Claims about budget balancing are baloney neither families nor businesses balance do

[Quantum Windbag]

Turn on any of the television or radio gab shows and it won’t be long before you hear someone proclaim that government must live within its means just as families do and businesses must.

Barack Obama gave this analogy the presidential seal of approval in a radio address in early July. In August, Ernie Boch, Jr., the Boston-based auto dealership magnate, added his two cents to Warren Buffett’s call to hike taxes on the rich: he would pay more taxes only if the government balanced its budget just as his and every other business must do.

But the truth is neither families nor businesses balance their books in the sense of forgoing borrowing. And even if they did, to insist that government do the same would extinguish whatever remains of economic growth and job creation, not ignite them.
Family and Business Red Ink

Few families balance their budgets the way the guardians of financial rectitude are now demanding of government. Nearly all families spend more than they earn and borrow to do so. When a family takes out a car loan, a student loan, or a mortgage on a house, it’s spending money it doesn’t have.

Is borrowing the road to ruin? Not if the debt is affordable. That depends not just on the size of the debt relative to the income available to service that debt, but also on how the family spends the borrowed money. For instance, assuming the size of the debt is manageable, borrowing to pay for education is justified if the education improves the family’s earning potential and so helps provide the income necessary to service the debt.

The same holds true of businesses. They borrow to invest and operate, especially in the United States where corporations finance the bulk of their investments by borrowing rather than by issuing stock.

While exact numbers are not available about the privately held Boch auto dealerships, rest assured that Boch’s company borrows to put the cars on his lot that he sells to the public or to build yet another dealership. That borrowing allows Boch’s and other businesses to spend more than they are taking in—Business 101.

Families and businesses in the United States do quite a bit of borrowing and quite a bit more borrowing than they had in the past. Today families rely on credit to meet their needs—for everything from food to fuel, from education to entertainment, and especially housing.

con't
Government “Living Within Its Means”? | Dollars & Sense

Families and businesses that consistently spend more than what they bring in eventually go bankrupt. Both borrow but both bring in more money than they spend and use that excess cash flow to pay off debt, or at least maintain the level of debt, but if they continuously add to debt, they go bankrupt. As the government will too.

eventually.....perhaps.

But interest rates are fairly low, so repayment amount is fairly low, and a balance on what they owe, like mortgages and credit card spending is the NORM for most Americans and most Americans do pay their bills....

Suzi Ormon once said a mortgage and car payment is all the borrowing she'd like to see people have on credit....but those 2 things were ok.....of course in moderation.

we own home and cars outright, thank goodness, but we have started to put some big purchases on our credit card....

My guess is that your debt was never so massive that your projected income could not cover it.

 

[WillowTree]

Face it folks neither small business nor corporate America balance their books as such. They just keep borrowing money no matter their wealth.

It depends on how the borrowed money is spent however the debt is ongoing...

many families and business have to declare bankruptcy due to too much debt.

Not the smart ones.

 

[percysunshine]

Only a utopian lib could convince themself that 2 + 2 = 5, if only they were to wish long and hard enough.

 

[Care4all]

Families and businesses that consistently spend more than what they bring in eventually go bankrupt. Both borrow but both bring in more money than they spend and use that excess cash flow to pay off debt, or at least maintain the level of debt, but if they continuously add to debt, they go bankrupt. As the government will too.

eventually.....perhaps.

But interest rates are fairly low, so repayment amount is fairly low, and a balance on what they owe, like mortgages and credit card spending is the NORM for most Americans and most Americans do pay their bills....

Suzi Ormon once said a mortgage and car payment is all the borrowing she'd like to see people have on credit....but those 2 things were ok.....of course in moderation.

we own home and cars outright, thank goodness, but we have started to put some big purchases on our credit card....

My guess is that your debt was never so massive that your projected income could not cover it.

Oh never was....we never went in to debt, more than one person in the family could pay for....even with our home that we had bought in Massachusetts....they kept telling us with both incomes we could afford a 500 to 600k home mortgage.... we bought one for $165k....and low and behold, 3 years later I was without a job, then a couple of years after that, the hubby was without a job too, so both unemployed....we did put the house up for sale at that point, we had an Emergency savings fund that could get us by for year, if no one was working, so we hit that to survive, until the house was sold....which was 6 months later....then we had the opportunity to move where we wanted to live, so we chose the Maine Coast, and here we are....

We have never been real big spenders....even though we had the money to be.....at one time in our lives....

And now, I spend nothing....and i mean nothing.....I am in that stage of life of being embarrassed by all that I own already, (like a tv in every room of the house) and never use....I am in the "waste not, want not" stage of life!

 

[WillowTree]

eventually.....perhaps.

But interest rates are fairly low, so repayment amount is fairly low, and a balance on what they owe, like mortgages and credit card spending is the NORM for most Americans and most Americans do pay their bills....

Suzi Ormon once said a mortgage and car payment is all the borrowing she'd like to see people have on credit....but those 2 things were ok.....of course in moderation.

we own home and cars outright, thank goodness, but we have started to put some big purchases on our credit card....

My guess is that your debt was never so massive that your projected income could not cover it.

Oh never was....we never went in to debt, more than one person in the family could pay for....even with our home that we had bought in Massachusetts....they kept telling us with both incomes we could afford a 500 to 600k home mortgage.... we bought one for $165k....and low and behold, 3 years later I was without a job, then a couple of years after that, the hubby was without a job too, so both unemployed....we did put the house up for sale at that point, we had an Emergency savings fund that could get us by for year, if no one was working, so we hit that to survive, until the house was sold....which was 6 months later....then we had the opportunity to move where we wanted to live, so we chose the Maine Coast, and here we are....

We have never been real big spenders....even though we had the money to be.....at one time in our lives....

And now, I spend nothing....and i mean nothing.....I am in that stage of life of being embarrassed by all that I own already, (like a tv in every room of the house) and never use....I am in the "waste not, want not" stage of life!

I'm the same way. We built our house and it was paid for the day we walked in. I used to "shop til I dropped." when I was younger. Now I absolutely hate to go shopping.. Funny how that works.

 

[alan1]

Turn on any of the television or radio gab shows and it won’t be long before you hear someone proclaim that government must live within its means just as families do and businesses must.

Barack Obama gave this analogy the presidential seal of approval in a radio address in early July. In August, Ernie Boch, Jr., the Boston-based auto dealership magnate, added his two cents to Warren Buffett’s call to hike taxes on the rich: he would pay more taxes only if the government balanced its budget just as his and every other business must do.

But the truth is neither families nor businesses balance their books in the sense of forgoing borrowing. And even if they did, to insist that government do the same would extinguish whatever remains of economic growth and job creation, not ignite them.
Family and Business Red Ink

Few families balance their budgets the way the guardians of financial rectitude are now demanding of government. Nearly all families spend more than they earn and borrow to do so. When a family takes out a car loan, a student loan, or a mortgage on a house, it’s spending money it doesn’t have.

Is borrowing the road to ruin? Not if the debt is affordable. That depends not just on the size of the debt relative to the income available to service that debt, but also on how the family spends the borrowed money. For instance, assuming the size of the debt is manageable, borrowing to pay for education is justified if the education improves the family’s earning potential and so helps provide the income necessary to service the debt.

The same holds true of businesses. They borrow to invest and operate, especially in the United States where corporations finance the bulk of their investments by borrowing rather than by issuing stock.

While exact numbers are not available about the privately held Boch auto dealerships, rest assured that Boch’s company borrows to put the cars on his lot that he sells to the public or to build yet another dealership. That borrowing allows Boch’s and other businesses to spend more than they are taking in—Business 101.

Families and businesses in the United States do quite a bit of borrowing and quite a bit more borrowing than they had in the past. Today families rely on credit to meet their needs—for everything from food to fuel, from education to entertainment, and especially housing.

con't
Government “Living Within Its Means”? | Dollars & Sense

You seem to be unable to distinguish between debt, deficit and budget.

I have a house mortgage which is debt, however, I have a budget that allows me to pay that debt without deficit spending year after year after year. The debt on my house keeps getting less and less year after year. My debt is not increasing because I am not deficit spending every year. My sole debt is my mortgage and it decreases every year.
My budget is my income minus my bills (paying off debt included) and is solvent to the point that I actually spend less annually than I take in as income. The vast majority of individuals and business spend less than their income, thus avoiding bankruptcy over the long term. Any entity that consistently spends more than their income year after year will eventually end up bankrupt. In other words, they failed to budget properly.

Debt, deficit and budget all mean different things. One can be in debt and budget properly to pay down that debt. If one continues to deficit spend, eventually their debt will outstrip their ability to pay for it.

 

[alan1]

eventually.....perhaps.

But interest rates are fairly low, so repayment amount is fairly low, and a balance on what they owe, like mortgages and credit card spending is the NORM for most Americans and most Americans do pay their bills....

Suzi Ormon once said a mortgage and car payment is all the borrowing she'd like to see people have on credit....but those 2 things were ok.....of course in moderation.

we own home and cars outright, thank goodness, but we have started to put some big purchases on our credit card....

My guess is that your debt was never so massive that your projected income could not cover it.

Oh never was....we never went in to debt, more than one person in the family could pay for....even with our home that we had bought in Massachusetts....they kept telling us with both incomes we could afford a 500 to 600k home mortgage.... we bought one for $165k....and low and behold, 3 years later I was without a job, then a couple of years after that, the hubby was without a job too, so both unemployed....we did put the house up for sale at that point, we had an Emergency savings fund that could get us by for year, if no one was working, so we hit that to survive, until the house was sold....which was 6 months later....then we had the opportunity to move where we wanted to live, so we chose the Maine Coast, and here we are....

We have never been real big spenders....even though we had the money to be.....at one time in our lives....

And now, I spend nothing....and i mean nothing.....I am in that stage of life of being embarrassed by all that I own already, (like a tv in every room of the house) and never use....I am in the "waste not, want not" stage of life!

When I bought my home, I was a single parent with a single income. I bought way less house than the real estate agent and the banker told me I could afford. It's funny, part of their argument was that "a home is the largest investment you'll ever make". They were wrong. In the past 15+ years, the housing market has collapsed and the stock market has been fickle. Despite the fact that my monthly contributions to my stock portfolio have been much less than my monthly mortgage payments, my stock portfolio is worth much more than my home. My home isn't my largest investment, but it has been a hedge against rising rent. Today, both my children pay more in rent than I do for my monthly mortgage.

I live simply and that allows me to live large on the few occasions when I want to. Other than my home, I haven't had any debt for at least 7 years and it's only been the past 3 years that I've had an upper middle class income. In my opinion, far too many people live beyond their means and something as simple as being unemployed for a few months financially ruins them. They put themselves in that position.

 

[merrill]

Turn on any of the television or radio gab shows and it won’t be long before you hear someone proclaim that government must live within its means just as families do and businesses must.

Barack Obama gave this analogy the presidential seal of approval in a radio address in early July. In August, Ernie Boch, Jr., the Boston-based auto dealership magnate, added his two cents to Warren Buffett’s call to hike taxes on the rich: he would pay more taxes only if the government balanced its budget just as his and every other business must do.

But the truth is neither families nor businesses balance their books in the sense of forgoing borrowing. And even if they did, to insist that government do the same would extinguish whatever remains of economic growth and job creation, not ignite them.
Family and Business Red Ink

Few families balance their budgets the way the guardians of financial rectitude are now demanding of government. Nearly all families spend more than they earn and borrow to do so. When a family takes out a car loan, a student loan, or a mortgage on a house, it’s spending money it doesn’t have.

Is borrowing the road to ruin? Not if the debt is affordable. That depends not just on the size of the debt relative to the income available to service that debt, but also on how the family spends the borrowed money. For instance, assuming the size of the debt is manageable, borrowing to pay for education is justified if the education improves the family’s earning potential and so helps provide the income necessary to service the debt.

The same holds true of businesses. They borrow to invest and operate, especially in the United States where corporations finance the bulk of their investments by borrowing rather than by issuing stock.

While exact numbers are not available about the privately held Boch auto dealerships, rest assured that Boch’s company borrows to put the cars on his lot that he sells to the public or to build yet another dealership. That borrowing allows Boch’s and other businesses to spend more than they are taking in—Business 101.

Families and businesses in the United States do quite a bit of borrowing and quite a bit more borrowing than they had in the past. Today families rely on credit to meet their needs—for everything from food to fuel, from education to entertainment, and especially housing.

con't
Government “Living Within Its Means”? | Dollars & Sense[/quote

Meanwhile back to the topic:

Using debt to invest in new industry and new jobs would be good thinking.

 

[Avatar4321]

You mean I dont have to live within my means? Holy crap! I've been doing it wrong the entire time. I should just start borrowing without any thought of paying it back. Clearly if everyone else can do it I can too.

 

[merrill]

I would say in the last 60 years the USA has never lived beyond its' means. The USA continues to pay its' bills as we do when they come due.

Then again as has been stated the USA budget is sooooooo different from any home budget. A war for oil control could never be managed on a home budget...