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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: i-node who wrote (704184)	3/14/2013 12:27:25 PM
From: bentway	Read Replies (2) \| Respond to of 1576901

BALANCED BUDGET: ARE YOU NUTS? The way the government does its accounting, investments are counted as “spending.” By this logic, no family could balance its budget if it bought a house, unless it had enough cash to do so without taking a mortgage; no business take a loan to finance inventory or build a factory. Every serious business in America — including every one owned or run by Republicans — uses “Generally Accepting Accounting Principles.” But not the US government. So one long-term “solution” to our deficit problem might be to change the way the government does its accounting. But that would mean huge fights over what qualifies as an investment (is education an investment?) and over what length of time those investments should be written off (a lifetime?). It would also mean recognizing some of the long-termobligations the government takes on, which are not currently counted in the budget. In the real world the benchmark should probably be: is the National Debt growing a little slower, over the long run, than the economy as a whole? In high-unemployment years, as now, extra government spending and investment are wholly appropriate. And in boom years, very low deficits — or even surpluses — are appropriate. But over long periods of time (e.g., the 35 years from 1946, when the Debt was 121% of GDP, through 1980, when it had shrunk to 30%), is the Debt gradually shrinking? Think about it: if the debt grew on average by 3% a year while the economy itself grew on average by 4.5% a year, of which 2% were the little bit of inflation we tend to get when things are humming and 2.5% were real growth, a perfectly realistic objective — then over time the debt would shrink dramatically as a proportion of the economy as a whole. So what’s 3% of the current Debt? About half a trillion dollars. That would be a perfectly reasonable deficit to run in most years, given the way the government does its accounting. Naturally, I’d like to see some years when the debt barely grew at all — like the last two Clinton years. And I’d like to see years when the economy grew at more than 4.5% (with most of that coming from real growth, not inflation). And I think that we’ll have some years like that. But people need to understand that a literally “balanced budget” is as dumb an idea — and as bad for our economy — as telling a young business it can’t invest to grow or a young family it can’t borrow to buy a home. Andrew Tobias.