Last year New York Times columnist Paul Krugman (7/8/11) wrote a sharp critique of those who argue that the federal government's budget should be compared to a family. He called it one of the "right's favorite economic fallacies," pointing out:
No, the government shouldn't budget the way families do; on the contrary, trying to balance the budget in times of economic distress is a recipe for deepening the slump.
He expanded upon it again this year (1/1/12), calling the government-as-family trick "a really bad analogy," and explained how governments don't pay off debts the way a family does–"all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation."
There are other obvious differences. A family doesn't issue its own currency–a rather monumental difference. The wage earners in a typical family can't decide how and when to give themselves a raise, which the federal government can do in the form of taxation.
The primary value in comparing the government to a family budget is to sound the alarm about spending–which makes it a very popular budget device on the right.
And the premise for a report on the new White House budget on last night's ABC World News (2/13/12).
Anchor Diane Sawyer asked, "What does this budget have in common with the kind of family budget Americans wrestle with around the kitchen table?"
Correspondent Jake Tapper responded by removing eight zeroes from the $3.8 trillion budget; thus, the government "family" spends $38,000– but takes in only $29,000. And, Tapper reminds us, "our family"–i.e., the federal government– has already wracked up $153,000 in "credit card debt."
The piece includes a soundbite of White House press secretary Jay Carney, who is followed by a clip of Republican Sen. John Barrasso denouncing the White House plan–and reinforcing the premise of the ABC report.
This family-to-government comparison has been dissected at length by many economists, and some reporters have pointed out the flaws in the analogy–not to mention that actual damage to the economy that could result from putting this folksy idea into practice. It is strange that ABC would choose to cover the budget debate through the prism of such an obviously flawed analogy. But it sure helps the Republicans make their case against the White House.