Dayne —

Thanks for your response. As I said in my essay, we must balance the risks posed by debt against the risks that excessively tight fiscal policy will slow growth, thereby making the country poorer and ultimately less able to provide the needs of its citizens.

I would be very interested if you could amplify what seems to me to be the most important point you make, the possible contribution that Austrian economics could make to balancing these risks. Please explain how the Austrian methods of ensuring healthy growth and the rules of monetary and fiscal policy that you see as appropriate.

By the way, there are a few minor points in your response that may not be expressed as clearly as they could be.

I do not think you mean “Clinton didn’t reduce the deficit either, he just balanced the budget for a couple years.” Perhaps you meant “debt” rather than deficit (you can’t run a “surplus” without eliminating the deficit). But even that is not right, as total Treasury debt outstanding did decrease during the Clinton administration. It seems to me that a budget surplus, by definition, means that debt repayments exceed new borrowing.

I don’t think it is accurate to say “These include replacing actual money in the SS trust funds with government bonds/treasuries”. There never was any “actual money” in the SS trust fund and the “bonds” there now are not conventional Treasury bonds, but rather, special issues that are bookkeeping devices that have no effect whatsoever on the actual financial position of the government.

I don’t think the assertion that “The US budget/debt are no different than a family households.” is consistent with the principles of Austrian economics. Austrian economics recognizes that the government has the power to meet its obligations by issuing fiat money. Households do not have that power.

Thanks for your contributions to this discussion.

Economist, Senior Fellow at Niskanen Center, Yale Ph.D. Interests include environment, health care policy, social safety net, economic freedom.

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