Once more it's time to visit our friend Neil the Ethical Werewolf, who suggests that Democrats start touting the ol' balanced budget. From a political perspective, sure, this is probably the sort of thing I would advise any candidate to do—the Bush administration really has made a hash of the deficit, and liberals may as well rub his face in it. But from a policy perspective, no, no, no. The balanced budget is an awful thing to pursue. I do understand that Bill Clinton eventually got to balance in 1999 and 2000, but it certainly wasn't something that needed pursuing—if anything, he caved in the face of GOP pressure on the issue, despite the fact that Gingrich's proposed budgets, which caused for massive cuts in social spending, were wildly unpopular. He held onto the surpluses not because it was good policy, but because he didn't want the Republican Congress to get its grubby hands on the extra money. (Jon Chait tells the story here.) Alas, then came 2000.

As a fiscal principle, the balanced budget makes no sense to me. In a downturn you're always going to want a bit of a deficit—not because of Keynesian public spending, but just because tax revenues are going to be down, unemployment benefits up, the states will all need additional federal revenue to keep ticking, and no one wants to start hiking taxes (or cut spending) during a recession. If we're really worried about exploding debt—as we should be—then it seems fine simply to keep the deficit roughly below the rate of growth, or keep the debt-to-GDP ratio stable, at around, say, its historical average of roughly 40 percent. No need to hike taxes even further or make more drastic cuts just to get the deficit down to zero. The difference between a manageable deficit of, I dunno, 2 percent of GDP and absolute balance is, after all, about $200 billion. You can do good liberal stuff with that money. Plus, there's no sense making a fetish of saving up surpluses for the future—if we've learned one thing over the last five years, it's that the surpluses just get squandered.

On the other hand, one thing I would like to see considered at the federal level is something that states make good use of: capital budgets, which borrow money and plan for long-term capital investments, just like any corporation would. (These budgets, obviously, don't need to be balanced as per state constitutional amendments.) I've never understood why the federal government doesn't have a capital budget. If there's anything we should be using debt financing for, it's on large public works and long-term infrastructure, no? Now the tricky thing is that, as I understand it, states are usually limited as to how much they can borrow by their credit rating, rather than any rules or regulations. Much like corporations. Obviously there's no such limit on Congress, so perhaps this wouldn't work nearly as well at the federal level. At any rate, I'd really like to know whatever happened to the committee that Clinton set up to study this issue.