Budget fight

The discussions going on now in regards to the budget are not working out because both sides are coming at the problem from a completely different directions. One side believes that you cannot keep spending more than you are taking in and the other side believes you can just print up the money to cover the deficit. The argument for the first side is hard to make since the government has been running deficits since WW 2. The reason this has been possible is that the deficit as a percent of GDP has held to about 3.5%. However that has changed in the past two years and is now projected to be 5.5% in the future. This could lead to a serious problem. The second side is based on an unproven economic theory called Modern Monetary Theory. It says that the government can print money as needed since the government is the issuer of the currency. It remains to be seen how long this can last. Most people think of budgets in terms of their private lives and know that spending more than you take in will lead to bankruptcy. This may not be the case with the federal government. The obvious solution to this problem is not to cut any spending but to cut the rate of increase in spending. In other words if the VA budget this year is going up by 4% then just let it go up by 2%. A compromise might include some adjustments for inflation. But it is all politics all the time, economics be dammed.