To be, or not to be, afraid of the federal budget?

Opinion editor's note: Editorials represent the opinions of the Star Tribune Editorial Board, which operates independently from the newsroom.

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One of the members of the Star Tribune Editorial Board who evaluates commentary submitted by others has a distaste for the word "countless." It literally means "too many to be counted," but often the thing in question could be quantified. The writer just didn't want to go to that kind of trouble for the mere purpose of making a point.

In that spirit we ask: How many moving parts comprise the federal budget — an issue coming to a head in Washington for, oh, the umpteenth time?

Well …

If we're talking about the number of things that can influence taxing and spending and thus deficits and debt, we'd have to lean on "countless." Maybe we could describe the government as an octopus, with each appendage acting semi-independently under a central brain, but that's still only eight arms, and with respect to coordination the metaphor is insulting to the octopus. The point is that budget forces — driven as they are by disparate interests, all of which are valid to their stakeholders and most of which might even be valid from a neutral perspective in isolation — take on lives of their own.

Maybe it's easier to put things in terms of dollars. Those move around and can be counted. Federal outlays projected for 2023 by the Congressional Budget Office in its most recent report: $6.2 trillion.

So it needs context. Revenue for 2023 as projected by the CBO: $4.8 trillion — which is to say, the government is taking in $1.4 trillion less than it's paying out.

That seems bad. Drop some zeros and you could certainly say it would be of no help to your household budget if you earned $14,000 less than you spent.

But, as you've no doubt heard a time or two — though not from politicians — the government's budget is not like a household's. The government has two advantages: It can (theoretically) demand more income at will by raising taxes, and it can fatten its wallet simply by conjuring the money. It isn't necessarily compelled to spend less.

All of those responses, though, affect the nation's economic output. Raising taxes can discourage investment. Printing money (the colloquial description, even though it's really an electronic affair) can dilute purchasing power. Even cutting spending, if it leads to festering social problems, can sour the business environment. You can begin to see why the "moving parts" question becomes so hard to wrangle.

So, more context. Economic thinkers find it helpful to measure things as a percentage of gross domestic product, which serves as a consistent baseline but one that takes into account the nation's growth. For outlays to GDP, the average over the last 50 years is 21%. It's 23.7% in 2023. The comparable numbers for revenue to GDP are 17.4% and 18.3%.

When the government consistently runs an annual deficit by spending more than it takes in, it has to borrow money from the public. It does this by selling securities such as Treasury bonds. The "public" in this context can be thought of broadly. It ranges from individuals to pension funds to foreign governments.

As a percentage of GDP, debt held by the public is at 98% in 2023, according to the CBO. Without changes, it's expected to rise to 195% by midcentury.

It costs money to service debt. It costs more money to service more debt. One concern is how high of an interest rate the government will one day have to pay to get people to buy its bonds. Another: Could it, at some point, have trouble finding lenders at all? No one really knows where the thresholds are.

There's an argument that it doesn't matter. The proponents of modern monetary theory believe a government with its own currency can perpetually print money to pay off debt as long as interest rates are kept low. The theory states that unwanted effects like inflation can be managed not by the central bank, as is the main practice now, but by raising or lowering tax rates as needed. Its adherents tend to overestimate the likelihood that Congress could ever be as agile as that.

Still, modern monetary theory is relevant, because the U.S. has been running a loose version of it for some time.

House Republicans, meanwhile, continue to resist an increase to the statutory debt limit that would formally permit spending Congress already has approved. It's imperative that they not carry on this brinksmanship to the point of risking confidence that the U.S. can be trusted with its debt, let alone bringing about an outright default. That said, the debt ceiling has been used in the past as an incentive for deficit-control measures.