Political Realities and Austerity

This got me thinking. Paul Martin, the ex-PM of Canada, wrote:

In the postwar years, many economists argued that you did not need to be in the black every year, as long as budgets were balanced over the course of the economic cycle, so that deficits during slumps would be paid off with surpluses in good years. Whatever the economic rationale for that approach, it didn’t work in the real world of politicians. Once you break the spell–once governments find that they can get away with borrowing instead of taxing to pay the bills–it is almost impossibly tempting for politicians to do it again and again until the debt is out of control.

I can understand this. With so many “needs to fill”, everyone pleading for a cause would be very upset if the government was sitting on a pile of money waiting for a rainy day. This is why austerity measures are required – we lack the discipline to run countercyclical deficits and surpluses.

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