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William Vickrey, 1996 Nobel Award in Economics

October 5, 1996

Authorizing income-generating budget deficits results in larger and possibly more extravagant, wasteful, and oppressive government expenditures.

Reality: The two issues are quite independent, in spite of the fact that many anarcho-libertarians appear to have been using the ideology of budget-balancing as a way to put a straitjacket on government activity. A government could run a deficit with no activity at all other than borrowing money by issuing bonds, paying out the proceeds in old-age pensions, and levying taxes sufficient to cover any net debt service. The issue of what activities are worthwhile for the government to carry on is a totally different issue from what the government contribution to the flow of disposable income needs to be to balance the economy at full employment.