We hear a lot that government budgets need to be balanced “like a household budget” that is decided “around a kitchen table.”
To balance the budget government has to either tax us more or spend less on things that make our lives better. That takes money out of circulation and does us no favors.
With less money in circulation businesses and households have to turn to the banks to borrow. And they have to pay interest to those banks.
Balancing the budget causes the private sector to turn to the banks and go into debt? The “financial sector” makes big bucks from that while the rest of us have less? Hey, wait a minute… who is pushing this “balance the budget” nonsense?
Atrios had a nice catch this morning. Trump’s Budget Director Mick Mulvaney explained that our government needs to run budget deficits to grow the economy.
Atrios linked to a Bloomberg Politics piece, The GOP Tax Plan Is Already Hitting Speed Bumps, that quotes Mulvaney,
White House Budget Director Mick Mulvaney is signaling similar flexibility, saying on CNN Sunday that decisions about deductions remain up in the air as “the bill is not finished yet.” He took it a step further on Fox News Sunday, by adding that a tax plan that doesn’t add to the deficit won’t spur growth.
“I’ve been very candid about this. We need to have new deficits because of that. We need to have the growth,” Mulvaney said.
Budgets that don’t add to the deficit won’t spur growth.
So there’s that.
Take a look at the op-ed by Stephanie Kelton in today’s LA Times, Congress can give every American a pony (if it breeds enough ponies).
Kelton introduces the idea that a government that issues its own currency can create money from nowhere, writing,
“Whoa, cowboy! Are you telling me that the government can just make money appear out of nowhere, like magic? Absolutely. Congress has special powers: It’s the patent-holder on the U.S. dollar. No one else is legally allowed to create it. This means that Congress can always afford the pony because it can always create the money to pay for it.
Now, that doesn’t mean the government can buy absolutely anything it wants in absolutely any quantity at absolutely any speed. (Say, a pony for each of the 320 million men, women and children in the United States, by tomorrow.) That’s because our economy has internal limits. If the government tries to buy too much of something, it will drive up prices as the economy struggles to keep up with the demand. Inflation can spiral out of control. There are plenty of ways for the government to get a handle on inflation, though. For example, it can take money out of the economy through taxation.”