A State is Not a Household

It is easy to persuade the public that it is important to maintain a low target deficit rate. This is simple household budgeting: if we are in debt, we should reduce our expenses. But a national economy and a household budget are qualitatively different. A family in debt can reduce its expenses (by buying less) and increase its income (by working longer hours) to narrow its budget shortfall. But a country is not a household; a balanced budget depends on what happens throughout the economy and not solely on government action.

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