I’ve often discussed on this blog how the advantage of having a fiat currency is that one can deficit spend when you need to (think of it as being on the gold standard, except that you can mine as much gold as you need, when you need it)*. Of course, if you deficit spend when there is no idle capacity (human or mechanical) in the real economy, this can lead to inflation. Likewise, if you flood a sector or group of people with dollars when they don’t need it, this also will lead to inflation and price distortion, and can result in socially undesirable outcomes (e.g., rampant income inequality).
The point is that deficit spending itself isn’t bad, it’s how one creates deficits that can be the problem. Republican governor of Florida Rick Scott has decided to be the poster child for bad deficit spending (italics mine):
Yes, Scott is proposing $5 billion in state spending reductions (in absolute terms, not reductions from some sort of current-services budget). Many of these cuts seemed to be ideologically driven, such as the decimation of the state Department of Community Affairs, which runs growth-management programs hated by developers; and a (roughly) ten percent cut in K-12 education, part and parcel of the state GOP’s war with teachers and other state employees.
But the size of the cuts wouldn’t be nearly so high if Scott were not also insisting on major tax cuts, notably in corporate taxes (due to be phased out entirely in a few years) and in state-controlled property taxes that support public schools.
Moreoever, nestled in his budget proposal are spending increases that are designed to redistribute resources according to conservative ideological prescriptions. Most remarkable is his request for $800 million (over two years) for “economic development incentives,” which almost certainly means a gubernatorially-controlled slush fund to be used to bribe companies to relocate to Florida through tax abatements, free government services, and other subsidies. And even as he sought major cuts in public school funding (in a state already facing something of a school financing crisis), he managed to find room to propose $250 million in private-school vouchers.
…He may or may not get his way on the details with a Republican-controlled legislature, but he has certainly initiated class warfare, and a redistribution of public resources to those “job creators” at the top of the income and power pyramid, with a vengeance.
This is the