It’s late and I’m tired, but another TV pundit once again used the example of the family budget to assert that the federal government ought to have to live within its means in exactly the same way that the American family does.  This time it was David Gergen on some PBS or ABC show.  I can’t remember, because I wasn’t really watching.  Someone else had turned it on, and I just heard it.

I am so sick of this analogy.  It simply doesn’t work for a number of reasons:

1) It’s based on a false premise.  Most American households carry debt, be it a mortgage, student loans, car payment, credit card debt or something else.  Ideally this is planned and the family can keep up with payments, but far too often that is not the case.  So many people live paycheck to paycheck.

2) A government has nothing in common with a family when it comes to finances.  A family cannot levee taxes.  It doesn’t have its own distinct currency.  It doesn’t have access to instruments to influence the valuation of its currency.  Everyone it needs to provide for is present and their needs visible.  I could go on, but the point is clear.  In terms of scale alone, the comparison is absurd.
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3) Speaking of scale, debt is not always a bad thing, especially for a large entity.  Corporations take on debt in order to bring factories up to date or to buy real estate, with the expectation that the activity that that results form those purchases will eventually result in increased profits.  Investors have even been known to take on debt to finance what they are sure is a profitable investment.

Right now the government is taking on additional debt with the plan that getting Americans back to work will decrease the amount paid out to them in unemployment benefits and such, and bring them back into the ranks of the taxpayers.

There are probably other reasons why the Federal Budget is not, in any way at all comparable to a family budge.  At least not unless your family has a few hundred million people in it.

So beware of folksy analogies.  They may seen down to earth and clear ways of helping us understand, but in fact they distract us from the real issues.