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| WHY BALANCE THE BUDGET? August 8, 1997 |
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Questions asked
in this forum:What's the difference between the deficit and the national debt? Should domestic spending be considered as "investments?" How does the deficit relate to the $300 million interest payment? Is balancing the budget short-sighted? Will a balanced budget reduce interest rates? Does the budget deal include a plan to reduce the national debt? Viewer comments on a federal balanced budget
NewsHour Backgrounders
July 29, 1997:
A background report and debate on the budget deal struck by Congress and the White House.
June 26, 1997:
The Senate works on finishing touches for the budget reconciliation.
June 10, 1997:
Rep. Bill Archer and Treasury Secretary Robert Rubin discuss the budget negotiations.
May 22, 1997:
The Senate works through numerous amendments on its way to a balanced budget deal.
May 2, 1997:
Congress and the President make a deal to balance the budget by 2002.
February 26, 1997:
The Republican Balanced Budget bill is rejected by the Senate, overturned by one vote.
February 7, 1997:
Office of Management and Budget Director, Franklin Raines, and Sen. Pete Domenici (R-N.M.), debate President Clinton's budget proposal.
January 30, 1997:
The NewsHour historians look at the history of bipartisanship.
Browse the NewsHour's coverage of the Budget
Browse past Shields and Gigot debates.
Outside Links:
The Office of Management and Budget has placed President Clinton's FY 1998 Federal Budget request on the Internet.
Ron Thomas of New York, NY, asks: I need a basic education here.
First, I need to understand the difference between the $300 billion in interest payments on the debt vs. the $30 billion that has to be borrowed to make up the budget deficit. Is that analogous to having a $300 billion mortgage that one budgets for, then having to borrow on a credit card to make up the difference between one’s income and one’s annual expenses, which includes the $300 billion mortgage payments? If so, would our personal financial managers counsel us to move into a less expensive house?
Paul Solman of WGBH-Boston responds:
Dear Mr. Thomas,
You do not need a basic education. You already have it, as your example suggests. The $300 billion in annual interest payments on our cumulative national debt IS analogous to a mortgage on a house -- the INTEREST payments on a mortgage. (Remember, the mortgage itself is actually a series of payments of both interest AND principal.) So yes, every year, the federal government makes these payments, plus all the other payments it's obliged to make, and those payments have kept being more than the money the government takes in.
That difference is the annual deficit (see my previous answer). Should we move into a smaller house? Well, that's what so many people have been arguing, for years. A smaller government is a smaller house, in terms of your analogy.
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