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Where family ends for super committee and budget cutters
(L-R) U.S. Rep. Chris Van Hollen (D-MD), U.S. Rep. Dave Camp (R-MI), U.S. Rep. James Clyburn (D-SC), U.S. Rep. Fred Upton (R-MI), U.S. Rep. Xavier Becerra (D-CA), U.S. Rep. Jeb Hensarling (R-TX), U.S. Sen. Patty Murray (D-WA), U.S. Sen. Jon Kyl (R-AZ), U.S. Sen. Max Baucus (D-MT), U.S. Sen. Rob Portman (R-OH), U.S. Sen. John Kerry (D-MA), and U.S. Sen. Pat Toomey (R-PA) participate in a Joint Deficit Reduction Committee hearing October 26, 2011 in Washington, DC. The special Joint Committee is tasked with finding $1.5 trillion in deficit reduction by Thanksgiving.
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Kai Ryssdal: I'm not telling you anything you don't already know when I say this has not been a a banner year for economic bipartisanship. We had the standoff over the debt ceiling. Now the super committee is deadlocked a week before its deadline. Congress still hasn't passed a budget for the fiscal year we're already in.
Back in July, the president had this to say:
Barack Obama: Every day, families are figuring out how to stretch their paychecks, struggling to cut what they can't afford so they can pay for what's really important. It's time for Washington to do the same thing.
That line of reasoning -- that the government has to learn how to live within its means, just like a family -- has turned out to be the one thing everybody could agree on. But is it true? From Washington, Marketplace's David Gura reports.
David Gura: Family budgets aren't that complicated. Mom and dad talk about what they want and what they need. And how much money they have. It all comes down to one question: What can we afford? So, if families budget that way every year, why can't Congress? Jared Bernstein is with the Center on Budget and Policy Priorities.
Jared Bernstein: This is a kind of folksy sentiment that just resonates with people, it just sounds right.
It seems so simple. And like lots of things that seem so simple, it's actually too good to be true. Right now, there is a budget conversation happening among the super committee. Its members have to find a way to cut the deficit by more than a trillion dollars. So, let's test out the metaphor. Picture the super committeee family, 12 members strong, gathered around the kitchen table.
Jim Kessler: Debt has brought them together. This is a family that's in financial crisis.
That's Jim Kessler, co-founder of a think-tank called Third Way. The Super Committee is co-chaired by Republican Congressman Jeb Hensarling and Democratic Senator Patty Murray, Super Committee Dad and Mom.
Patty Murray: We all need to be willing to make some tough decisions and real compromises.
So, here's the situation: The U.S. spends more money than it has. And as President Obama put it:
Barack Obama: The result is a lot of debt on our nation's credit card.
Third Way's Jim Kessler says the Super Committee family is acutely aware of the fact they haven't planned well for the future. In the U.S., there are Baby Boomers ready to retire, thousands of roads and bridges that need to be repaired -- or replaced.
Kessler: This is a family that doesn't like to make choices that really deal with stuff far down the road. They're really looking at their next vacation -- and buying their next car right away.
Before long, Kessler says this family's budget meeting gets tense.
Kessler: Some people in the famliy are saying, "Look, we need to cut this, and this, and this. And we can't spend money on that. And no new washer and dryer." And somebody else is saying, you know, "Aunt Marilyn, maybe you should go out there and get a job, and bring in some more revenue."
The funny thing is, just as the Super Committee family falls apart, the family budget-federal budget metaphor falls apart too. A family doesn't have to budget for wars. And it can't print money -- at least not legally. A family looks out for itself. The government has to take into consideration millions of families, hundreds of millions of Americans.
Joe Gagnon is with the Peterson Institute for International Economics. He says the government has to deal with the big economic problems -- like economic downturns and high unemployment.
Joe Gagnon: For the country as a whole, the feedback actually matters. Because if we don't spend now, and we save, it actually at least in the short term puts people out of work.
That's not something that comes up when a family's figuring out its budget. Here's Jared Bernstein again, from the Center on Budget and Policy Priorities:
Bernstein: That happens to be, with great respect to the president, a terrible analogy.
He says it's too simplistic and it flies in the face of economic theory. Bernstein argues families and the government shouldn't tighten their belts at the same time. When families cut back, the government should step in to help. And when the economy rebounds, that's when the government can tackle the deficit.
In Washington, I'm David Gura for Marketplace.
This is one tired analogy, boy—usually reserved for the domain of conservative Republicans. If this country operated its finances like a family, it would have gone broke back in the 80’s when faced with the bailout of the S & Ls. Funny how we never hear this line when corporate or financial interests are at stake. That’s when the team sports’ rhetoric and “let’s stop all this partisan bickering” propositions come to the forefront. With all due respect to Barack Obama, are you really a progressive Democrat or just another corporatist in progressive clothing? This country is way overdue for a decisive, unapologetic, unequivocal move to the left; and I don’t mean more legislation like the recent health care gift to private industry (such a radical socialist—woooo. Before you know it, he’ll be putting the brakes on efforts to privatize public education!). For the record, S.S. should not even be on the table. It has been raided so often, everyone seems to buy the idea that it’s part of the federal budget; it isn’t.
Jared Bernstein is the only one who gets it right. The rest are absolutely wrong.
The Federal Government is a currency issuer. The 50 states, every business, every household, and every individual in the US are currency users.
The accounting rules are not the same for both.
The 50 states, every business, every household, and every individual in the US must balance their budgets, and must earn their money before they can spend it. (Just as those economies in the world that are still on a gold standard or whose currency is convertible to a hard metal must do.)
The federal government is the issuer of non-convertible currency. It will never go broke. WE ARE NOT ON THE GOLD STANDARD, but everyone is thinking as if we are.
We are being bamboozled (and so is the President) to think that we need to cut social security and medicare.
Read this book (and that includes the editors of Marketplace) which will explain it and get it to everyone you know.
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
CNBC called him the smartest guy in finance after his book came out in 2010.
And today this went up on Huffington Post:
http://www.huffingtonpost.com/warren-mosler/it-must-be-impossible-for_b_...
MARKETPLACE, INTERVIEW THIS MAN!
If we could print our way to prosperity, why not just print money and distribute it to us all, make us all millionaires? You're right, the federal government will never go broke, but don't forget that money printing eventually leads to inflation, which is a hidden tax on us all, but it hurts the poor the most. Inflation is caused by currency issuance and has brought a price rise over 20 fold in a single lifetime. Just think about why the old 'five and dime' shops are now '99 cent' stores. Just because an economist has a Ph.D doesn't mean he's always right. The state of economics today is like the state of medicine a couple centuries ago when a doctor's 'treatment' (i.e. leaches) was more likely to kill you than heal you. The prescription by your favorite economist would have the same effect.
