fiscal conservativism v. fiscal liberalism

[Vikingking66]

Q: I know traditionally conservatives have argued for a balanced budget and restrained government spending, while liberals have argued for deficit spending on social programs to stimulate the economy. Since Bill Clinton came through with his "progressive" balanced budget, it seems like the entire Democratic Party has pretty much agreed that a balanced budget is necessary, since you can then spend on social programs from surplus.

My question is this: Is there an economically liberal position anymore, or do we have a consensus? Is the only battleground over what to do with the surplus (debt reduction v. social spending) or is there an alternative to balanced budgets within the Democratic Party?

[lcordero]

1. Sorry but there is no alternative to balanced budgets

Q: I think you're wrong on deficit reduction, by the way. I don't believe deficit reduction is a central issue. The government can operate at a deficit, and it's just false to say the government is going to go bankrupt.

Feingold: I think it's a mistake from the point of view of our economy and also as far as gaining credibility with the American people if we don't try to avoid deficits. Whatever organization you are with, whether it's an environmental group, right-to-life group, Communist Party, you all are going to have to pay the bills. You establish a base-line credibility with people when you show them that whatever your ideology you will take care of their dollars in a businesslike way. I believe that is part of Wisconsin progressivism being tight with a dollar and being careful about being irresponsible with expenditures.

The keywords here is "pay the bills".
http://www.progressive.org/May%202002/intv0502.html

People should be put in jail for borrowing on the backs of their children and grandchildren.

A balanced budget wouldn't be so difficult if there was no payoffs, corporate lobbyists, favors, cronyism and other related-type stealing involved.

[Vikingking66]

2. ok - i see

On the other hand, doesn't that premise invalidate the New Deal?
Remember, Hoover's reaction to the Great Depression was to balance
the budget, and it didn't work. It was FDR who ran the government
on a deficit and turned things around.

I agree with your point about borrowing on the backs of future
generations, but I also think that the issue has to be looked at
from a historical perspective. Deficit spending is as old as
Alexander Hamilton, and I think the question needs to be dealt
with.

[Resistance Is Futile]

3. Short term vs. long term deficits

There are two types of deficits. Cyclical deficits result from governments spending borrowed money to push a slumping economy out of recession. Cyclical deficits are short term problems that go away when the economy recovers. They are a good thing because they mean the government is working to restart a stalled economy.

In contrast, structural deficits result from spending more money than the governments take in over the long-term average of the business cycle (recession, recovery, boom, downturn). Structural deficits are permanent and result from unsound public policy. They do not go away even during a boom.

Liberal fiscal policy believes in running cyclical deficits (and conversely, boom-time surpluses) to stabalize the business cycle. On average, however, the bills must be paid; it's just that bills from a recession will be paid during the next boom.

Conservative fiscal policy believes in balanced budgets regardless of the state of the economy. This ideology will result in a sound government balance sheet at all times but is not effective at insuring that an economy is producing at its full capacity.

The best description for people who want to run structural deficits is 'fiscally irresponsible.' Structural deficits are a very bad idea and are not sustainable as the bills simply aren't being paid. People who advocate these kind of policies are either ignorant of economics (as is frequently the base with hard-left leftists) or kleptocrats (as is the case with the right wing)

[TrogL]

5. Simple analogy

I have a balanced budget. My furnace is old but workable. My old roof has a small leak.

Scenario 1 - do nothing

• Roof leaks gets bigger.
  
• Social worker threatens to remove kids unless unsanitary mess fixed.
  
• Max out 29% credit card paying for roof patch.
  

Scenario 2 - surplus

• Raise and bonuses/commissions at work due to strong economy
  
• Fix and insulate leaking roof paying cash
  
• Heat bills go down because of better insulation
  

Scenario 3 - Keynesian deficit spending

• Shop around for best rate for home upgrade loan
  
• Fix and insulate leaking roof and replace furnace with money borrowed at 12% - payments $125/month
  
• Heat bills go down $250/month because of efficient furnace and better insulation
  
• pays for itself in six months
  

The Canadian government is thinking about failing to do a #2. They ran up a $6 billion surplus and there's talk about blowing it all on debt-paydown instead of buying some replacement military hardware and throwing some money at health care infrastructure.

[German-Lefty]

4. Republican fiscal liberalism vs. common sense

lcordero's description is very nice. A fiscal liberal uses public spending to kick start an economy in ression and tax down an overheated economy.

The latter is harder for politicians. It's hard for them to cut back on public spending and raise taxes when the economy is doing well, but this is the only way to ensure the debts get paid off.

The conservative philosophy "Goverment is bad and politicians won't do the right thing with money" leads to fiscal conservatism. You tie the goverment's hands with a balenced budget admendment to the constitution. Sure a useful tool is lost, but you get stablity and accountablity.


Conservatives haven't been to conservative lately. Regan and the Bushes all blew up the national debt.

Here's the difference between Republican policy and Democrat policy:
Democrats tend to perfer public spending to benfit the public, paying for roads, schools, research, healthcare, ect.
Republicans want to blow it on defense spending, which also can create jobs, but doesn't provide the other positive externalities and allows for the money to be given to cronies more easily.

Both types of spending have special interests, corruption of officials, and overpricing.

If you look at how much the US pays for the mililtary (6% of GDP) compared with social spending(3% of GDP). You can see who's winning.

[stevebreeze]

6. to every thing a season

A balanced budget is a very bad idea in a recession. It is not that Bush spent the money it's how. Bush has proved without a doubt that you can spend a tremendous amount of money while providing very little fisical stimuless. Instead of tax cuts for the rich he should have given staes some help with their deficits, extended unemployment. Given tax cuts targeted to those who would comse more rather then stuff it in an offshoare account.
How over rated is a balanced budget? Every time this country has balanced it's budget it has been followed by recession. Balanceing the budget take to much currency out of the market to keep money flowing.

It is far better to lower debt slowly as a % of GDP. That is grow out of the debt rather then pay it down.

:kick: