Tuesday, February 24, 2009

Against balanced budgets

"Think how many times you have heard conservative politicians say that since businesses and households have to balance their budgets, government should do the same. But individuals and businesses separate out their current expenses from their capital outlays; people don’t define themselves as running a deficit this year because they bought a new house for $200,000. No, they finance capital expenditures like houses, new kitchens, and automobiles by borrowing, and they count themselves as living within their means as long as they have income to cover all their expenses including interest payments." - Fred Block (UC Davis sociologist) in Dissent
Obama has vowed recently to halve the deficit. Now this isn't necessarily as bad as it sounds: it depends on whether steps taken to accomplish this are sensitive to both 1) whether such steps take into consideration fixing current economic conditions and 2) whether such steps would lay the groundwork for extending the increases in spending indefinitely. As Block points out, we are already hearing Republicans blathering about how we are 'deferring the cost of this stimulus to our grandchildren' blah blah, etc. But its important to note that this sort of blathering is about 4% true. If the current attittudes and policies toward taxation remain unchanged then it is true that any ambitious spending regimen will be threatened in the long term unless changes are made. This does not meant that the government needs to 'balance its budgets' at some point in the future. However it does mean, at least, that budgets must be restructured in order to put spending initiatives on firmer political ground so that deficit-hawks and other 'free market' zealots will have a much harder time assaulting the social spending when/if economic conditions improve.

As Block puts it: "one essential issue has yet to be engaged or discussed: changing budget procedures to facilitate a long-term increase in government investment spending." 'Balanced budgets' are the reason "why we have a $2.2 trillion backlog of needed repairs to our decaying infrastructure...why our vital research and development machinery is generating fierce battles between different interest groups fighting for a piece of a shrinking pie....why our education system... is increasingly threadbare, dysfunctional, and ineffective in facilitating upward mobility." Glaringly omitted here is "this is (one reason) why we have decaying public health insurance programs (medicaid, medicare) and the worst health insurance system among all Western capitlaist nations because public money is not spent guaranteeing universal access".

Block proposes creating two different Federal budgets: a 'current account' and a 'capital account', where the 'current' acct would be kept in balance (except during reccession) and the 'capital' acct would be financed by borrowing. I'm not sure whether this is a good idea or not, but such a plan's raison d'etre (facilitaing large spending initiatives) is far more attractive than that of deficit-hawking (i.e. strangling the ability of the government to spend).

Concretely, Block proposes the following:
"First, the Obama Administration needs to begin right away developing plans for big ticket infrastructure projects to assure that they will be “shovel ready” over the next three to five years. Now is the time to map out, prioritize, and secure public support for multi-year projects of building high-speed rail lines, modernizing mass transit systems, and facilitating the replacement of coal and oil with green energy. Second, there needs to be an “all hands on deck” offensive to persuade the public of the urgency of this budgetary reform."
While Block's criticism of the current stimulus is (correctly, in my view) that it 'doesn't go far enough', perhaps the same should be said of his propsoals. Nonetheless, the general trajectory of his plan sounds infinitely more attractive than what the Administration seems currently interested in doing. Both parties typically cannot restrict themselves from gushing over the virtues of 'balanced budgets' as though they were glorious ends in themselves. Block is wrong to say 'conservatives' are the only ones pushing them, unless he meant to include a large amount of Democrats under the designation 'conservative' (a move I wouldn't resist in the least).

No comments: