Is the budget deficit a meaningful economic measure?
The budget deficit would seem most likely to have these claimed effects if it were a meaningful economic measure. Unfortunately, it is not—although there is a meaningful underlying phenomenon, which it mismeasures, about which the above claims can be made. The budget deficit’s main shortcoming is that it is calculated on the basis of cash flow, rather than economic accrual. Suppose that an individual kept his books under the rules that the federal government uses to measure the budget deficit. If he managed to buy a million dollar home for only a thousand dollars, he would seem to have acted imprudently, since, in the year of purchase, he would have increased his deficit. This transaction would be treated identically to losing a thousand dollars at the racetrack. If he instead sold a million dollar home for a thousand dollars, or agreed to pay someone a million dollars next year in exchange for a thousand dollars today (assuming that this was not classified as a loan), he would have ac
Related Questions
- Would this measure, if passed, require a 60% vote of the citizens if they initiated a measure to decrease the budget of a political subdivision or to decrease taxes?
- Can the federal budget deficit be addressed while creating economic stimulus to help individuals and small businesses?
- Is the budget deficit a meaningful economic measure?
