<p>^^^^</p>
<p>Right about everything except consistently balanced budget. The budget should not be consistently balanced. By balancing a deficit during a recession, you screwed your country. By balancing a surplus during an inflationary gap, you created hyperinflation (screwed country times 2). During recession you need to spend (increase deficit) until conditions are back to normal. During inflationary gap u need to tax tax tax (increase surplus).</p>
<p>Basic economics</p>
<p>BASIC ECONOMICS</p>
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<p>Yep. As you said, we often deal with inflationary pressure by raising taxes (or decreasing government spending) and we often deal with recession by government stimulus. This causes periodic deficits and surpluses.</p>
<p>It is worth noting that you don’t need fiscal policy to curb inflation. Sell t-bills. Increase bank reserve requirements.</p>
<p>But we’re missing the point: a balanced budget would decrease long term tax rates (relative to consistent budget deficits as seen today) by decreasing government debt and related interest expenses. This is indisputable. Thus, the idea that:</p>
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<p>is misleading. Consistently running budget deficits DOES demand extra taxes, and consistently paying off these deficits DOES give you a long run tax refund (above and beyond the taxes you’d incur to pay off these debts today). They don’t run parallel, but the effects of paying off deficits are very real. </p>
<p>This brings us back to the Bush tax cuts and Iraq war. The accumulated federal debt due to these decisions will result in increased taxes or reduced government program benefits.</p>