“And then,” said Mr. Micawber, who was present, “I have no doubt I shall, please Heaven, begin to be beforehand with the world, and to live in a perfectly new manner, if – in short, if anything turns up.”– Charles Dickens, David Copperfield
A government which robs Peter to pay Paul can always depend on the support of Paul.– George Bernard Shaw
We saw in Part One how labels can matter even if they are arbitrary and misleading. Thus, politicians fight about labeling a particular provision as a tax increase or a spending cut, even if substantively the classification makes no difference. Likewise, they play budgetary games to reduce short-term deficits, even if the long-term budgetary picture does not improve. However, for budget deficits, unlike taxes and spending, Part One left open the question of why these machinations would be politically advantageous.
From the politicians' standpoint, asking why they prefer reporting lower deficits might prompt the old retort: “Is this a trick question?” Obviously, no one wants to be accused of running up the tab. However, the other side of the coin, concerning why voters and analysts may care, is considerably more complicated. The underlying concerns are multiple, and are grounded in substance even though the deficit measure is not. In demonstrating this, it is useful to start by reviewing deficits' modern history.
Budget Deficits – A Capsule History
Concern about budget deficits and resulting national debt has deep roots in Anglo-American history.