Monday, 15 July 2013

Temporary Prosperity At The Cost Of Longer-term Prosperity

By David Merkel

I am a fan of balanced budgets. Why? Balanced budgets are sustainable. This is particularly true if budgets are balanced on an accrual basis.

Politicians like to promise more than they deliver. They are like J. Wellington Wimpy, who said, “I would gladly pay you Tuesday for a hamburger today.” Goods and services today, payment later.
This happens in a lot of ways, large and small:

  • Federal Pension Plans are unfunded, supported by the taxation authority of the Federal Government.
  • Running large deficits that don’t do much good for the economy as a whole, while racking up debts that will have to be paid by future generations.
  • Running monetary policies that improve conditions today, but will worsen future conditions as a result. Far better to let recessions bite, eliminating bad debt and projects, and leave behind a less indebted society, ready to grow.  

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