Indebted to John Tamny for Sparking this Exchange

(Don Boudreaux)

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My morning began with writing this letter, to John Tamny, pushing back against his criticism of budget-deficit hawks. John then thoughtfully replied, to which I here offered a second response.

After sending the last-linked note to John, I followed-up with this note:

John,

Another, more succinct, response to your hypothetical budget choice occurs to me. The choice that you pose in your Daily Caller essay and as you summarized it in your last e-mail is this:

Which is preferable to you: $50 trillion in federal spending over the next ten years with none of it borrowed, or $25 trillion in spending over the next 10 years, half of it borrowed? I think the answer is pretty clear. Spending is the problem, not how they get it.

But because the ability to borrow increases government’s incentive to spend, in today’s real world in which government can borrow with little or no restraint, a more realistic choice is this:

Which is preferable to you: $50 trillion in federal spending over the next ten years with half of it borrowed, or $25 trillion in spending over the next 10 years, none of it borrowed? I think the answer is pretty clear. The ability to finance with debt increases spending.

Deficit financing fuels higher spending, a fact that makes the latter choice more realistic than the choice as you pose it.

Don

John and I continued throughout the day to correspond by e-mail. You can read the remainder of our correspondence beneath the fold.

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