Politicians often tell us that we should live within our means. True enough. Unfortunately, many of them do not appear to understand what this actually entails when it comes to fiscal policy. So far as most economists are concerned, the events of the last decade have thoroughly discredited advocates of austerity. Yet, it remains quite common to hear politicians from across the political spectrum calling for reductions in fiscal deficits or even fiscal surpluses. There appears to be little awareness that, in most countries, a call for a fiscal surplus is, literally, a call for the society to live beyond its means.

Continue reading →