A Balanced Budget

The Green New Deal is silly and isn’t worthy of our attention. The broader point it makes—that we can have anything we want if the Federal Reserve extends credit—is.

Let me blow your hair back for a second. The two biggest stock market rallies in the history of our stock market (in the 1920s and in 1990) occurred against a backdrop where the budget deficit was disappearing or had disappeared.

Calvin Coolidge is perhaps the second-least well-understood president of the 20th century (behind only Warren Harding). I’ll give you the abridged version: Coolidge was perhaps the biggest CF known to mankind. He ran the country like he ran a household budget. Talk about austerity—wow.

I worked for the government under the Clinton administration. Clinton was not well-liked by government employees. He kept telling people to “do more with less.” No money for trips, no money for projects, no money for boondoggles.

Go look at the budget figures from the 1990s—the size of government remained pretty constant, which is something. It was the closest thing we’ve had to austerity in nearly 70 years. The drunken spending spree, replete with new government bureaucracies and multiple wars, was kicked off by 9/11.

(In hindsight, it should not have come as a surprise that stocks went straight up in the 90s. Free trade, peace breaking out all over, balanced budgets, innovation—really an amazing time to be alive. And people were miserable.)

Do you think it is an accident that the two biggest bull markets roughly correspond with government austerity? I do not.

Today, the opposite is happening. In the 2000s, Dick Cheney said that deficits didn’t matter, but at least he was constrained by the bond market. I suppose that if MMT were implemented, foreign exchange markets would have their say about it (provided we still had floating exchange rates).

Don’t you think it’s weird that the government can spend as much money as it wants, but you can’t? That the government gets to play by a different set of rules?

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Gary Anderson 2 months ago Contributor's comment

Austerity from time to time could help, but continual austerity like we see in Europe is a total failure.