Saturday, March 23, 2013

Deficit doesn't have to be Zero!!! Just More Republican Fear Mongering.

I saw this from Bloomberg's Josh Barro, and thought it summed up nicely why zeroing out the debt is another ridiculous obsession from the Republicans...and Paul Ryan.
Barro: "The federal government has run a budget deficit in 46 of the last 50 years. So if budget deficits are going to destroy the American economy, they're taking an awful long time about doing it."

Bloomberg News: My colleague Evan Soltas has ably explained why we never need to balance the budget: So long as the economy keeps growing, the government can keep borrowing more money, and it’s all sustainable if the debt does not grow too large relative to the economy. That’s how it’s been possible for the U.S. government to run budget deficits every year since the 1970s, save a handful during the Bill Clinton administration, without blowing up the economy.

People are resistant to this message.

There are appropriate times for individuals to borrow, such as when getting an education or buying a home. But over a lifetime, the individual is supposed to be working to pay down debts and build wealth But the government does not have a life cycle; it plans to exist indefinitely. So it makes much more sense to compare the government to a corporation, which also plans for indefinite existence and therefore may have debt as a permanent part of its capital structure. There is not necessarily an expectation that a firm will decrease its debt load over time, and if a company keeps growing, its debt load may keep getting larger without being a sign of financial distress. 

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