A Note on Budget Deficits

by Don Boudreaux on February 8, 2006

in Politics

Assume that the U.S. government more or less
reflects the informed will of the American people. (I believe this assumption to be unrealistic,
but I’ll put aside my skepticism for the moment.)

Being well-enough informed, American voters should know that
the true level of taxation is the amount of government expenditures – soon to
be about $2.77 trillion annually – and not the amount of tax revenue the
government collects.

So why are we concerned about Uncle Sam’s budget
deficit? If voters truly are well-enough
informed so that we can regard the expenditure side of the budget to reflect
not only the “will of the people” but “the informed will of the people,” why
not regard the revenue side (and the resulting budget deficit) with equal
equanimity? The entire budget –
expenditures, current tax revenues, and any need to finance a resulting deficit
with debt instruments – can be thought to be the product of sound and
acceptable, if not perfect, choice of the people.

If the entire package is what well-enough-informed voters
really want, why lament any part of it?

But if we recognize that the budget deficit is the
consequence of political dysfunction – voters either ignorantly or selfishly
(and dangerously for the country over the long run) loading an unjustified tax
burden on future taxpayers, why not regard the entire budget to be afflicted
with such dysfunction?

…………

I imagine myself asking the above questions to, say, Paul
Krugman. Krugman (like many others)
rightfully criticizes today’s gargantuan government budget deficits. But he also (like many others) typically
assumes that most government programs and projects are justified – or at least
that these are programs that We the People in our wisdom have asked government
to deliver.

He can’t have it both ways. If government spending is justified because reasonably informed citizens
choose its content and level, then these same reasonably informed citizens must
also be assumed to choose the budget deficit. If, however, the budget deficit is the result not of informed citizen
choice but instead of dysfunctional political institutions, then these same
dysfunctional institutions must be assumed to operate on the expenditure side
of the budget.

Of course, it’s possible to say that citizen-voters are
sufficiently informed – and that politicians respond to these citizens’
preferences – but that these citizens also have a dangerously short
time-horizon, or that they callously disregard their children’s and
grandchildren’s futures. The budget
deficit, then, is a result of these regrettable features of voter preferences.

But if this is true, then why respect the expenditure side
of the budget? Won’t it, too, reflect
current voters’ dangerously short time-horizons?

Just asking.

Comments

58 comments    Share Share    Print    Email

Previous post:

Next post: