|WHY BALANCE THE BUDGET?|
August 8, 1997
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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
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.
The Office of Management and Budget has placed President Clinton's FY 1998 Federal Budget request on the Internet.
Peter Nuernberg of Aarhus, Denmark asks:
If the government pays $300 billion per year to cover interest payments on the debt, it seems that instead of balancing the budget, the target should be a budget surplus, so that the debt can begin to be paid off. Do "balanced budget" agreements include budget items to reduce the outstanding debt? It seems that a plan that would reduce the debt by some small percentage per year would allow taxes to fall slightly every year as well, since the government wouldn't need to take in as much money to cover the budget (if all other things remained equal and the interest payments went down).
Instead of trying to finance tax cuts now, it seems that a promise of falling taxes over time would be a more reasonable goal. Is this plan simply not politically feasible, or are there some economic reasons why it wouldn't work?
Paul Solman of WGBH-Boston responds:
...And this leads us, quite neatly, to the last question, from Denmark's Mr. Nuernberg. (We have viewers in DENMARK???)
If we ran a surplus, we WOULD presumably start paying down our debt. (Actually, federal IOUs are coming due all the time; we keep borrowing to pay them off. So we'd just pay some off with the surplus money instead of borrowing to do so.)
But hey, some folks argue: what's so terrible about having a $5 trillion dollar debt, which costs $300 billion dollars a year in interest payments? Almost all that money is owed to ourselves: bondholders and federal trust funds. ( When I once told that fact to Paula Poundstone, comedian /columnist for MOTHER JONES magazine, she was shocked, and concluded in print that the national debt was no great shakes.) Besides, say the non-worriers, we're a huge economy; as long as we keep growing, we can keep borrowing. It's not how MUCH we borrow, or have borrowed; it's what we DO (or have done) with the money. And if, as several letter writers have suggested, we INVEST the money -- wisely -- in ways that will help us to grow economically, then we should be GLAD. Which brings us back to the arguments that seem to concern many of you.