Originally Posted by ziggy29
Unfortunately, government's track record of using surpluses to pay down debts or build a "rainy day fund" is atrocious. There's just way too much pressure by special interests to either spend it on a pet program or refund it to the taxpayers.
You and I agree.
The irony, though, is that folks have their panties in a bunch now about government deficits at a time when the government should
be running deficits but didn't care so much when such deficits were actually irresponsible (pre-crisis). It's the pre-crisis deficits that are the problem, and the driver of the outsized deficits now.
But I don't think pro-cyclical austerity during downturns is the answer to boom-time profligacy. It's hard to see how policies destined to create greater financial volatility can result in greater financial stability. Or even lower borrowing costs.
Perhaps a counter-cyclical requirement to run surpluses when trailing 12 month GDP is north of 2% would be a better solution than an absolute balanced budget requirement.