One of the conservative ideas that bothers me most is the idea that a government should be run like a family budget. This is wrong on so many levels. The idea that conservative businessmen/women would believe this is baffling. The idea behind this is simplification to a point that parrots (the tea party) will grasp as a mantra, but it benefits those with the money most. Austerity doesn't work as a business model. It works as a retirement plan for a business or government. Businesses that have no set end date for their operations wouldn't even think of pursuing austerity business models. I will elaborate below the fold.
The idea of an economy being like a family budget fails to understand the nature of a business or government that needs to continue to grow to ensure its viability within a market. Families work off of a pretty fixed budget. It takes the willingness to take a risk to increase the size of that budget, but many people avoid that kind of risk past a certain point. These risks are investments in the future that are an attempt to grow the family's value to increase future revenue. Think of it as college or training or even starting a business. These risks usually come with taking on new debt. The risk is made worthwhile with the increase in salary later. This makes the family more valuable within the labor market and increases the standing of the family economically. There is only so long that a family can continue to take risks because of a limited life cycle. At some point, it will be time for that family to exit the market. This is why the idea of our nation balancing its budget like a family with a set life cycle is impossible. There should never be a retirement plan for the United States Economy.
Now, consider a business. Businesses have to compete within a market and constantly try to grow their business and market share. Businesses have to invest constantly. If a company fails to invest, it will not grow. When this occurs, the companies are overtaken by substitute products and will eventually become an inferior good. This is closer to the truth for the United States economy. The nation, like a business, must take on debt (leverage) in order to continue to invest in its infrastructure and growth. This debt is an investment in the future. It makes it to where we can continue to compete with our neighbors. If we simply start going for balanced budgets, we stop competing in the global market and fall behind. A great example of this would be if Apple's profits started shrinking. For Apple, profits shrinking just means that they raise the prices of their products incrementally and/or take on debt to cover the expenses of research and development of new products that will once again increase their sales and market share. The idea is to grow out of debt rather than cease growth and fall behind. The goal is that by taking on the debt now, you increase your revenues later to pay for the debt and keep competing.
Now, with a national economy, this concept goes even farther. The government must continue to invest in projects that increase our value in the global market. When we are finding ourselves with deficits, it isn't necessarily a bad thing. The main time that a deficit is dangerous is when the money isn't being spent on areas that have potential to grow. The government can take steps like Apple to circumvent the deficit problem. The government can raise taxes on those who are most able to pay (increasing revenue). The next steps are looking at ways of making your work force more valuable by spending those revenues on helping workers get more training, increasing infrastructure to make us more accessible for businesses and putting people to work. Making training more availible is an obvious way to keep up with the rest of the world. The infrastructure projects are often referred to as earmarks because of short-sitedness. It is crucial that we work on roads for businesses to utilize, education to ensure our children are as prepared as they can be for the world that awaits them and most of all be willing to put money into the hands of the middle class. There is a symbiotic relationship between the government and businesses that happens when these conditions are met (and it doesn't involve the tax cut fellatio that republicans flaunt).
By having highly trained workers, we appeal to companies in ways that lesser nations would find themselves unable to. We get higher income jobs that offer more revenue from income/payroll taxes. By improving our education, we give our children the best chance at succeeding when they get into post-graduate activities (college or job training). This also leads to higher income jobs for these kids later on, more revenue from payroll/income taxes. Then, there are the projects to improve physical infrastructure. This puts people to work so that they are no longer having to take government assistance with no work put in. This gives them job experience, starts them paying taxes and allows them to start spending more money (more on this later). This activity also works for businesses because with improved infrastructure, it makes it easier for businesses to operate (my hometown spent significant money working to utilize several of the rivers around us to power the town in an efficient way to bring business here, but it works for tourist locations and other business models, too). This allows for more money and jobs to be brought into communities. All of this money generates high demand for goods. Republicans hate to hear this, but demand drives them to supply more goods. Supplying more goods requires more workers. This means lower unemployment, more tax revenue (including local and sales taxes) and a more competitive economy for businesses and citizens.
I will admit that there are issues that keep this system from being perfectly implemented, but those are largely due to the government working against its own interests for the good of corporate greed. We need to begin taxing foreign-made goods at a higher level to force incentives to keep jobs here. We need to make the requirements for a product to be called "Made in America" more stringent. We should make requirements that the distinction be more apparent to consumers. We should stop rewarding companies for lacking patriotism. We should also create ad campaigns that promote this distinction and highlight the "look for the label" concept. The goal would be to punish corporations that sell out their own country for a buck. Even as I type this, I realize that it is highly unlikely, but demand driven economics (highlighted above) still work well enough without this policy to make sense.
These are serious problems with republicans. It is how they control the talking points with a large group of Americans. They make the idea so simple that you don't have to look at each part of the policy. They simply say "would you want your checkbook to be operating at a deficit" and the fear in their base takes over. They have executives who want lower taxes backing them, so it makes their base think, "that's a name I can trust about money." The truth is that those executives are attempting to push America into a retirement pattern so that they can set up shop in other countries, pay the people pittances for their work and rake in the profits from Americans who are struggling, while getting giant tax breaks. The rich don't need our economy to grow, the middle and lower classes do. Austerity is a retirement plan for the economies that adapt it. It leaves the rich as the only ones comfortably sitting atop the ladder as they rake in the last of the cash from the people on the bottom. They are looking to leave the US behind and, in hidden bank accounts, their money already has.
This is why I cringe when I hear people, even social liberals, argue for conservative economics in ways that could just as easily be said, "austerity leads to prosperity, it is so true it rhymes." These are concepts that we have to find a way to teach to the parrots so that we never give into this disasterous policy.