Here We Go Again

Once more, the debt ceiling must be raised or our Federal government will have to grind to a halt. Historically, this has rarely been a big deal. The debt ceiling has been raised as a matter of course. It has only recently become a big deal since the Republican Party decided to use it as a hostage in order to try cutting government programs.

Republicans, especially their Tea Party wing, like to think of debt in terms of "home economics." What's no good for homemakers can't be good for our government. But this piece of reasoning is insane. The government is not the same as a household.

What are the differences? First of all, the government has a flexible income stream (revenue) while a household's income stream is relatively fixed. The government's income comes from within and the household's income comes from without. That is, the government draws income as a variable percentage of the nation's annual gross national product. A household's income is determined by its participation in the world around it, that is, it's contribution to the gross national product. 

Debt is the amount of income which we are obligated to pay out. Debt occurs either because we have promised to pay something to somebody for some purpose or because we have borrowed from somebody in order to spend for some purpose. Borrowing always involves interest on the amount borrowed so that is a further obligation. When debt equals income, we either have to borrow more to cover new expenses (which increases future debt) or increase the income or reduce spending. The debt ceiling is a ban on increasing debt.

The Tea Party would like us to believe that the average American household manages its finances in ways far superior to the Federal Government. But this is a fantasy. The average American household is indebted right up to 100% of its income. That is, every household has made promises to feed and clothe itself, to say nothing of providing cable and cell-phone service, gasoline, insurance, etc. Households have rents or mortgages and indebtedness on loans, credit cards, etc. Households also have obligations to Federal, state, and local governments. By the time all of this is added up, few households possess what is called "disposable income" or income that can be spent on new adventures. Most households are locked into their income streams so borrowing is their only way out. 

The government would normally have far more flexibility than a household. But, for the last twelve years, the government has been held hostage to a ban on increased income (tax revenue). Thus, if the government is simultaneously prevented from borrowing, it is forced to curb spending. That situation might be all right, in some circumstances, but the last four years has seen a large reduction in revenue and a large increased need for spending because of the major recession we have been through. 

A household can lose a major portion of its income when the breadwinner(s) loses employment. When it cannot meet its obligations, the members of the household find themselves homeless. Only the government can reliably provide assistance at this point. But that means increasing government spending in times of need. 

What the Tea Party and other Republicans seem to want is nation fashioned after Les Miserables --- no social conscience, just let people suffer whatever happens to them and guard your own bread.