|>>|| No. 5902
The economics behind a government running a surplus are the exact opposite of what most people think. People think "state gets slimmer, taxes go down, more money in my pocket". Except you can't just think about it on an individual level. What happens on the macro level is that the government takes money out of the economy and does not spend it. They are a drain on the private sector. In order for the economy to keep growing, we have to either get the money from overseas by running a trade surplus (which we don't and haven't done in a long, long time, and it should be pretty obvious that this can't be a policy pursued by governments everywhere, as for one country to have a trade surplus, others have to run a trade deficit) or borrow the money from banks. So the burden of debt is shifted from the public to private sector. Oh, and somewhere down the line, the banks realise that they can't keep lending, these loans are starting to look a bit dodgy and the arse falls out of the whole system again. Great stuff Gideon.