The personal-finance metaphor

By Felix Salmon
July 21, 2011
Paul Krugman has been railing against what he calls "the false government-family equivalence" for a while: what's true at the family level -- if your income goes down, for instance, you need to spend less money -- is not necessarily true at the government level.

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Paul Krugman has been railing against what he calls “the false government-family equivalence” for a while: what’s true at the family level — if your income goes down, for instance, you need to spend less money — is not necessarily true at the government level.

But the metaphor is back, in a new form. And this time it’s coming from the left. Here’s Larry Summers:

The idea that adults who have some agenda, whatever the merits of their agenda, are really prepared to threaten sending the United States into default, to pursue their agenda, is beyond belief.

You know, I have had arguments with my college-aged children about spending, and sometimes we discuss whether they should spend less, whether they should pay, whether I should pay. We don’t entertain the option that because we can’t resolve our argument, Visa should get stiffed.

Nemo has extended the metaphor to full-on allegory length, talking about a woman who orders a $40 pizza when she only has $20 to spend. And Michael Kinsley has a whole column driving home the equivalencies:

What does Michele Bachmann teach all those kids about the importance of living up to your obligations?

Say, for example, that one of them owed some people, oh, about $14.3 trillion dollars. Would Bachmann tell her children that a debt is a moral obligation that an honorable person will go to great lengths to pay if at all possible? Or would she tell them, Well, it all depends. Whether you pay back money that’s been loaned to you is a practical question. And if you calculate that you’d be better off reneging, then by all means do so. It’s perfectly O.K.

Does Bachmann teach her kids that it doesn’t matter why you owe the money or what you spent it on—that if you owe it, you have a duty to repay it? Or does she tell them that your obligation to repay depends on whether—in your own opinion—you spent the money wisely or wasted it? Does she say it’s a matter of principle, or does she say it’s a matter of what you can get away with?

It’s all well and good to say that the government is like a household and should always honor its debts. But households don’t always honor their debts — this is why very few people have perfect credit ratings — and if they’re a few days or weeks late on a payment, the world doesn’t come to some calamitous end. So as an argument, this is not a very strong one.

And tactically, wheeling out the household-finance metaphor plays right into the hands of those who, like Barack Obama, are prone to talking about how “government has to start living within its means, just like families do.”

I’m beginning to think that the most politically corrosive movie of the past 20 years was Ivan Reitman’s Dave, from 1993, where the president, armed with nothing but his neighborhood accountant and a couple of bratwursts, manages to fix the budget over dinner.

It’s an attractive and romantic notion, which is why it plays so well in congressional races; it’s almost an article of faith, at this point, among Tea Party types. All we need is some common sense, and the problem’s solved. And that’s also why the personal-finance metaphor is so toxic and dangerous. I can see why people reach for it, at times like these. But they should maybe think twice before doing so.

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