CIVICS 101: The Budget and Why We Are Broke.

Hello my friendly neighborhood bus compadres!

Today, we’re kicking off CIVICS 101 – a fellows guide to all things politics by breaking down all of the fun things your parents like to read about in those ridiculously old fashioned things called “newspapers” (who knows, maybe they have an iPad – but since I don’t own one myself, I’ll just assume your parents don’t either).

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Our first amazingly exciting topic: the BUDGET! Dictionary.com defines budget as (painstakingly and boringly as possible as) “an estimate, often itemized, of expected income and expense for a given period in the future.” BLAH, BLAH, BLAH, WHO CARES RIGHT?

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Well, I do – and you probably should, too. When talking about government and politics the budget IS government and politics. The budget outlines what our society and elected officials decide what’s important to spend money on, whether it be schools, roads, to give to hospitals, and as well as benefit programs that you probably hear your grandparents complaining about: Social Security and Medicare. 

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(The irony in this photo is overwhelming.)

So think of the government’s budget like the people’s bank account (not related to “the people’s eyebrow”). You put money into your bank account from the wages you earn; the budget puts money in its coffers from everyone’s wages through taxes. To continue the analogy, when you spend more money than you have in your bank account you go into overdraft; similarly, when the government does the same thing through spending more on policies than it receives in the amount of tax dollar$ it goes into a deficit. When you’re taking in more money than you’re spending, it’s called a surplus. A surplus is great because it can be used to pay back debts, which our country currently has almost $16 Trillion of (and yes thats Trillion with a “T”). 

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(Cue angry Republican baby.)

In reality, our national (sometimes referred to as the federal) government takes on so much debt because our individual states (read: the great state of Washington 🙂 simply can’t. Each year the states are forced to balance their budget – so in tough economic times (hey that sounds like today!) they are forced to cut spending on programs that people benefit from (Did your college tuition go up? I’m sure it did!). By sheer miracle, while in office former President Bill Clinton actually created a budget surplus on the national level by raising taxes and cutting spending!

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So that’s Civics 101: The Budget. Questions? Email emilio@washingtonbus.org

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About emiliowabus

I'm a Summer Fellow for the Washington Bus and a recent graduate from the University of Washington with a degree in Political Science - Political Economy
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4 Responses to CIVICS 101: The Budget and Why We Are Broke.

  1. DHouse says:

    It is pretty much impossible for the United States to run a government surplus without plunging the nation back into a recession. In order for us to do this, the private sector (consumers) must either go into deficit, or we must enter a trade surplus (we must become net exporters). In regards to becoming a net exporter, I will not go into the nitty gritty details unless you want, but it it is practically impossible for the US economy to be a net exporter on the world stage. Thus, for the government to run a surplus, the private sector needs to run a deficit. This is much more dangerous than a government deficit, since the private sector can default, whereas it is economically impossible for the government to default based purely upon capacity to pay debts. The last government surplus was coupled with a private sector deficit, and was followed immediately by the 2000-2002 recession. So a government deficit is not a bad thing for the US government and economy.

    • emiliowabus says:

      Thanks for the insightful comments. I tried to avoid a huge diatribe on Keynesian economics as the point of the civics 101 is to get those not so familiar with political rhetoric involved in the game. I do agree with you on both the government surplus and trade surplus aspects – in my opinion, debts and deficits are necessary to stimulate economic growth, and government spending is especially crucial when private credit markets dry up (which tend to happen in a recession). Continually, with China and India having an outrageous advantage in terms of cheap labor, there’s almost no way that the US would become a net exporter – especially considering we’re largely a consumer economy that loves small, cheap goods from Walmart.

  2. Daniel says:

    Exactly. Not to mention that one of the most valuable commodities in the world is the USD, which adds further fuel to foreign nations wanting to export their goods to us. We can’t all be Sweden. I’m a rare breed, a man aiming for the private equity world while accepting Keynesian and Post-Keynesian economics over Neo-Classical economics. If you’re interested, one of my all-time favorite economics textbook is getting published soon, and I highly recommend it. I read the manuscript, it’s pretty in-depth and is a perfect explanation of the current economic structure.

    http://www.amazon.com/Modern-Money-Theory-Macroeconomics-Sovereign/dp/0230368891/ref=sr_1_1?ie=UTF8&qid=1342126706&sr=8-1&keywords=modern+money+theory

  3. Pingback: The Politics of Funding Rape Crisis Centers | FellaBus Blog

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