Quote:
Originally Posted by TracyCoxx
The TLB staff can place words in my mouth and change the meaning of what I wrote, then state the obvious that I would say didn't say it. It is obvious so I won't.
So anyway, is the statement above in quotes an empirical statement, or does it depend on one's point of view? If it does depend on a viewpoint, can someone please explain what viewpoint, and within that viewpoint how it's rational to continuously operate in a deficit?
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Well, I agree, the government deficit is different from private debt for one simple reason, the government can print money! By printing money the government inflates the value of the money and thus reduces the actual debt. The government can get away with this for extended periods of time as long as the inflation does not become excessive (ie late 1970s). By printing money and borrowing more money the government can provide the populace with the services it desires and conduct the wars it desires.
Sooner or later there is a day of reckoning and the government either has to cut expenses or raise taxes or both. The Clinton administration succeeded in balancing the budget and the deficit could have been reduced to reasonable levels. Then Bush came along and went on a wild spending spree and irresponsible tax cuts, The deficit soared as the economy collapsed. Obama inherited a massive financial mess.
According to Keynsian theory, the way to recover from an economic downturn is for the government to spend lots of money, which is what Obama did. Did it work? Well, not very well because much of the money went into the stock market instead of into the economy.
