Would you support a Balanced Budget Amendment and a cap on fed spending IF........

[OmahaBlueDog]

....
a) The tax-cuts begun under the Bush administration were immediately repealed in their entirety
b) All of the troops were brought home from Iraq, Afghanistan, and operations in Libya within 90 days of passage of the bill.
c) That any cut in domestic social spending would have to be matched by cuts to defense, excluding care for wounded veterans.

[shraby]

1. I could never support a balanced budget amendment. In case

of national emergencies, we might not be able to come up with needed funds. That very provision that has been written into state constitutions is right now hamstringing a lot of the states in being able to provide for needed assistance for their residents, not to mention education, upkeep on infrastucture etc.

[OmahaBlueDog]

3. The Balanced Budget Amendment proposals include an emergency override option

Also, the flip side is that any for any future foreign adventures (read:Iraq), the President and COngress would have to agree to a funding mechanism.

[Cool Logic]

14. States do not have the luxury of being able to print their own money like the fedgov does.

[Fearless]

2. Any future crisis and social programs will be the first to go...

The groups with the least ability to represent themselves will always be the hardest hit.

[OmahaBlueDog]

6. True, but if the budget were balanced and the debt started paying down

we'd be in a better position to weather a crisis down the road. It's like getting a fixed rate mortgage - the payments seem high in the beginning. As your income grows, the payments become less and less of a burden, and you have more money to do other things.

[Fearless]

8. That would only be true if Republicans didn't exist.

In theory there would be more money.. etc. down the line. But with Republicans, this (part of the cut, CAP, and balance measure) would make it easier for them to "reign in spending" because it limits the amount of money which can be spent. If they use up the money on their pet projects or lower taxes, then they literally bankrupt our social programs.

[OmahaBlueDog]

9. OK, suppose there were built in protections for Medicare, for example

It could not go below X% of the budget without 2/3 vote of both houses (very difficult to get, actually).

[Fearless]

12. If say the Amendment precluded social programs then I would agree...

I would have a hard time otherwise even considering it.

[MADem]

4. The largest defense expenditures are personnel costs.

I suspect more than a few servicemembers wouldn't be happy about being dragged home from deployment and fired, and that is what would have to happen to make any kind of a real dent in defense expenditures. GOP "cut and run" ads would fill the airwaves in the next election cycle.

You'd have to arrange an orderly drawdown, similar to that which took place in fits and starts during the Bush I/Clinton years, post-cold war. They take a long time to organize.

We don't keep large standing armies sitting on their behinds, so keeping the personnel on the payroll just isn't an option if they're not engaged in some sort of mission.

[RUMMYisFROSTED]

10. Prove it.

I suspect that payroll is under $100B, a tenth of the budget.

[MADem]

35. Here ya go, add it all up.

http://comptroller.defense.gov/Budget2012.html

Don't just include salaries, now. What you call "payroll" is only a teeny, tiny portion of what DOD includes as total "personnel costs."

Include pensions, recruiting, basic and advanced training (costs millions to teach a person to fly, you know), medical, dental, family housing, travel (PCS and deployment/TAD-TDY travel), casualty assistance, to include transshipment of remains and burial costs (active and retired), life insurance expenditures and death benefits, maintenance of facilities that serve personnel and their families, such as Family Support Centers, MWR facilities like movie theaters and gymnasiums and libraries and pools and clubs and golf courses, uniforms, dog tags, special clothing allowances, ID cards, records support (fiscal, personnel, medical, dental), chaplain/religious support/services....the beat goes on.

It's the biggest chunk of the DOD budget. BY FAR.

We wouldn't have drawdowns on a regular basis if this were not the case.

When uniformed personnel are demobbed, those expenditures shrink as the forces do. About the only aspect that retains a bit of bloat is medical/dental, because it's hard to plus that up in a hurry.

[RUMMYisFROSTED]

44. Operations and maintenance cost 33% more than personnel.

ed:sp

[MADem]

47. You need to break down your O and M, though and weed out the "personnel" elements.

If you don't have people, you don't need to maintain base MWR and QOL facilities and housing, so those expenditures go completely away. If you don't have people, your "operation" costs which include recruiting, training, PCS transfers, TAD funds, HHG shipping, etc., all the stuff I mentioned previously, also go away.

When you're talking about the "personnel" chunk of the pie in a budget meeting, you have to include these things in your calculations. Without the personnel, O and M costs shrink as well. When Pentagon bean counters looking to find efficiencies talk about the personnel slice, they're factoring in all these things, not just the "cash to the servicemember" aspect that is listed as "personnel costs" in your chart, there.

FWIW, from a Service-specific "fight for every dollar and never take a reduction if you don't absolutely have to" perspective, it makes sense to 'hide' some essential personnel costs under O and M, because if Congress realized how much each servicemember actually cost, they'd be looking for battlefield robots quick as you could say "Aw shit!" Also, they start looking to pull end-strength numbers DOWN if the figures listed under "personnel" get too big. Figures lie, and liars figure.

It's why drones are finally taking off in the two decades after YEARS of just the Navy doing all the research in MD, and the USAF saying no, nay, never--yes, they are expensive, but they're WAY cheaper than training and paying a pilot. When you're tasked to create efficiencies, you do what you need to do to continue the mission with the assets you're given. That's why the USAF finally joined the club and got over their dislike of the things.

[RUMMYisFROSTED]

48. Double booking horseshit.

Thanks for playing.

[ThomWV]

5. Constitutional Amendments are not tools to fix short term political problems

[OmahaBlueDog]

7. We've been in debt as a nation now for a very long time.

It's not a short term problem.

On edit: The amount of debt became a much hgher problem under Reagan (wasteful defense spending) and Bush (unwise tax cuts and a war in Iraq that went horribly wrong).

[Taverner]

11. OK - if you want a balanced budget ammendment then...

1 - We would need a locked-in progressive tax, that couldn't be changed

2 - We would need a locked-in Estate and Capital Gains Tax

3 - We would need the return of Glass-Stegall and a bunch of other New Deal programs locked in...

[OmahaBlueDog]

13. So, if I understand correctly, you'd support it if the balancing were mostly on the revenue side

..and if Glass-Stegall were restored (to help guarantee we never have to bail out a bank that's too-big-to-fail), and we lock in certain key New Deal (Social Security) and (I'd guess) Great Society programs (Medicare).

I could live with that.

[Taverner]

15. And perhaps add FDR's 2nd Bill of Rights

Quid pro quo...

[Chan790]

16. No.

I didn't even have to read the rest of the question past "spending" (but I did anyways just to see how underwhelmed I'd be) to know the answer is "No!!!". I'm a Keynesian, I fundamentally reject the very basis-notions of supply-side economics which comprise the foundation under the BBA. I believe in the utility of deficit spending during economic downturns (it's the "paying off the deficit when we're running hot" thing we suck at.) so the bar to approve such a proposal pretty much has to be big enough to cripple corporatism.

I'm just not going to support it for any condition less than the nationalization of large publicly-interested industries like the media and energy companies, formation of a national bank, very-wide-and-deep Sherman Act enforcement to tear "Too big to fail" institutions into manageable portions and ending all FTAs.

[OmahaBlueDog]

20. I don't think that Keynes ever envisioned deficit spending becoming the norm

As you say, the "paying back when we're running hot" part has become a problem.

[bowens43]

17. a balanced budget amendment

is dangerous and outright stupid.....

[OmahaBlueDog]

24. Consistently spending more than you take in is smart? That's just nuts.

I agree that this is an issue that needs to be addressed at the revenue side as much, if not more than at the expenditure side. That said, neither party has shown the ability or discipline to balance the books.

Prior to the Bush tax cuts, we had books close to balanced. IMO we need to return to the tax rates in effect at that time before we cut anything. Those tax cuts, combined with an ill-advised and underfunded war in Iraq got us largely where we are now.

[SheilaT]

18. A balanced budget amendment is a very bad idea.

The federal government simply needs more flexibility than that.

What we do need is an understanding that we need to go back to tax rates that prevailed in earlier times. Heck, we had some of the all-time best economic growth rates in this country when marginal rates were 70% or above.

[OmahaBlueDog]

22. I agree that we need to collect more revenue. I don't see how balancing the books is bad

The Federal government needs flexibility for emergencies. Otherwise, it could use a modicum of discipline.

[girl gone mad]

26. Balancing the books is bad in times of private sector de-leveraging.

The government must run a deficit when the private sector wants to save or when we experience debt deflation, such as right now. The alternative is collapse.

[OmahaBlueDog]

30. No, Cutting spending is bad in times of private sector de-leveraging.

I'm not necessarily in favor of vast reductions in spending. I'm saying we need to raise more taxes to make expenditures match revenues. That should have no downside other than some reduction in discretionary spending on the part of the taxed.

[girl gone mad]

31. Cutting spending and raising taxes are both bad moves in a downturn.

When demand for money is high, it's not a good idea to remove money from the system.

[jmowreader]

19. I wouldn't support a balanced budget amendment AT ALL

A week or so ago I discussed the water heater as applied to deficit spending: if yours goes out, you're not likely to go to your boss and ask that your hourly wage get cut or to decide hot water isn't a real necessity; rather, you'll go to the hardware store and pull out the credit card.

A balanced budget amendment makes it far too easy for the Republicans to decide the hole in the water heater isn't an emergency after all, because they've got more important things like a tax cut to make Grover Norquist happy to spend the water heater money on.

[OmahaBlueDog]

23. In some states, where balanced budgeting is the law, the solution for this is a "rainy day" fund

That seems to be the most far fetched possibility in the world at the moment. However, if a BBA were to be passed, it becomes more feasible as the debt gets paid down. Even in a low inflation environment, in as few as five years of balanced budgets, debt servicing shrinks noticeably as a percentage of expenditures.

Part of the trick is not to simply hand all the money back in the form of tax cuts the second the treasury has funds it does not know how to spend. We've sucked at that (refer to 2001).

[girl gone mad]

27. State governments are actually constrained in spending.

They have to either collect taxes or borrow when they want to raise revenue.

That constraint does not apply to the federal government.

[OmahaBlueDog]

28. The Feds cannot endlessly accumulate debt nor can they simply print their way out

At some point, either buyers will lose faith in the bonds, the currency will inflate, or both.

[girl gone mad]

29. The federal government doesn't need to borrow at all.

Inflation is the one true constraint to federal spending, but we aren't facing any significant inflationary pressures right now. If inflation were to become a serious concern (we'd have to be much closer to full employment and productive capacity), the government can raise taxes to control it.

[OmahaBlueDog]

32. Your post reminds me of Jeff Foxworthy's reply to the repo man - "Oh, you'll take a check!?"

If the Federal government does not need to borrow, then why do we do it? Hell, why don't we simply authorize the Treasury print up 14,000 One-Billion dollar bills and pay everyone off? Problem solved.

The true constraint to Federal spending is gross domestic product. We do not have an infinite capacity to either spend or produce money. Imagine a homeowner with a valuable property and a home equity line of credit. They can keep borrowing, but at some point, no matter how vaulable their property is, they will outstrip the ability of their income to support the payments. Have we reached that point? Maybe or maybe not. The bottom line is that if we don't need to borrow, we shouldn't do it, and we should especially not borrow from foreign powers. If the fact is we do need to borrow, it should be a temporary state of affairs, and we should attempt to pay back the debt in the agreed-upon timeframe.

[girl gone mad]

34. Our borrowing is largely a gold standard relic..

but your real mistake is in imagining government debt to be like household debt.

Government debt is not true debt. The government doesn’t have to draw on revenue, borrow, or sell assets to cover its debts, as households do. It’s just a matter of crediting and debiting accounts on the government's book. This is just an accounting device, even though it appears that there is an actual financial relationship occurring between the central bank and Treasury. Reserves that are transferred to banks through government disbursement are used to buy treasuries. When a treasury is bought there is a transfer of reserves from the buyer’s bank account at the Fed to the government’s account. When the treasuries are redeemed (sold), the reserves that were stored at interest are simply switched back, creating a deposit again. It’s essentially the same as buying and selling a CD, just a swap between reserves and securities at the government level.

Government spending is included in GDP, not constrained by GDP. A sovereign fiat currency government does have infinite capacity to spend and produce money, but if the government floods the system with too many dollars chasing too few goods, this will drive up prices.

Foreigners don't fund our spending. We don't need to sell bonds to China, but it's a relationship which is more beneficial to us than it is to them. China gets pieces of paper which we produce at little to no cost in exchange for finished goods which they labored to produce. We give them a small amount of interest and provide a safe haven for their savers.

[OmahaBlueDog]

36. Your mistake is believing that there is any difference between any kind of debt

When I hear phrases like "This is just an accounting device", I am immediately reminded of Enron, and mark-to-market accounting. That was an accounting device - one that cost investors billions of dollars when it was used to grossly overvalue a company.

Debt is debt. One either owes, or one does not. This is equally true for households, businesses, and governments. We owe roughly 10-15 times (depending on who's counting) what we bring in in a year. If what you say is true, and this is merely a convenience, then let's just have Timmy print up the bills and pay everyone back.

[girl gone mad]

39. No, all debt is not the same.

Households and businesses are not the monopoly issuers of the currency on which their debts are based. The US federal government is the monopoly currency issuer and all of its debts are sovereign.

Timmy could simply "print up" the bills and pay everyone back, subject to an act of Congress. This is a political constraint, not a financial constraint.

Ben did just "print up" several trillion dollars in order to nationalize much of Wall Street's bad debts. Did your taxes go up to help pay for this hefty bailout? Were we forced to go hat in hand to China? Did Congress and the President spend weeks debating this spending?

People need to take more time to learn exactly what money is and how it can be used to grow the economy and improve the quality of life for our citizens and less time worrying about imaginary threats.

[OmahaBlueDog]

41. But if Timmy printed up the bills, the money would be devalued, and we'd have inflation

..especially with respect to imported goods and commodities. It would certainly hurt our ability to borrow, given that our creditors would be weary of the prospect of being paid back in devalued dollars.

Just about every nation outside of Europe (which has a multi-national currency) considers itself to be a monopoly issuer of currency. Yet nations have defaulted on debt beyond the ability of the government to repay. Argentina leaps to mind as an example. Why didn't the Argies simply print money to settle their debts? After all, these debts are just swaps between central banks, yes? The answer is that no sane bank or nation would accept paper of dubious value as repayment.

Any governments ability to issue currency can only be based on one of two factors. Either the currency is backed by some asset (gold, silver, etc.) or it is backed (as ours is) by "full faith and credit." That faith can only come from the belief that the citizens and outside creditors have in the ability of the economy to produce goods and services of value. At one time, we did a lot of that. We made shirts, shoes, televisions, radios, frying pans, ovens, stoves, cars, and planes. Who does most of that now? Not us, that's for damn sure. We used to be self sufficient in extracting sufficient quantities of oil to power our vehicles and power plants, and to produce our petrochemicals and plastics. Now we ship cash out by the trainload and fight expensive wars to obtain that commodity. Since the 1970s, our government has pretty consistently spent more than it takes in in no small part because we import far more than we export as a nation, and because we produce far fewer goods and commodities of value than we once did. We are not in danger of deflation because of our government's failure to spend. We are in danger of deflation because we no longer produce sufficient goods and commodities of value. We are in danger of deflation because, in addition to governmental debt, we are far to laden with household and business debt.

You say "People need to take more time to learn." I say that most people think the notion that our nation can simply run up endless debt sounds like double-talk. It sounds like the same kinds of arguments put forward about the "new tech economy" and how the fundamental investing rules could be ignored on small tech companies with 250,000 to 1 PE ratios. It sounds like the same kinds of arguments that told us not to worry about borrowing against real estate to buy more real estate, because it was an immutable law that prices would always rise. I'll say again, if we don't need to borrow, then we should eliminate the practice. If, as most of suspect, we have "needed" to borrow, then we need to come to grips with the idea that we can't simply continue to live as borrowers, and need to adjust our spending and income to repay the money.

edit: I am not attempting to sound hostile to you personally. I have heard your arguments put forth by individuals like Paul Krugman. It is the arguments I take issue with - not you as a poster.

[girl gone mad]

43. So we are in agreement that..

inflation is the only financial constraint to government spending. This is why we can't run up endless debts or spend endless amounts of money.

Inflation happens when you have too many dollars chasing too few goods. "Printing" money to pay off debts would not involve the creation of any new money, just trading one type of money for another.

We're in a deflationary environment because the private sector ran up too much debt and leverage over the last 30 years to maintain a decent standard of living in the wake of shrinking wages and corporate offshoring. As long as the private sector continues to net save (run a surplus), the public sector must net spend (run a deficit) or the economy shrinks. We can always produce sufficient goods and commodities of value.

The only certain things in life are death and taxes. Fiat currency derives its value from the governments ability to tax, not from faith or credit.

Krugman is a Keynesian. I'm a Minskyian.

[OmahaBlueDog]

45. I'll agree that it is one restraint

The other restraint is an economy robust enough to raise sufficient funds to cover the costs of services via taxation or to convinve would-be creditors to loan money. So we disagree that faith and credit is not a huge part of the equation. Right now, we are at the limits of faith and credit. This is in part due to a manufactured political crisis, but also in part due to financial markets recognizing that our economy lacks the wherewithal to do business the way we have been for the past 40 years. We still have over-capacity in banking and houing markets, and we are still importing goods and commodities in quantities that far exceed our ability to pay for them.

[jmowreader]

38. Idaho has a rainy day fund...

but thanks to all the rain we've been getting, it's empty. Probably most states that have those funds are in the same situation.

[KittyWampus]

21. I'm unsure and will continue to read the replies to your thread. It's interesting so far.

[OmahaBlueDog]

25. Thanks

I admit I'm more fiscally conservative than most here at DU. Where I differ from the GOP is that I'm in favor of domestic social spending, and I firmly believe America's wealthiest 25% are woefully undertaxed.

[grahamhgreen]

33. The balancEd budget proposed is simply a cap on raising rich peoples taxes.

D

[OmahaBlueDog]

37. Not necessarily

It could be legal recourse for raising their taxes. It depends on how you view it.

[grahamhgreen]

40. I meant the specific proposal they now have on the table.

[OmahaBlueDog]

42. Fair enough

[booley]

46. We would also need to do a few other things

Add single payer
And lower the medicare age to 55

Both would spur the economy by reducing the burden on small business and most americans and allowing younger workers to enter the work force without sacrificing older workers.