Australia’s Prime Minister, Malcolm Turnbull has promised a ‘return to surplus’. So has Theresa May. Though America’s President Donald Trump has no such concerns one way or the other, President Obama repeatedly characterised a budget surplus as something to aspire to. They are completely wrong to do so.
A surplus means a government collects more in taxes more than it spends – taking more from us in tax than it gives us in its spending, and weakening our bank balances. The aspiration for surplus is the reason so few Australians, Americans or Brits have had a real pay-rise in 15 years. It is the reason that public services have been cut, inequality has taken off and private debt has increased. It is the justification for austerity, in all its forms.
They are wrong to think a budget surplus is necessary. They are wrong to think a surplus is consistent with sustainable economic growth. They are wrong in nearly everything they ever say about government finances and how these are linked to current and future prosperity.