When is it the Proper Time for the Government to Tighen Its Belt?

1

February 27, 2010 by D Stack

Here in Massachusetts, as in most states, the annual budget of late is a nightmare of cuts. Teachers losing their jobs. Cuts to various social services, health programs, psychiatric care, special education, etc.

An oft-repeated claim is that as citizens tighten their belts so should the government. I’m not so certain that is the best way to handle things. Certainly if there is any elective spending it needs to be carefully evaluated. Similarly any long-term projects may need examination to see if they can be held off until times are better.

However, when times are tough – as they certainly are right now – it seems to me that the services that are typically cut are the ones that are most vitally needed in hard times. People are losing their jobs, facing pay cuts, and facing underemployment. People are losing their jobs, their medical insurance. Is that really the time to take apart the safety net?

Now in general state governments, unlike the federal government, must have a balanced budget. So there is little states can do other than cut services, raise taxes, or both. And despite being a good liberal, I am well aware that tax hikes must be carefully implemented (as must tax cuts).

However, the federal government is allowed to go into debt to meet its budget. It would seem a reasonable proposition that during tough times it would make sense for the budget to go into a deficit. However the contrast would be that during good times it would make sense to prepare for a rainy day. Of late however, our policy has been to slash taxes during good times without being able to pay for them. As taxes and income were slashed over the past decade spending has accelerated – especially with our fighting two major wars. When we had a surplus in our budget some ten years ago the debate was on how to spend it, with paying down the national debt being pretty low on the priority. Now that surplus did not last long, but if it could have been maintained we would have had a much larged debt buffer during these tough times. I’d suggest that the government should do the opposite of its citizens. It its people are doing well, that is the time for the government to maximize its income and reduce its expenses whereas when times are tough, that is the time the government’s programs are most needed.

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to Yahoo BuzzAdd to Newsvine

Advertisements

One thought on “When is it the Proper Time for the Government to Tighen Its Belt?

  1. Ben Hoffman says:

    [It its people are doing well, that is the time for the government to maximize its income and reduce its expenses whereas when times are tough, that is the time the government’s programs are most needed.]

    That’s exactly right. I believe that’s part of Keynesian economics.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

February 2010
M T W T F S S
« Jan   Mar »
1234567
891011121314
15161718192021
22232425262728

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 5 other followers

%d bloggers like this: