Fiscal Charter Debate

Origin of Specious

Here is George Osborne accusing Labour of wanting to ‘borrow forever’.

The funny thing about this turn of phrase, which is meant to make us gasp in horror, is that actually shows why the government, in principle, neverneeds to run a surplus. That’s exactly the point: it can borrow forever. (Of course, I don’t think it’s really borrowing, but I’m happy to play along with the conceit for the sake of argument.)

If I borrow, I need to run a surplus at some point to pay back my debt. I can try to keep borrowing to repay my debt, but at some point nobody will be likely to extend me a new loan to refinance my existing loans. Why? Because at some point I’ll die, and the last person holding my debt will get nothing but my crappy assets. Death is the ultimate default.

But the State doesn’t die. It doesn’t even retire. So it…

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