Raise the Roof

Representative Michele Bachmann (R-MN) speaking last weekend about her determination to vote against raising the debt ceiling stated that the U.S. government couldn’t afford to, in effect, raise the limit on its credit cards. She said the government shouldn’t and couldn’t continue to spend borrowed money because families can’t do that; her husband and she couldn’t “last a month that way.”

Ms. Bachmann, never one to let a bad analogy go to waste, perhaps has forgotten that she and her husband don’t have 310 million dependents. Or that governments and families don’t share the same teleological functions: the role of the government and the role of the family are not identical. When’s the last time your family was in charge of regulating an airplane, providing national security, building a nuclear weapon, or instituting and enforcing national law? Families and governments do not have the same reasons for existence and do not have comparable responsibilities. So what’s up with the perpetual expectation that the government operate financially in the same way an American family would? And, incidentally, between personal bankruptcies and foreclosures, there are private citizen economic consequences that would equal the collapse of the United States if the analogical translation were extended that far. The government, thankfully, doesn’t share comparable consequences if they exercise deficit spending.

However, in this bad analogy, there is one lesson politicians, pundits, and the government could learn from families regarding budget issues. “When families are really broke, they try to raise revenues first. Somebody looks for a job, a second job, or a raise.”[1]

Government spending constitutes about 38-45% of our GDP, so if the government really tightened their belts as families do, or worse, slipped through the economic cracks as do too many other families , the entire economy would stumble and falter. This isn’t something I think we really want when the recovery from the Great Recession is still at risk, housing prices are still undervalued, food commodity and oil prices are spiking, and the U.S. is still engaged in two—some say three—wars. Of course the government must reduce the national debt over time. Yes, it should probably reduce the percent of spending that comes from borrowed money. In the long run. Just not now.

Besides, on this next congressional battle on raising the debt ceiling, it needs to be remembered that if we don’t, it sends a very strong message to our creditors that we are not to be trusted, that the American people will honor their financial obligations only to a point, that American promises aren’t as good as their word. We’ve already incurred the debt: how can we justify not owning up to it by raising the ceiling to match? [2]

An American family couldn’t tell their creditors that their debt is less than the lenders think it is. The government shouldn’t do it, either. But that may be one extension of the perpetual bad analogy that I’d bet Michele Bachmann and those who agree with her wouldn’t accept.


[1] Melissa Harris-Perry, Twitter, 10 April 2011.

[2] Timothy Geithner’s opinion is here; And Ben Bernanke, who calls the effects of defaulting by not raising the ceiling “catastrophic”, and Nouriel Roubini, who says it could result in a dump of U.S. bonds by holders which would raise interest rates for existing and future government financing, in another PBS NewsHour segment that’s worth watching: here.

 

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