How The Federal Budget Is Just Like Your Family Budget (Or Not)
Filed by KOSU News in US News.
March 19, 2013
The House has begun debate on its budget resolution, with a vote expected later this week. And as supporters talk about this budget, there’s one comparison you hear a lot.
House Speaker John Boehner, R-Ohio: “Every family in America has to balance their budget. Washington should, too.”
Rep. Scott Garrett, R-N.J.: “You know, every family in America understands the necessity of a balanced budget.”
Budget Committee Chairman Paul Ryan, R-Wis.: “This is how every family tries to live in good times and in bad. Your government should do the same.”
But just how accurate is that analogy?
Ryan’s budget is 91 pages long with colorful graphs and charts. Washington Sen. Patty Murray’s Senate Democratic budget is 113 pages.
Margie Dennison describes her budget this way: “Well, it’s one of those three-pronged folders — very water stained and kind of gross — with binder paper inside.”
Dennison lives in Missoula, Mont., with her husband and two sons.
“January takes up about three pages of binder paper,” Dennison says. “And I write what my grocery budget is, and then discretionary budget and then plus gas.”
On the grocery page, at the start of the month, she writes $1,000 at the top in pencil. Then, every time she goes shopping, she subtracts the amount she spends.
This simple system was Dennison’s New Year’s resolution. “Even in these first three months, we haven’t totally stuck to it because of extra things happening in February, like lots of skiing,” she says.
Skiing totally busted the family’s discretionary budget line. Luckily, Dennison was under budget on groceries. But sometimes car repairs or medical bills hit. Occasionally a credit card is required.
And that’s one of the things about drawing a comparison with American families: Many families run a deficit.
“For the year 2012, 29 percent of households had credit card debt. And the average amount of credit card debt they held was $6,662,” says Lucia Dunn, a professor of economics at Ohio State. She works on the Consumer Finance Monthly, a household survey that looks at debt.
The Dennisons make a habit of paying off their credit card bills quickly. But many Americans don’t or can’t. And Dunn says all that debt adds up. Nationwide, the sum total is: “$831 billion of credit card debt.”
Put another way: “Debt has become a way of life for Americans,” she says.
Joseph Minarik, research director at the Committee for Economic Development in Washington, D.C., was chief economist in President Clinton’s budget office.
“It’s not clear that American families are as virtuous as some people would like to believe,” he says.
And although congressional Republicans talk about balancing the budget as an obvious goal, Minarik says “balanced budgets are actually quite unusual.”
“Since 1969, the United States has had a total of five balanced budgets. Four of them were the last years of the Clinton administration,” he says.
So family budgets and the federal budget do have some things in common.
But the analogy breaks down in other ways. Families can’t print money, for instance, or go to war. They can’t go out and pass a tax increase. Credit cards charge pretty substantial interest rates, but the federal government is borrowing at really low rates because U.S. bonds come with the full faith and credit of the United States.
And then there’s this whole issue of the budget itself. In Dennison’s family, there’s just one budget: the grimy little report folder. Not so, under the arcane system that is the American budget process.
“The truth is, the federal government doesn’t have a single budget,” says Douglas Holtz-Eakin, the former director of the Congressional Budget Office, who is now president of the American Action Forum.
Budgets are planning documents. He says in the best of circumstances, the House and Senate agree on one, and then the White House has its own. The president’s budget isn’t even out yet. And just like the Dennison budget — where the ski lift tickets trumped the numbers penciled in the folder — the federal budgets don’t have the force of law.
So if the federal government were a family, “Mom, Dad and the kid each make a plan and off they go and do it,” Holtz-Eakin says. “And at the end of the year, they sit down and say, ‘Wow, that didn’t work out so well. Let’s try it again next year.’ “
Which is likely what Congress and the president will do again a year from now. [Copyright 2013 NPR]