Quote: Mark Blyth – Government Budget Is Not The Same As Family Budget

“The whole idea that the government is like a family — completely fallacious.” – Mark Blyth

Amen to that brother. The federal government’s budget is not like a family budget. As soon as you hear a politician say they are the same, you can ignore the rest of the sentence because more bullshit is sure to follow. And more importantly, if you are hearing calls for austerity during an economic downturn or fragile recovery, it’s even more reason to be suspect of the person who is speaking. The federal government can and should deficit spend to get out of a bad economy. The problem is that we don’t rein in the spending during the good times.

The United States issues the global reserve asset that everyone else needs to earn in order to conduct foreign trade. Families don’t get to do that. I don’t get to import people into my family and tax them for the next three generations. Governments get to do that. —

But there’s also a political dynamic here that is really important. There’s a kind of procyclical bias to accumulating debt, regardless of the party or regardless of, honestly, the country. Think about it this way. Keynes said back in the day, to quote Keynes, “the time for austerity is the boom not the slump.”

Now here’s the thing, at the time of a boom when houses are going up in value, when everyone is having a great time, what’s the reward you get in congress for standing up an saying, “hey guys, let’s cool it down, let’s raise some taxes”? —

So you get this kind of positive convexity in the system, that it keeps going up. And then you get to a certain point — by 2007 for example, at least on the Republican side, were jumping around saying, “61% of debt to GDP, oh my God, we’re all going to die.”

So the financial crisis happens, you bail the global financial system, which is where the debt comes from, and suddenly after basically bailing out the assets of the very people who’ve taken out most of the income growth for the past 30 years, they turn around and say, “Look at all that debt! That’s shocking! There’s been an orgy of public spending.” I take Amtrak every day. I would have noticed an orgy of public spending. Trust me. Didn’t happen.

– Mark Blyth (author of ‘Austerity’) on Up with Steve Kornacki, 04/14/2013

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