Tuesday, August 3, 2010

Does the budget have to be balanced?

From the NYTimes: part3 "An economically powerful country can prudently run some deficits.

A reasonable budget goal would be to reduce annual deficit to the point where the debt-the sum total of annual deficits, now $9 trillion- is no longer growing faster than the economy. Once the debt is stable, the nation would most likely avoid the worst effects of persistent deficits, including sharper higher interest rates and slower growth. Under current projections, that would require cutting the deficit to about 3% of gross domestic product from 10% today.

When he established a bipartisan deficit commission, Mr. Obama called for reaching this goal by 2015. Given today's weak economy, that is probbably too rapid. The aim is sound, even if it takes a decade to get the economy, there."

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