Here's Why Rand Paul's Economics Make No Sense

Here's Why Rand Paul's Economics Make No Sense
Source: AP
Source: AP

Today on PolicyMic, Rand Paul made a bold claim, saying: "Just as American households must balance their checkbooks, the federal government should do the same."

You've heard this before — probably several times from several different Republicans, all hoping to score points with Americans who view themselves as financially responsible. While I'm sure this line gets loud rounds of applause at rallies, it is a completely false comparison. 

Rand Paul's statement makes the assumption that households actually balance their budgets, or at least that they should. Both are false.

Households do not actually balance their budgets. After all, the vast majority of Americans don't pay cash for their homes, or pay in full for tuition while they are in college. Can you imagine a world in which you were forced to save up every dollar for a home before you could buy it? You wouldn't be able to buy a home until you reached retirement. Or what if you were denied access to college unless you could afford it out of pocket? Very few people would go to college or graduate school.

According to the U.S. Census Bureau, 69% of American households are currently carrying debt. So really, only 31% of Americans are financially responsible, at least as Rand Paul would define it. 

(On a related note, I'd love to be able to link you to the actual Census survey, but since good folks like Rand Paul have carried on the government shutdown for this long, I'll have to send you to this news article because the U.S. Census Bureau's site is down.) 

Americans who take out mortgages and student loans are running huge deficits at any given time. So Paul's comparison to these fictional households that constantly balance their budgets is simplistic at best, and completely misleading at worst.

But because Rand Paul doesn't make a habit of completely ignoring reality, what he must actually mean is that most Americans balance their checkbook monthly by paying the required minimums on their credit cards and by making timely payments on their student loans, mortgages, and miscellaneous obligations. Right?

Hate to break it to you Senator Paul, but the United States government already does that. The only time it doesn't pay its obligations is when ineffective Congresses force false financial crises by refusing to raise the debt ceiling. Raising the debt ceiling would allow the federal government to, as Paul says, "balance its budget" at the end of the month like those 69% of Americans who also carry debt do — by paying the minimum requirement on loans and financing domestic obligations.

While the sheer amount of debt the United States has taken on is certainly concerning and needs to be dealt with, reducing the problem to an illogical and overly simplistic comparison misleads the American public into thinking this problem is clean cut.

Now, if we want to stretch it a little, let's assume that Rand Paul meant that households and the federal government should balance their budget, rather than that they already do. This logic is also flawed.

If we were to actually require the federal government to balance its budget, the United States would be completely unable to respond appropriately in times of emergency or war. Just like the average American doesn't budget in several thousand dollars every year in case of a heart attack or a car crash, the United States federal government cannot reasonably budget for every natural or man-made disaster that might befall the country in a given year.

Many states have balanced budget amendments, which is great. But states have a much more predictable problems to deal with: they do not control federal agencies, regulate the monetary suppy, or fight wars. Asking the United States federal government to balance its budget when the total cost of a war cannot possibly be predicted, for example, is absurd. Additionally, it would fall out of sync with the logic that congressional Republicans have set up so neatly for us — that the federal government should operate like a household.

Households take on reasonable amounts of debt that they pay back over time in order to invest in themselves or to respond to unpredicted but crucial emergencies. The federal government should do the same. Not all debt is bad debt, and it's high time for Republicans to start operating under their own comparisons.