America's Debt Limit Explained...A satirical film

[grnidone]

Probably the best explanation about America and it's debt limit.  Dogboy said he thought a government shoudl do a few things. 

I think a government should work on a budget.  Not borrow to pay debt.  This borrowing to pay debt is just stupid.  No bank would allow an individual to do it OR a business to do it...why a government.

http://www.youtube.com/watch?v=Li0no7O9zmE

[ergophobe]

Politicians of both parties are addicted to deficit spending. It makes their lives so much simpler.

I read an article by the guy who started some conservative think tank (Heritage Foundation?). He was one of the original progenitors of the "starve the beast" idea (cut taxes and spending would have to fall). Originally, they were not an anti-tax group, they were an anti-government group who saw tax cuts as the means to their end. This is before it became an article of faith among such groups that raising taxes on wealthy people was morally wrong. The moral "wrong" they were seeking to correct was, rather, an overreaching executive more than anything else.

But a funny thing happened on the way to the revolution. Prior to the starve the beast movement, Democrats were generally comfortable with deficits and uncomfortable with cutting programs and Republicans were uncomfortable with debt and comfortable with cutting programs (except the sacred cow, defense, of course). But once it became clear with the starved beast that programs (including military) were going to get cut, Republicans got new religion about deficit spending. This is why David Stockman, Reagans' director of budget, broke so publicly with Republicans during the last election cycle - Reagan and Stockman had envisioned deficit spending as a temporary measure to destroy the Soviet Union which, once accomplished, would be rolled back (remember the "peace dividend").

But what happened is ultimately, after a few years of fiscal responsibility in the 1990s, deficits rose dramatically. Let's say you had a budget of 100x and income of 90x and were expecting a 10x deficit. But then you cut revenue by 10x. So hopefully you now have a budget of 90x, income of 80x and a deficit of 10x. But of course, politics doesn't work that way, so you expect a budget of 100x, an income of 80x and a deficit of 20x.

But that's not what happened in America. Once Republicans realized they could posture on small govt but pass earmark spending for their pet causes and just use deficit to fund it, it was more like the income was still 80x because of the revenue cuts, but the budget went to 110x. So instead of the original 10x deficit, we ended up with a 30x deficit.

So the upshot of the study was that before the "starve the beast" efffort, you could say we had one party that was socially responsible and one party that was fiscally responsible and between the two, they sometimes managed to actually balance the budget without entirely cutting loose those in need. After, you ended up with two parties addicted to deficit spending and nobody fiscally responsible watching the kids.

That's where you get the person in question, Stockman and others of that mindset (i.e. fiscally responsible) arguing now for a "increase revenue, decrease spending" approach to the deficit. The problem with that reasonable approach is that it is the hardest one to sell. It effectively manages to piss everyone off so for most politicians it's a third rail.

And so now you end up where we are now. One party wanting to spend a lot on social programs, the other party pushing for two very costly wars and both parties telling Americans that they should run out and buy more TVs and cars.... and massive debt passed on to children.

[ergophobe]

BTW - the video explains the debt well, but not the question that looms on Oct 17.

A better analogy would be this:

Wife: Honey, I'm worried we're spending too much.
Hubby: But I want a new TV
Wife: We can't keep putting stuff on credit cards
Hubby: Okay, but I *already* bought stuff on the card for this month.
Wife: Okay, well let's not pay our mortgage and our credit card bill. That will solve it.