The first negative speaker (arguing against the resolution) in the Braver Angels debate, Garrett Neaves, argued to disabuse the notion made by most deficit hawks that the federal government should act like an American household, and endeavor to spend no more money than it takes in. Rather, he said, federal spending should follow the precepts of early 20th Century economist John Maynard Keynes.
“Deficit spending by our government is almost always essential to avoid causing a recession,” Neaves said. "And because every dollar being spent is also a dollar of income to someone receiving that dollar, whenever a dollar is being saved rather than spent, someone is not getting that dollar as income."
Neaves said that the federal government is not like a household, but more like a scorekeeper, deciding who should receive tax money. Deficit spending is the foundation of an economy based on fiat currency. The U.S. dollar only has value because the nation’s citizens must have them to pay income taxes.
On household spending versus federal spending, he said "In order to be responsible for ourselves, we need to be good savers, and in order to avoid a recession, we need there to be enough spending."
It’s an economic theory that President Franklin Delano Roosevelt employed to pull the U.S. economy out of the Great Depression but found its nemesis in 1981 when Ronald Reagan took office and preached the theory of supply-side economics, which posits that job creation is made by private employers and not the government, and therefore tax cuts for employers is the way to grow employment and stem any economic downturns.
But recessions and economic downturns in general lead everyone in an economy to hold on to their savings. That leaves only the government to willingly flow more money back into the economy by spending on federal and state programs and pay for it by printing cash or buying up its own bonds.
"Our federal government is nothing like a household," Neaves continued. "The federal government is our monopoly creator of dollars. We can decide to have our federal government spend as much as is necessary to allow us to save as much as we want without causing a recession."
Neaves made the distinction between the often-confused federal deficit and debt. In short, the deficit is the difference between the taxes and other revenues the government takes in over a fiscal year and the amount it spends on myriad programs in that same year. Federal debt is the accumulation of years of deficits when they are not paid off, usually by printing cash (an inflation risk) and/or buying back its own bonds. "Deficit and debt fear has been a highly dominant weapon used to manipulate us for the 50 years," he said.
Under Q&A, Neaves was asked why re-institution of the gold standard wouldn’t work.
“The gold standard was a choice,” he replied. “The government issues currency, and the currency has a real and tangible value.”
Another question regarded government-issued bonds during World War II.
“I think we should use bonds to achieve public purpose,” Neaves replied. “Bonds were sold to regulate people so they wouldn’t buy refrigerators and cars” as the factories that otherwise assembled consumer goods converted to the war effort. “Because they were sacrificing by not buying cars, they should get a return (from bond interest) for the sacrifice.”
The second negative debater, Ethan Ableman, works in Washington reading the texts of appropriation bills, and says deficits are necessary for expenditures that fall outside the boundaries of such spending bills.
“Unlike the federal budget, nearly every single state has a balanced budget requirement.” State legislatures find it next to impossible politically to raise taxes to pay for budget shortfalls, so they have to cut spending to such necessities as infrastructure and public schools. Pandemics, natural disasters and other emergencies fall outside both federal and state budgets, with “part of the federal budget set aside, but only so much” for such agencies as the Federal Emergency Management Agency (FEMA), Ableman said.
“If Congress had to balance the budget during the pandemic, people would have died (as a result) for sure.” Operation Warp Speed, for example, former President Trump’s effort to speed up approval of COVID-19 vaccines, cost $10 billion in deficit spending.
“Even if we don’t like the monetary theory, there are times when the government needs to spend large amounts of money very quickly,” the second negative concluded.