The virtue of balancing the budget is that it forces people to weigh the benefits of government against the costs. It's a common-sense standard that people intuitively grasp. If the Deficit Commission is serious, it will set a balanced budget in 2020 as a goal, allowing time to phase in benefit cuts and tax increases.And Here, David Ranson explains a very inconvenient truth about tax rates and tax revenue collected. BHO and his crew will do well to learn a bit more about Hauser's Law, even if they are too arrogant to learn anything about reality.
In a fundamental way, the budget is always in balance. That's just double entry bookkeeping. The fundamental equation of accounting is Assets = Liabilities + Owners' Equity. This equation cannot fail to be true, since it is a mathematical identity. But it can be made to appear to be false through the magic of fiat money, a central bank, and government borrowing.
But still, in a fundamental way, the budget must always be in balance because you cannot borrow what has not already been produced, as I have explained on several occasions in this blog. Here, for example. In other words, Aggregate Borrowing = Aggregate Saving within any economic system.
So, what gives when the U.S. Treasury (with the help of the Fed) seemingly borrows more than has been produced? Look at the fundamental equation of accounting for the answer. If Assets (the value of stuff that has been produced) is any particular number, and if Liabilities (i.e., U.S. Treasury borrowing) rises, then owners' equity must fall.
Whether it's Greece or the United States of America, when governments attempt to borrow what has not yet been produced, owners' equity must fall. Guess what, folks; it is we who are the owners! What we think we own is simply stolen.
How, you ask, is it stolen? Two ways; inflation and falling asset prices. So far, the Fed has managed to keep inflation slow enough over the past 20 years or so that no one is howling about it. But inflation has been persistent and serious over that 20-year period. And people were certainly howling when their 401(k) stock portfolios plummeted in value and when they went upside down on their home mortgage.
Move over, Greece; we are on the way, and we are the big dog in town.