Unformatted text preview: There are three basic sides to the balanced budget debate. The traditionalists argue for a reduction of the budget deficit on the grounds that it harms the economy. Another group holds the Ricardian view of government debt in believing that there is no real harm done to the economy by the national debt. A third group exists on the fringe with the opinion that the budget deficit is not an adequate measure of fiscal policy. Traditionalists argue that a reduction in the budget deficit will significantly help the economy in the long run. This theory is based on the following logic. When the government runs a budget deficit, it is spending more than it is taking in. In this way, national savings decreases. When national savings decreases, investment--the primary store of national savings--also decreases. Lower investment leads to lower long-term store of national savings--also decreases....
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- Fall '10