Budget: Deficit Thinking

After setting trade deficit records five years running, it was heralded as good news last week that our trade deficit may fall to only $705.9 billion and our budget deficit to only $150-200 billion this year.

Part of the joy of being an intern is the ability to attend events to put those monstrous numbers in context, like this panel discussion yesterday on balanced budgets, hosted by Democracy. The subtitle of the event, “Debating the Future of Progressive Fiscal Policy,” tells pretty much all the necessary details about the panelists’ political leanings. To varying degrees, all were bullish on the American economy, but they were also quick to point out that the type of deficits we’re currently running are not wholly advisable.

They all seemed to be in agreement that the type of spending mattered more than the actual amount of spending. That is, deficits can be used for positive purposes. This is where it relates to education. When mentioning good types of investments in the future, almost all of them referenced education, training, or some type of human capital investment.

Several of the panelists argued that progressives need to make the case for government in general. When conservatives attack the government and launch “starve the beast” type campaigns, the losers are inevitably the worst-off elements of society. Not coincidentally, they are also the least politically powerful. Investments in infrastructure like roads, water and air quality, transportation, energy, and yes, education, are things worthy of defending. They provide economic stimulus and keep the economy growing. There were a lot of investment metaphors thrown out, but my favorite is fairly simple. Think of an average American family. We’d say it would be a good thing for them to borrow to finance a mortgage or a child’s education. It probably would not be so prudent to purchase consumer goods like iPods, cell phones, or clothes. The same types of spending principles should be applied to the federal government.

For as much attention that is paid to balanced budgets, there is actually relatively little political will for it. Everyone thinks it’s a fine idea in principle, but no one’s for it when their pet program is on the chopping block. One of my college professors suggested this exercise: think of four priorities, like balancing the budget, cutting taxes, funding education, and keeping Social Security solvent. Which party is going to rank balancing the budget as their top priority in that list? The point is that balanced budgets and fiscal responsibility are principles for everyone, but priorities for no one.