- Joined
- Apr 8, 2008
- Messages
- 19,883
- Reaction score
- 5,120
- Location
- 0.0, -2.3 on the Political Compass
- Gender
- Undisclosed
- Political Leaning
- Other
In my personal opinion, a balanced budget is a bad idea for two basic reasons:
Politicians will hide expenditures in off balance sheet financing making an accurate understanding of where the government's financial picture really is. Making our government even more corrupt and less beholden to the people.
But secondly, my biggest concern is that it would be a death of a thousand cuts. During a recession as tax revenue dries up, the government would be forced to cut spending. Assuming no change to automatic stabilizers, spending would actually increase forcing even greater cuts. We'd deepen the recession by being forced to either raise taxes or dramatically cut spending. As economic activity declines due to aggregate demand falling, even less revenue would come in causing even more cuts. In theory, there's a real possibility that a balanced budget requirement would result in default as there would be no spending left except for debt servicing and any reduction in revenue from that point would result in insolvency. Basically, the balanced budget requirement would be death by a thousand cuts. To alleviate this, emergency spending would bypass the requirement but that begs the question of why even bother with the requirement in the first place if emergency spending simply bypasses it entirely?
Politicians will hide expenditures in off balance sheet financing making an accurate understanding of where the government's financial picture really is. Making our government even more corrupt and less beholden to the people.
But secondly, my biggest concern is that it would be a death of a thousand cuts. During a recession as tax revenue dries up, the government would be forced to cut spending. Assuming no change to automatic stabilizers, spending would actually increase forcing even greater cuts. We'd deepen the recession by being forced to either raise taxes or dramatically cut spending. As economic activity declines due to aggregate demand falling, even less revenue would come in causing even more cuts. In theory, there's a real possibility that a balanced budget requirement would result in default as there would be no spending left except for debt servicing and any reduction in revenue from that point would result in insolvency. Basically, the balanced budget requirement would be death by a thousand cuts. To alleviate this, emergency spending would bypass the requirement but that begs the question of why even bother with the requirement in the first place if emergency spending simply bypasses it entirely?