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Governments are Broke

Governments are Broke
Profile photo of Redmond Weissenberger

Great article on The Freeman today

Earth to New York Times: Governments Are Broke

I often hear the argument that Governments incurring deficits and debt is OK because they are investing in “our” future. Never mind the Trillion dollars in interest we have paid in Canada on the debt that Pierre Trudeau incurred during his tenure.

I don’t know about you, but when I get the mortgage statement at the end of the year informing me that I have paid more in interest over the year than principle, I am not terribly pleased.

But as William Anderson points out, this is the argument used by the New York Times when referring to the Federal, State and Local budget crises that are ongoing in the USA:

A country with a deficit is not necessarily any more “broke” than a family with a mortgage or a college loan. And states have to balance their budgets.

Ah but there is a big problem with this example – it isn’t quite analogous, Williams make the point that:

There also is a huge problem with the Times’ mortgage analogy. The Treasury is borrowing money to make payments on previously borrowed money. If I were paying for my groceries with a credit card and borrowing money to make my mortgage payments, and it was clear my projected income over many years would not cover my expenses, that would be the very definition of “broke.”

Broke indeed.

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Profile photo of Redmond Weissenberger

Redmond is the director of the Ludwig von Mises Institute of Canada.

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