Wednesday, July 27, 2011

Balanced Budgets: The Culprit?

I can see good reasons why a nation might not want a high debt-to-GDP ratio, though it is not obvious to me that Japan (say) is that much worse off than Libya.  But to jump from this premise to an obsession with balancing the budget--as in, say, a "balanced budget amended"--has always seemed to me crack-brained.  Balance what, exactly?    Does it mean we can't (say) buy a pickup trick for cash (don't these guys understand depreciation?).  Or do we balance cash flows?  Terrific, let's not pay our bills, and watch the cash pile up.   Anyway, balance over what time period?  Balanced budget advocates usually talk about the "year," but what's so sacred about a year?  Here it is nearly noon--the mail just came and there's no check: uh oh, can't spend any more until tomorrow.  Or--isn't it true (I can't seem to find a link) that Portugal once issued a 3,000-year bond?

How did we get locked into this mysterious trope, I have wondered.  And just this morning, it came to me--it's Dickens.  Well: I don't suppose the average Congressman is up on his David Copperfield, although I'd speculate that  a few might have seen the movie with WC Fields.  But I bet more than one has heard of the feckless Mr.. Micawber, who said:
"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
Link. Right, the very thing, We're going to structure the sovereign fisc around the insisght of the dumbest money manager in human history.

1 comment:

Davis X. Machina said...

Once you determine that recessions in fact are caused by a collapse in national aggregate virtue, the rest follows more or less of necessity.

The jobs will return when we're good enough.

Moral panics don't look that different from Panic panics of you squint right