Noam Chomsky: Balancing the Budget (Explained)

On April 15, 1997, a college student asked Noam Chomsky, “What is your analysis of the obsession of balancing the federal budget? What would be the implications regarding military spending and corporate welfare?”

Noam Chomsky replied:

You'll notice that the guys who want to balance the budget want to raise military spending.

The Heritage Foundation, which crafts policy for right-wing Republicans and has all sorts of blather about the free market, but they're calling for increasing the military later.

In fact, right after the 1994 election, you know the big so-called conservative landslide, which actually amounted to a shift of about 2% in the vote in contested positions, Clinton's first move was to raise military spending beyond what had been allocated. And then Gingrich came along with a congressional majority and raised it even further. And then the Heritage Foundation came along with their budget proposal and set it even higher. And so their idea is that military spending has to go up!

But during that time military spending went down…

But let’s let Noam Chomsky continue…

(sorry I’ll have to post his verbal remarks here because they’d take too long for me to transcribe)

Noam Chomsky’s correct that Republicans want to increase defense spending, which it’s interesting he didn’t argue against it as many leftists typically do because he credits the Pentagon for much of our modern innovation.

Swish! Republicans?

With that said, his evidence is EXTREMELY weak for such a bold endorsement of military-driven innovation because otherwise North Korea and the Soviet Union would be one of the most innovative countries on Earth. Defense spending can incentivize private investment to help achieve certain national goals (to the Mooooooon!), but overall there’s a lot of evidence that the military-industrial complex crowds out privately financed R&D and drains the private sector of much of its top researchers.

Chomsky’s main complaint, therefore, is that Republicans only care about balancing the budget when it pertains to welfare spending on the poor.

He’s factually wrong though.

Both parties support welfare spending on the poor!

Republicans have CONTINUOUSLY supported welfare spending on the poor. In the last 40 years, Republican politicians have consistently voted for federal budgets that increase welfare spending.

In addition, Republican presidents have signed into law such anti-poverty legislation as: Tax Equity and Fiscal Responsibility Act of 1982, Omnibus Budget Reconciliation Act of 1990, Americans with Disabilities Act of 1990, Civil Rights Act of 1991, Ryan White CARE Act, Immigration Act of 1990, No Child Left Behind Act, expanded Medicare drug benefit program aka "the greatest expansion in America's welfare state in forty years," Medicare Act of 2003, CARES Act.

On the state level, Republican politicians have also supported welfare spending on the poor.

And on an individual level, many Republican voters are on food stamps, Medicaid, Medicare, Social Security, etc.

If Chomsky’s claim was accurate then in 2016 when Republicans had control of the House, Senate, and Presidency they would’ve cut welfare spending on the poor, but in fact, they increased it.

Overall, the U.S. spends about 20% of its GDP on social welfare spending, which is more than Australia, Canada, and Switzerland. This is a MASSIVE amount too when you consider the U.S. has the largest GDP in human history.

Generally, Republicans support less welfare spending than Democrats, but it’s dishonest populist pandering leftist straw-manning to suggest they don’t support it at all.

Both parties support welfare spending on the rich.

Unfortunately, Chomsky’s correct here that both parties support corporate welfare.

As Noam Chomsky points out, “The extent to which corporations rely on the nanny state is often not realized.”

Since the 1980s, Big Business started lobbying for more regulations and government spending. Famous recent examples are the 2008 bailouts, Obamacare, Walmart/Amazon lobbying for a higher minimum wage, and Big Tech endorsing a Global Minimum Corporate Tax.

This isn’t a bug in the system, but an INEVITABLE consequence of any big centralized government hence why any socialist vision that doesn’t acknowledge this reality is fundamentally utopian.

The only way to reduce cronyism/corruption in D.C. is to do the EXACT OPPOSITE of what Chomsky proposes: we need to downsize D.C!

Socialism for All (vs.) Free Market for All.

Chomsky wants to give the ruling 1% even more power/control over your life.

Want to choose your own doctor? Nope. Want to choose your own teacher? Nope. Want to start your own business? Nope.

Chomsky wants politicians/bureaucrats/academics to dictate virtually everything about your life, “for your own good,” of course.And although there are many socialists who come to power with good intentions, absolute power corrupts absolutely, and the ruling elite inevitably put their own self-interest over the collective interest because humans are naturally self-interested. Anyone who promises you something for nothing should be treated as a scammer no matter if they’re speaking from an Ivory Tower, the House of Representatives, or a Nigerian “palace.”

Like a scammer, Democratic Socialists will demand more and more of your income and then they’ll finally be able to deliver you whatever they promised! The pot of gold is just a little bit further! They just need 10% or 30% or 50% more of your income.

There’s a reason why as people get older they stop believing in Santa Claus and Democratic Socialism.

These fairytales are meant to make us feel good and make a handsome profit for those trafficking in their lies, but to grown adults capable of critical thinking we know breaking into someone’s home won’t end with free milk & cookies.

If such Democratic Socialist policies as Medicare-for-All, College-for-All, Jobs-for-All were ever passed then not only would they destroy the U.S. job market, therefore massively increasing consumer prices, but unlike “socialism for the rich” these policies remove choice for Americans.

D.C. works for big businesses by giving them money and tax loopholes while saddling their small business competitors with taxes and regulation.

When D.C. “works” for the poor we can call it, “trickle-down economics,” i.e. give to top-level bureaucrats who will then try to spend the money on the poor’s behalf. Ummm, definitely not on behalf of their favorite political donors and groups. No, no, no. D.C. is obviously above such political calculations (cough, cough Biden’s “human” infrastructure bill).

One of the areas where the United States has really embraced socialism is in education. How’s it going? Terrible. We spend more on education per pupil than virtually every country on Earth and yet we have decreasing educational standards! We’d be better off giving a $10K check to each high school student and telling them that if they want another $10K next year then at the end of the year they need to pass XYZ tests, which could be administered either online or at a local facility. This would encourage students to have stronger study and critical thinking habits as they’d have to take greater responsibility for their own learning.

Ultimately, Chomsky believes we should have more socialism for everyone (remove individual responsibility, therefore, making Americans softer/stupider) whereas conservatives believe we should have more capitalism for everyone, in part, because the most innovative and affordable parts of our economy are the least regulated (software, clothing) and for the parts of the economy that are highly regulated (healthcare) the least regulated parts of that sector are the best (cosmetics, eye surgery, COVID-19 vaccine).

Balance Budget Amendment Is Sensible

Chomsky argued, “As a program balancing the budget makes no sense at all. No enterprise lives on a balanced budget. A household or a business they all live on debt unless you’re a hermit living in the woods. That’s not how any live system works.”

Pure nonsense.

There’s a lot of evidence that nations that exceed 90% debt-to-GDP ratio (US is currently at 138%, which is the highest in our history) experience a slower rate of economic growth. In addition, every year 15% of the U.S. federal budget goes toward interest payments on our national debt (doesn’t even touch the principal), which is hundreds of billions of dollars that could have otherwise been going toward education, defense, or left in Americans pockets.

If you want to make sense then you need to think in terms of cents.

And then finally, a high national debt leads to inflation, which ends up hurting fixed-income Americans the most as they have to spend more dollars to buy the same goods.

Chomsky doesn’t seem to understand that the rich will not just sit by and let the federal government eviscerate the value of their wealth without trying to move it overseas and into new commodities/denominations, such as crypto, gold, or Renminbi.

The federal government could try and prevent the rich from moving their money, but that’s virtually impossible in a globalized economy with a relatively free exchange of goods and services.

We can’t even keep out hundreds of thousands of people from illegally entering the country so it’s a pipedream to suggest the federal government has the competence and/or politicians have the political will to stop the movement of their rich political donors’ money (FYI it’s impossible to “get money out of politics”).

Our best course, therefore, isn’t so much to use government violence/force to keep people/money/businesses from leaving, but instead to have sound money, which a balanced budget amendment would help create.

Only someone interested in pandering to the lowest common denominator would say a balanced budget makes no sense.

Chomsky claims, “No enterprise lives on a balanced budget.”

Wrong again.

Virtually every household or business makes more money than they spend each year otherwise they wouldn’t have a home or stay in business very long. This is what a BBA would require.

Of course, certain investments/emergencies require enterprises to go into debt. For example, many people go into debt for college or to buy a home (the price is artificially high though because gov. makes lending too easy)and similarily a BBA would permit the government to deficit-spend too for special circumstances such as recession, war, or a national emergency whereby the Congress could overrule the BBA with a 60% vote. Chomsky needs to learn that a national deficit is not the same as the national debt and so even if the federal government started balancing its books every year the United States would still have a national debt for decades to come just as many enterprises do.

In the end, a Balanced Budget Requirement is just plain ol’ economic sense, but dishonest academics and politicians will try to sell us on the idea that we can just spend, spend, spend, print, print, print and there’ll be nothing but economic growth and rainbows ahead.

To those of us who exist in the real world though, we know unfortunately there won’t be a pot of gold at the other end.