The Unbalanced Budget: A Petition

Max Sawicky sawicky at
Mon Feb 15 13:20:29 PST 1999


Below is an open letter that is being circulated for endorsements by professional economists and economic policy-makers. Feel free to cross-post and otherwise circulate.

If you would like to sign, please e-mail your name, position, place of employment, and any relevant titles to:

preamble at

Alternatively, you may fax a signed copy to:


** Please do NOT reply to the address from which this post was sent. ** Any questions may be directed to the following e-mail address:

NoSurplus at

Places of employment are for identification only. They will not be listed as endorsing institutions, unless we are otherwise advised.

Endorsements at this point include:

Dean Baker Paul Davidson James K. Galbraith Max Sawicky Randy Wray



We, the undersigned professional economists, offer our views on certain basic features of the Federal budget released by the Clinton Administration for Fiscal Year 2000.

1. We support the Administration's rejection of large tax cuts targeted on upper-income taxpayers, and their refusal to cut Social Security benefits.

2. But we do not support the commitment of budget surpluses expected over the next 15 years to reduction of the national debt. We believe this policy is economically unwarranted and indeed self-defeating: it is likely to undermine the national economic growth and high employment on which achievement of the projected surpluses depends.

3. For the past decade, we have objected repeatedly to a proposed constitutional amendment that would mandate balanced budgets. Like mandated balanced budgets, mandated surpluses work to slow growth, and to lengthen, deepen, and multiply recessions. When unemployment is high, the right policy is to run deficits, not surpluses.

4. The surplus mandate would prevent increased public investments that are needed to support economic growth in the future. Growth in public investment can and should be significantly larger than the President's budget allows, even at the cost of a reduced surplus. Also, the 1996 welfare repeal will require new initiatives from the Federal government soon. These actions will be made much more difficult if surplus mandates remain in place. We believe that the well-being of children in poverty is a higher priority than savings of interest on the public debt.

5. The notion that budget surpluses -- if they indeed materialize -- will be translated dollar for dollar by the capital markets into increased long-term private business investments lacks foundation in either fact or theory.

6. A policy of national debt elimination also entails the repurchase of the safest financial assets now available to private investors. Such a policy implies that private investors seeking safe assets will be pushed toward foreign markets (such as for the euro) and poses high risks to the stability of financial markets and of the dollar.

7. Finally, nothing in this proposal is relevant to the financial condition or future viability of Social Security, since future retirement incomes can only be paid out of future production. If benefits do exceed payroll taxes in future years, the difference can only be resolved by raising taxes, reducing benefits, or increasing once again the national debt -- exactly as at present, and irrespective of any steps that may be taken now.

8. In sum, we oppose a policy of buying down the national debt -- as unlikely to succeed, as unlikely to do good if successful, as unneeded to preserve Social Security, and as an inferior use of our public resources. We urge policymakers, the press, and our professional colleagues to refrain from embracing this simplistic approach to this important issue.


========================================================= Max B. Sawicky Economic Policy Institute (EPI) Suite 1200 1660 L Street, NW Washington, DC 20036 202-775-8810 (voice) 202-775-0819 (fax)

Opinions reflected above are not necessarily shared by anyone else associated with the Economic Policy Institute. ==========================================================

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