Not too many years ago, many politicians, as well as most candidates for office, both Republicans and Democrats, made a big deal about the excessive increases in our national debt. There was constant emphasis on the importance of balancing the federal budget, and maybe even acquiring a “surplus”. Somehow, in 2019 it no longer seems to be a concern of our national leaders. These days, little is being said in the media or by our elected officials about the non-stop growth in our national debt.
Much of the rhetoric from both Congress and the White House leans heavily towards lowering taxes, while at the same time promising more programs sought after by voters and constituents. Lowering taxes, coupled with greater spending (for such things as health care, education, infrastructure, etc.) directly contribute to our federal deficit. This approach takes us further away from the necessary goal of achieving a “balanced” federal budget, or even a “surplus”.
Our US government has not had a balanced budget, or a budget surplus, since the years covering 1998-2001. At our current pace of creating larger deficits, that possibility will not occur again any time soon.
Many of our individual state governments are currently in much better shape. It was reported in 2018 that at least 25 out of 50 states have balanced budgets. In most of those states, it’s partly due to legislation requiring the balancing of revenue versus spending.
If many states can balance their budgets, why can’t the federal government? Maybe the US Congress needs to enact legislation, or even propose a constitutional amendment, requiring annual balancing of our budget.
In addition to the power of Congress, and the White House, to enact legislation raising or lowering taxes, and increasing or decreasing spending, there is the unique ability of the federal government to print and issue currency. States are prohibited by the constitution from issuing their own currencies, but our federal government enjoys the power to print as much money as it chooses. I’m not an economics scholar, but it seems to me that the power to issue currency would give Congress and the Executive branch a powerful tool to help achieve a balance between our revenue and our spending. Through the Federal Reserve, the US government can increase or decrease the money supply, thereby raising and lowering interest rates for borrowers. This directly influences everyday commerce and consumer spending.
I do understand the concept of revenues and expenses – how much money we have or take in vs. how much we spend. It applies to families on a personal level, to large and small business, and to charitable institutions as well. The basic formula for all types of entities is that in order to stay in balance, the entity can only increase spending if it takes measures to also increase revenues. Practically speaking, no matter how it happens, if US revenue from taxes increases, then federal spending can increase proportionally. This can be done without increasing the deficit.
Naturally, people don’t want their taxes to go up. I am clearly not advocating increases in tax rates. Yet, without changing tax rates, if more and more people earn more money over the years, US tax revenues will grow. Sometimes, even the reduction in tax rates can result in overall revenue growth, if more and more individuals and businesses earn more money.
As a final comment on lowering or raising taxes, I advocate that all levels of income should be treated proportionately and fairly, relative to their levels of income. The minimum wage workers, and the vast middle class, as well as the high-income earners, should all be expected to contribute their respective fair shares. As the gross national output of our economy increases, and as individuals and families begin to earn more income, total revenue will increase without the necessity of raising tax rates. Or, more simply, as people earn more, more taxes are paid. Perhaps tax rates can be safely lowered, without decreasing overall US revenues. Increases in revenues will proportionately allow for increases in spending for necessary services and infrastructure.
With current runaway growth in our national debt and unchecked spending not in balance with our country’s revenues, the overall deficit dangerously grows without a limit in sight.
Why are our leaders no longer emphasizing the need to balance our federal budget?