[quote=sdduuuude]I believe, however, there is an optimal level of debt. Not enough is bad. Too much is also bad. And, once you are past the point of optimality, piling it on gets you farther from optimality.
We are well past that point and whomever writes articles like this doesn’t realize it.[/quote]
Agree. You can’t stimulate the economy every time we hit a bump in the road. But to maintain this optimal level of debt, you need to have budget surpluses when the economy isn’t in a slump, so that the surplus can be spent to stimulate when a slump comes without piling on more debt. Just like rainy day savings.
The problem is that every time we get a budget surplus we spend it, mostly by cutting taxes but also increased spending on other things. Then when the slump comes there’s no money, so we go deeper in debt to stimulate.
The balanced budget amendment proposal is stupid for this reason. Budgets should be balanced over the business cycle, not arbitrary dates.
