Warren Buffett thinks that it is utterly foolish not to let the national government keep on growing. In his words, it would be “most asinine” not to raise the debt ceiling: “We’re a growing country, and we’re going to have a growing debt capacity.”
What’s the appropriate size of the government? Buffett’s answer: Larger. If the debt limit is not raised, this imposes a harder budget constraint. We all have hard budget constraints. Why shouldn’t the government have one too in this form? Why should it have a highly flexible “limit”? How large would a child’s allowance be if it could take any amount it pleased from its parents’ income? I find it hard to imagine that the Congress will limit itself in this way, but it’s possible. If it does, the government will be forced to keep its size to the sum of its taxes plus its borrowing limit. There will be a political struggle over who gets a pie whose size is more limited than it would be if more borrowing could occur. Such a struggle would be a plus. It would bring government spending on specific programs more out into the open to be debated.
8:04 am on May 1, 2011
