Saturday, July 16, 2011

Suppose we cut enough to balance the Federal budget and the economy starts growing like crazy. Then what? What goes up must come down.

If we cut enough to balance the budget, the Federal debt stops getting bigger. It starts to get smaller.

And if the economy is growing, and we use credit for growth, then the Non-Federal debt grows fast.

So then we have private debt growing fast, and public debt shrinking. This is what everyone seems to want.

But with rapidly increasing private debt and a falling public debt, the Non-Federal Relative must rise again:

And then, it must fall again. Like the last time. Only, worse than last time.

You remember the last time, right?

Balancing the Federal budget does not solve the problem.

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