PSCI 3325 Lecture Notes - Lecture 5: Balanced Budget Amendment, Balanced Budget
18 Oct 2016
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A lot of deficits are justified and most don"t pay with cash anymore. People will need to have a house to live in but usually cannot pay for it in cash. Difference between how much you have and how much you actually spend: the debt limit. As long as you can borrow the money with a reasonable rate of interest. As a citizen, it depends on your salary and age. Government"s ability to repay is based on their economy, how much taxes they can accrue to pay for the deficit. If ability to grow is faster than deficit, bond buyers are not going to be scared. As long as the rate of debt does not exceed the rate of growth. Your ability to pay does not exceed your deficits. Interest rates can increase because of question/inability to pay. Lately, there has not been a war or major depression that can justify the deficit that has been accruing.
