Cantor Spokesman Wrong on Budget

A blog about business and economics.
April 3 2013 11:46 AM

You Don't Want to Balance the Budget for the Sake of Balancing the Budget

balanc

A remarkable series of tweets Obviously, Dan Pfeiffer is correct about this.

If you want to see why, just consider that there is some level of government spending that you consider appropriate. Imagine that level of spending is achieved. Zero money is being spent on wasteful or useless programs, and no good spending is being forgone. We're doing everything we ought to be doing. Now we need to finance that spending with some mixture of taxes and borrowing. The Cooper viewpoint is that it's always the case that the optimal mix is 100 percent taxes and 0 percent borrowing. But why would that be? If the future is going to be richer than the present, there's a strong prima facie case for borrowing. You don't pay 100 percent cash for your house or your college tuition, and there's no reason you should pay 100 percent cash for your national defense or vital infrastructure either. How much should you borrow? It has a lot to do with the interest rates. Not only is borrowing at a high interest rate expensive, but government borrowing at a high interest rates crowds out private capital investment. But if interest rates are low, then you don't need to worry much about crowding out, and the economic burden of repaying the interest is likely lower than the economic burden of higher taxes.

So you borrow some money. Ronald Reagan did it. George W. Bush did it. Eric Cantor's voted for a lot of deficit-increasing measures in his career. So say that balancing the budget for its own sake is a good idea?

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Students Aren’t Going to College Football Games as Much Anymore

And schools are getting worried.

Two Damn Good, Very Different Movies About Soldiers Returning From War

The XX Factor

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

Why a Sketch of Chelsea Manning Is Stirring Up Controversy

How Worried Should Poland, the Baltic States, and Georgia Be About a Russian Invasion?

  News & Politics
Weigel
Sept. 20 2014 11:13 AM -30-
  Business
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
  Life
Quora
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
  Arts
Brow Beat
Sept. 20 2014 3:21 PM “The More You Know (About Black People)” Uses Very Funny PSAs to Condemn Black Stereotypes
  Technology
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Bad Astronomy
Sept. 20 2014 7:00 AM The Shaggy Sun
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.