Do you think the federal government should be required to balance its budget each year?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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No, I do not think that the federal government should be required to do this.  There are at least two main reasons for that.

First, we often hear that the federal government needs to run more like a business or like a household.  People who say that mean that it should never spend more than it takes in in a year.  But this is not how households really work.  Many households are in debt and we typically believe that this is a good thing.  For example, we think it is good for a household to have a mortgage so it can buy a home.  We think it is fine for a household to take on debt to buy a car.  If we do not allow the federal government to take on debt, we prevent it from doing things that cost a lot now but will pay off in the long term.  For example, we prevent the government from embarking on large projects like the freeway system.

Second, if the government can never run a deficit, it will hurt us in times of recession.  If a recession occurs, tax receipts will drop.  That will mean government spending will have to drop.  If government spending drops as a recession starts, it will make the recession worse.  This is not a good thing.

There is no question the federal government needs to do better with its budget.  However, requiring it to balance the budget every year is not a great idea.

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