A balanced budget is bad fiscal policy

Post #243,253 by ben_tilly 2/2/06 10:47:11 AM Reply	A balanced budget is bad fiscal policy You really do want a government to run a deficit in bad years. Think about it. In bad years it is the safety net for a lot of people. And tax revenues are going to be down because it is a bad year. That means that you lose money. However you also want to run a surplus in good years so that it isn't a problem to run a deficit from time to time. (Which is the half that politicians like to ignore.) So in the long run you want government's budget to balance. But it is a really, really bad idea to make it balance every year. Cheers, Ben I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
Post #243,260 by Another Scott 2/2/06 11:03:53 AM Reply	As an absolute, yes. I agree that the government needs to have tools to even out the business cycle, especially when a crash appears imminent. However, one needs to have some mechanism to control spending. In other words, we need to have some definition of "bad years" and "good years". Or we need something like the EU's policy of having member countries [link\|http://news.bbc.co.uk/2/hi/business/4119282.stm\|commit to having budget deficits of < 3% of GDP]. Yes, it's fuzzy (Germany has gone over that limit, as have France, Italy, Portugal...), so it's no silver bullet either. As it stands now, there's almost no constraint on spending by the federal government. The opposition party doesn't have the votes to impact the budget in Congress, and the president has never vetoed anything. Some sort of statutory requirement, with teeth, is needed. Even the Clinton-era [link\|http://www.reason.com/rauch/021305.shtml\|offsets] would help greatly. Not that I expect it to happen any time soon.... :-( Cheers, Scott.
Post #243,308 by ben_tilly 2/2/06 7:02:36 PM Reply	"Balanced over every 7 year period" could work. Number randomly chosen to be fairly short but longer than most business cycles. Ramping up by staying balanced from the start to the present. So the first year is balanced. The first + second are balanced and so on until the 8'th year. Cheers, Ben I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
Post #243,412 by Another Scott 2/4/06 11:07:54 AM Reply	I like it.

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