Arnold Kling  

Obama's Budget Attacked

Fukuyama's Perfectly Horrifyin... Economics Bloggers Surveyed...

A blogger writes,

we will still face unsustainable medium- and long-term deficits.

Let us explain this word "unsustainable." For me personally, an unsustainable budget would be if I promised to buy my kids mansions in Paris, Tokyo, and London. I cannot keep those promises, hence they are not "sustainable." They are lies. When this blogger uses the word "unsustainable," that is his way of calling Baloney Sandwich on the President's Budget.

This alternative, like it or not, is sustainable. In a better world, the discussion would be limited to sustainable budgets. Discussing anything else is like my family discussing buying mansions for the kids. It's delusional.

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CATEGORIES: Fiscal Policy

COMMENTS (2 to date)
Gary Rogers writes:

If I have to take out loans and borrow against the equity in my house just to cover normal expenses you could call that sustainable because I am doing it, but it can only last as long as my credit rating. Since this cannot last, I would say unsustainable is a better word.

I think the blogger may be referring to crossing the arbitrary, but important, milestone of 90% debt-to-GDP ratio. Carmen Reinhart and Kenneth Rogoff write of this threshold: "Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies…"

I think the author is commenting on a debt spiral: chronic deficits will balloon the public's debt, reducing growth and tax revenues, increasing interest payments - causing further debt, which is unsustainable.

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