≡ Menu

Budget Deficits Do Indeed Matter

Here’s a letter to John Tamny:


I believe that you’re mistaken to dismiss concerns over government budget deficits (“Federal Deficits Don’t Matter, But Federal Spending Certainly Does”). While it’s true that the correct measure of the amount of resources consumed by government is what it spends, it’s not true – despite Milton Friedman’s suggestion to the contrary – that this figure is distinct from what government takes in taxes. Because debt incurred today must be repaid tomorrow, today’s deficits are tomorrow’s taxes.

In short, the amount spent today by government is the amount that it taxes.

But the timing of taxation matters. By allowing government to spend today and shove the bill onto taxpayers tomorrow, deficit financing enables citizens and government today to spend the money of people many of whom have no opportunity to vote for or against these spending and taxation proposals – many of whom, indeed, literally aren’t yet born.

Precisely because you rightly worry that government spends too much, I invite you to join the ranks of us deficit hawks. We understand that by further divorcing government’s spending decisions from the need to raise the requisite revenue – that is, by further enabling government to spend other people’s money – government spends and taxes more than it would were it required to annually balance its budget.