There's been a lot of talk lately of balancing the budget. This should lead to a discussion of the role of government, but it hasn't. Instead it has led to a lot of people saying that the Government should handle its budget the same way that a family or a business would. My answer to this is that it is the reverse way and these people haven't considered the role of government in our society at all. I would contend that government should spend more than it takes in when the economy is faltering and reduce its debt in times when the economy is booming and to reach this conclusion, there are a number of factors, each having to do with the role of government, so let's discuss that role:
~Protect its Citizens from External Forces~
This task does not change based on the economy. Military spending is not necessarily uneffected by the economy but the requirement for a military to be present to defend us remains unchanged and the amount of money required to continue the required defense is unchanged. As a result, in relation to the economy, the government is spending more in bad times and less in good times, though the exact dollar amount does not change except as a result of
~Provide for the Common Welfare~
This can be split into multiple parts, and most require not simply sustained funding in bad economic times, but enhanced funding:
- Safety - To some degree, you might think that fire fighters and police do not need to have increased funding in poor economic times, fires don't increase in commonality and intensity because people don't have jobs. On the other hand, crime tends to increase, so maybe a few more police officers might not be a bad thing. On the whole though, it seems like funding for safety doesn't need to be increased, but it certainly shouldn't be decreased in poor economic times.
- Health - People without jobs tend not to have healthcare, so public funding for health related services is in higher demand in a recession than when we're seeing low unemployment.
- Parks and Recreation - This is an interesting one. Parks don't need more service when people don't have jobs, but there is a need to help keep teens being productive rather than disruptive. Public recreation services play a role in this, as do non-profit and for-profit organizations such as day-care or camps, but I would suggest that increased funding is essential here.
- Protection of the General Welfare - And by this, I mean protection of people against starvation and cold and the like. This is where food stamps, medicare, medicaid, and social security come in. This portion of the budget, by definition, increases in poor economic times. There is also an argument to be made that by providing some capital to those who are not making money on their own is good for the economy because it increases demand, or at least keeps it from dropping as drastically as it might otherwise.
- Economic promotion - Here's the thing that most people forget. Promotion of the national economy is a big part of what the Government does. It's why we have public training programs and build roads and bridges. Here's the key... this one, this one right here is the biggest reason why we should expect increased funding in poor economic times. In these times, we can expect companies to shrink their work force as profits decline. These newly unemployed citizens will decrease demand, even if they get some level of help from the government, and because of this diminished demand, companies' profits will fall. Because companies' profits are shrinking, they'll shrink their workforce. See a pattern here? Corporations won't change this cycle on their own. Instead, it is the government's role in recessions and depressions to prop up the economy a bit by hiring more people, which then has a similar reverse cyclical force (more people are working->more demand->people hired to supply for that demand). This principle of creating more demand than you're creating supply is the foundation of trickle down economics. Simple economics (the kind you learn in MacroEconomics or Economics 101) state that if a government spends more than it takes in, it will improve demand because citizens will have more money to spend.
The problem is that trickle-down economics, or decreasing tax rates in general, doesn't work. We have a century of experience to prove this. There's a reason it doesn't work, which is pretty easy to figure out. The rich in our current economic situation don't need much that they aren't already purchasing. By increasing their ability to consume, you don't get as much actual consumption for every dollar provided. By contrast, if you spend that same amount on government programs, putting people to work, building railroads or highways for instance, increases demand dramatically. There's also the added benefit that you're building infrastructure (or repairing it) which is needed for sustained growth and national wellbeing.
But, surely government shouldn't be deficit spending when families and businesses can't afford to. Surely government must play by the same rules. You're forgetting that government is not a business nor a person. Government is specifically there to help people and businesses. As a result, government is in a unique position to be able to deficit spend to prop up people and businesses and general demand for services. If government acts as a business, the cycle of recession just increases in intensity. Instead, government SHOULD deficit spend, and do so to a dramatic extent, to offset the loss in demand for services created by businesses shrinking and family budgets disappearing. This doesn't mean we're creating a class of citizens who will never work, it means that we're preventing the economy from falling further into depression so that we will rebound and have more jobs so people have the opportunity to work instead of being forced not to because there are no jobs. By firing teachers and canceling/postponing public works projects, we're just hurting ourselves. By putting public works projects front and center and not firing teachers and other public servants, we're not only stabilizing the economy but improving our national situation.
Yes, the debt is a problem, but a flailing economy won't be able to sustain a smaller debt. Instead, a robust economy must be created so that when we're doing well, we can begin decreasing the debt. This was a lesson we learned under Clinton and failed to understand under W. Bush.
Corporations are not people, and governments are not corporations or families. Let's end the simplification that would suggest that all entities are the same, because simply put, they're not.