lectur3-page50 - the economy could slip into a depression...

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A balanced budget amendment to the U.S. Constitution would require the federal government not to run a deficit, and perhaps even a surplus. This may sound like a sound financial practice, but then again it may cause some problems. Could you imagine if all of us were forced to run balanced budgets. No credit. What do you think would happen to our economy without credit? Too much available credit is probably not very wise either. Like many things in this world, too much or too little, can create problems. Forcing a balanced budget would mean that government would not be able to increase government spending during a recession to stabilize the economy if that additional spending would create a deficit. There would be a real possibility that
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Unformatted text preview: the economy could slip into a depression like that of the 1930’s. If the economy began to overheat creating rampant inflation, then the government would not be able to raise taxes in an effort to cool the economy down if those additional tax revenues would create a budget surplus. The government would be left with little, if any, fiscal policy tools to use to manage the economy. Credit can be used wisely and productively, or it can be misused. This is true at the government level, and at the individual level. I am not sure that we want to “throw the baby out with the dirty bath water.” to force fiscal restraint. That may be a very expensive mistake for all parties. 50...
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This note was uploaded on 12/29/2011 for the course ECO 210 taught by Professor Malls during the Fall '10 term at SUNY Stony Brook.

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