Well, I suppose the snarky response is that your household doesn’t have direct control over multiple battle carrier groups. Joking aside, the fixation on reducing budgets is essentially the economic equivalent of flat-earthism. James Galbraith, in a must read piece, spells out why public deficits are necessary:
To put things crudely, there are two ways to get the increase in total spending that we call “economic growth.” One way is for government to spend. The other is for banks to lend. Leaving aside short-term adjustments like increased net exports or financial innovation, that’s basically all there is. Governments and banks are the two entities with the power to create something from nothing. If total spending power is to grow, one or the other of these two great financial motors–public deficits or private loans–has to be in action.
So why not have banks–private loans–be the primary stimulus? Well, unless you’re a bank, it’s not a particularly good thing (italics mine):
For ordinary people, public budget deficits, despite their bad reputation, are much better than private loans. Deficits put money in private pockets. Private households get more cash. They own that cash free and clear, and they can spend it as they like. If they wish, they can also convert it into interest-earning government bonds or they can repay their debts. This is called an increase in “net financial wealth.” Ordinary people benefit, but there is nothing in it for banks.
And this, in the simplest terms, explains the deficit phobia of Wall Street, the corporate media and the right-wing economists. Bankers don’t like budget deficits because they compete with bank loans as a source of growth. When a bank makes a loan, cash balances in private hands also go up. But now the cash is not owned free and clear. There is a contractual obligation to pay interest and to repay principal. If the enterprise defaults, there may be an asset left over–a house or factory or company–that will then become the property of the bank. It’s easy to see why bankers love private credit but hate public deficits.
Banks do have a purpose–when constrained within reason. They are quick and nimble, and much better at determining the appropriateness of small scale, local spending increases (loans). Loans also shift resources from consumption to investment.
For those of you worried about runaway deficit interest payments, they would serve as a massive stimulus:
A recent projection from the Center on Budget and Policy Priorities, based on Congressional Budget Office assumptions, has public-debt interest payments rising to 15 percent of GDP by 2050, with total debt to GDP at 300 percent. But that can’t happen. If the interest were paid to people who then spent it on goods and services and job creation, it would be just like other public spending. Interest payments so enormous would affect the economy much like the mobilization for World War II. Long before you even got close to those scary ratios, you’d get full employment and rising inflation–pushing up GDP and, in turn, stabilizing the debt-to-GDP ratio. Or the Federal Reserve would stabilize the interest payouts, simply by keeping short-term interest rates (which it controls) very low.
Anyway, as the kids say, read the whole thing. There’s a lot of good stuff in there.
And, as a bipartisan sop, I would note that Democrats, in practice, are as bad about deficit reduction as Republicans, perhaps worse in that Democrats actually try to reduce deficits, whereas Republicans increase deficits (although by spending the money very poorly, in tax cuts to the rich) even as they claim to be ‘fiscal conservatives.’