Balanced Budgets are Bullshit

It's been said before, and it's still true.

The ideological function of "deficit hawking" is clear: convince people, especially those who already have a preference for increased social spending, that the government is starving and must be scaled back considerably.

I hear this worry often from leftish-liberal people sympathetic to reforms like single-payer health insurance. They say something like this: "well, we simply can't afford that... what about the deficit and future generations?". Many liberals are obsessed with this: one thinks of the deficit-hawking talking points leveled against Bush by Democrats in 2006.

The political consequences of this widespread belief are deeply conservative. Once you convince people of this lie about balanced budgets, they're prepared to draw other invalid inferences, (e.g. "well, either the government goes into the red or we slash spending... hence we must slash spending). And the people I have in mind here aren't hardened capitalists or right-wingers: they are ordinary left-leaning liberals and "progressives" who actually want to see vastly increased spending on education, health-care, public transit, etc.

There are several important things to say here.

First, we must ask why the deficit is as large as it is. Put simply, the deficit is sizable for two reasons: 1) massive tax breaks for the richest of the rich over the last 40 years, 2) transfer of toxic assets and debt from the private financial sector to the Federal Government (i.e. TARP).

For more on 1) see this. We have much lower top marginal tax rates than many comparable capitalist nations in Western Europe. Also- even if we grant the "deficit hawks" their confused claims, we can still just say: if you want to balance the budget, then tax the rich because the surpluses they hoard are large enough to pay for the national debt ten times over. It has recently been estimated that the Bush tax cuts of 2001 alone have inflicted a $3 Trillion loss. The surplus cash is out there, it's simply being stock-piled by the rich. As Rick Wolff has argued, even a modest tax on "intangible property" (e.g. stocks, bonds, etc.) would easily cover the budget shortfalls facing state and municipal governments:

At the present time, the vast majority of US states and municipalities exempt intangible property from property taxes. That is, stocks and bonds are kinds of property not subject to the taxes on other kinds of property (land, houses, etc.). If we imposed a very low rate of property tax on intangible property, it would cover the present and anticipated fiscal shortfalls of US cities, towns, and states...If coordinated across all states and cities (perhaps levied and collected by Washington and then returned to states and municipalities), intangible property owners would have no incentive to move it from one place to another.

For elaboration on 2) read Joel Geier- "capitalist governments transferred private capitalist debt from banks and corporations to the state—losses were socialized for the public to pay for."

The second thing to say is that, contrary to prevailing dogmas perpetuated by both pro-business parties in the US, balanced budgets are not intrinsically valuable. There is no benefit, in itself, to having a balanced budget. If balanced budgets are valuable at all, they must be instrumentally valuable, that is valuable only as a means to fulfilling some other function or task.

Think of it this way: what should the function of government be? Most would agree that the function is to do certain things: provide infrastructure and certain services, create the conditions for people to flourish, lead free lives, whatever. You needn't be a radical to think that (although it's striking how radically anti-capitalist the conclusions are when you take seriously the idea that politics should be about creating the conditions for human beings to flourish.... but I digress).

Now, who in their right mind would say that the function of government is to balance its budgets? That is bass ackwards. It makes no sense. The function of government, even if you ask conservatives, is supposed to be to ensure liberty, provide certain services, etc. Nobody actually thinks, on reflection, that the function of government is just to balance its budgets.

Yet the practice and ideology of "deficit hawking" seems to assume precisely this. It fetishizes something that has no intrinsic value, in order to legitimate the slashing and burning of public institutions and social services.

Third, as I talk about in the link provided at the beginning of the post, the idea that there is something morally suspect about not balancing budgets is preposterous. Often this conservative complaint is made by way of the following analogy. "My family has to pay all of its bills at the end of the month, so the government should as well!" Two things on that: first, the analogy between the state in advanced capitalist societies and a typical bourgeois family unit is not a good one. Second, even if we grant the analogy, the argument still falls apart. As so many people are now realizing with the mortgage crisis, very few Americans actually own their homes (or their cars or college educations for that matter). Almost everyone debt finances those purchases. Likewise small businesses debt-finance much of their undertakings, just as larger firms do as well. Debt-financing is pervasive in contemporary capitalist societies, so it's a little dense to single the government out and claim that it is doing something illicit that "regular people" don't do.