Deficit Denial

If you are worried about government deficits and debts, The New York Times has an exasperating editorial (emphasis added): 

“We’re broke! We’re broke!” Speaker John Boehner said on Sunday. “We’re broke in this state,” Gov. Scott Walker of Wisconsin said a few days ago. “New Jersey’s broke,” Gov. Chris Christie has said repeatedly. The United States faces a “looming bankruptcy,” Charles Koch, the billionaire industrialist, wrote in The Wall Street Journal on Tuesday. 

It’s all obfuscating nonsense, of course, a scare tactic employed for political ends. A country with a deficit is not necessarily any more “broke” than a family with a mortgage or a college loan. And states have to balance their budgets. Though it may disappoint many conservatives, there will be no federal or state bankruptcies. 

A mortgage or a loan is a debt, not a deficit. If a family doesn't have a deficit, it can pay off its debts, because its yearly income covers its expenses - including debt servicing. If a family has debts and an annual deficit (as the government does), it risks bankruptcy if it can't borrow additional funds to cover the gap. The Times analogy is terrible. Their assurance that there will be no bankruptcies is worthless. Their solutions to the crisis (raise taxes on the rich and wait for a recovery) would cover a fraction of the current fiscal problem. The Times is in deficit denial.