Tuesday, January 8, 2013

The Upside of Government Default

There is a good chance that the U.S. government will be forced to default on its explicit and implicit promises within the next few decades. Fortunately, the state government experience of the 1840s suggests that this may provide the best and most durable long-run solution.
Considering the incentives that politicians are faced with and the ease of demagoging a rational ignorant electorate some kind of federal Government default might be the best option.  It would make it much more difficult for Governments to borrow money forcing balanced budgets.

No comments: