Why is it growing? What effect does it have on the economy? Why is it bad? And is the national debt really the same as a family's debt? To answer these questions requires historical and conceptual context, context which has been lacking in the political debate about the debt.

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