More on Balancing Budgets

A comment posted below in response to my post on budgets, inspires the following.

There are three basic ways to balance a budget (meaning without borrowing, i.e., incurring deficits):

1) To cut spending so that it is the same as, or less than, the amount of revenue coming into the federal treasurey

2) To raise taxes to guarantee that more revenue is coming in than is needed.

3) For unexpectedly more revenue to come into the government via tax revenue than was planned for.

Guess which one was the reason for the balanced budgets from 1998-2001? (hint: it isn’t #1 or #2, that is to say, they weren’t pre-planned balanced budgets).

Guess how hard it is to do #1? Answer: pretty hard. For one thing, the federal budget isn't just a tally sheet with revenue and outlays. It is staggeringly complex set of documents that contain a good deal of variable costs. Even once a budget is passed, it is not 100% certain how much it will end up costing.

Further, members of congress, of both parties like to spend money, on policies great and small. Indeed, we citizen (of both parties) like them to spend the money, too (just so long as it on our district, or related to something we believe in. That, class, is called democracy (or, at a minimum, is the direct result of allowing popularly elected legislators to make policy-they tend to have this strange need to please the voters who can take their jobs away).

Guess how hard it is to do #2? Can we say "impossible"? I bet you can. And for two reasons: first, it is notoriously difficult to get congress to raise taxes, especially to the levels that would guarantee balanced budgets. Second, even if you raised the taxes, guess what congress would do? That's right: they would SPEND THE MONEY. Shocking, ain't it?

So, despite the snarky sniping of partisans of various stripes, the bottom line is that balancing the budget isn't as easy as it sounds, and one balance, isn't something that any given President can do just because he wants to. Even President Clinton (who, as any President would, took credit for the balanced budgets-and I am not slamming Clinton, I sincerely mean any President would have taken credit), early on noted that while he would like a balanced budget, it could take some time to achieve. Then, unplanned by anyone, we had a balanced budget. It happened because the economy grew at a fast rate, meaning more money was coming in than we had planned to spend. It would be akin to any one of us getting an unexpected raise. At first it would seem like we had a lot

And this is all without a discussion of mandatory and discretionary spending, the role of entitlements, or the complexities of appropriates bills and the like.

In short, Presidents don’t have as much influence over balanced budgets as they (of either party) would like to think. Indeed, they have far less influence over the overall economy than they would like to think.

Posted by Steven Taylor at August 3, 2024 03:44 PM | TrackBack