“Balance is the perfect state of still water. Let that be our model. It remains quiet within and is not disturbed on the surface.” - Confucius
The translator of Confucius’ Chinese writing could have used the word “tranquil” in place of “quiet within” without altering the meaning of the saying. The preamble of the US Constitution states, “We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.” Our government was expressly created to “insure domestic tranquility” which means that it is obligated to promote balance of all sorts of things: budgets, trade, authority and power, economic growth, environmental impact, opportunity to pursue happiness ……..
Our elected officials and parties justify the success / failure of their policies according to the amount of tranquility experienced during their tenure. Remember the main theme of President Reagan’s successful 1988 re-election campaign, “Are you better off now than you were four years ago?”
We know that we can never achieve a state of balance in our national domestic life all of the time. There will always be disturbances that upset balance. We cannot prevent uncontrollable major disasters like Hurricane Katrina or the 9/11 terrorist attack from occurring. What we want is to live in a condition of self-regulation where disturbances oscillate away smoothly. What we want is as much tranquility between rare upset occurrences as possible. We want to avoid creating turbulence and chaos of our own making. We especially want to avoid chaotic conditions that have no restoring regulation so that they spin out of control.
Who amongst us today would say that America is in balance – quiet down deep and undisturbed on the surface - tranquil? We all know with certainty that imbalances abound today. What is most disturbing is that competition among the three branches of government and competition between the two political parties has not focused on justification through attempting to move closer to balance and achieve tranquility. Instead the competition seems to be designed to enhance instability and blame the resulting stressful chaos on the other branch of government or the other political party. Our elected officials have been unable to balance their drive to be elected through negativism with their constitutional mandate to seek tranquility through positivism.
In our private lives we all know that we must balance our cash flow over our whole lifetime. We must ultimately spend only what we make or less. There can be fluctuations as our life progresses. For a period of time we can make more than we spend and accumulate savings or pay-off debt. Sometimes we can spend more than we make and reduce the accumulated savings or borrow temporarily. For the most part, our borrowing is regulated so that the risk that the debt won’t be repaid is low. Our financial system, when it works correctly, won’t let us build up future obligations that are greater than our future earning capacity.
The same is true in business. Every business must make income that is at least equal to its expenses. There can be fluctuations over short periods of time but if the income becomes less than the essential operating cost long enough, suppliers will demand payment of old bills and the business will close. Profit is not a dirty word – it is essential to survival.
Throughout, my entire lifetime (63 years) the federal government’s income has exceeded its expenditures in only four years. Why isn’t the government closed (out of business)? My home would be taken away and I would be on the street if I always spent more than I made – why is the President still in the White House and why haven’t we foreclosed on the Congress office buildings and the Capital?
The answer is that what seems obvious actually isn’t because the government can do things that we can’t do as individuals or businesses. For example, you can’t print money in your basement tonight and then use it to buy things or pay off some of your debt. You will go to prison. The government can do this and does. You cannot decide to make a loan to yourself and then use the proceeds to buy something or pay an old debt. The government can do that. The government can’t do these things without limit because it dilutes the value of our money so that citizens and business pay more for goods and our assets are devalued. Expanding the money supply also reduces the government’s ability to borrow more and raises the cost of refinancing government debt as it comes due. And, if the world perceives that the risk of loss is unacceptable then no one will buy the government’s bonds. Essentially, the government has the ability to spend in excess of its income and, by using “monetary policy” spread the excess expenditure to us and other nations around the world that are willing to share because they depend on the American economy. When the government spends more than it earns, it is essentially levying a tax on us that is not specified in tax law.