I realize they may just be practicing politics, but Senators Olympia Snowe and Jim DeMint serve up a basic misunderstanding of economics in their commentary on The Wall Street Journal’s op-ed page today. Ms. Snowe, a Republican from Maine, and Mr. DeMint, a Republican from South Carolina, write:
For the long term, to prevent both this Congress and its successors from hijacking the promise of American prosperity, we also need a balanced budget amendment to the Constitution, like the one we and all 47 Senate Republicans have introduced… Our government has balanced its budget only five times in half a century.
Ms. Snowe and Mr. DeMint seem to be suggesting that the federal government is fiscally responsible only when it runs a balanced budget. But that’s not true. The government can run deficits indefinitely, without federal debt rising, so long as one year’s economic growth pays off the previous year’s deficit.
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