The Household Budget Analogy (2)

• A household has to "live within its means"

  • Income must match or exceed spending

  • Otherwise, debt and bankruptcy

• So, too, must the federal government follow the principles of "sound finance"

  • Income must match or exceed spending

  • Otherwise, national debt grows and leads to some combination of:

    • Inflation

    • Refusal of people to buy government bonds

    • Bankruptcy