My opening shot (!) in an ongoing series that I plan on the federal deficit:

All the talk about a balanced budget ignores the fact that the government is on a cash basis in which all expenditures are treated as outflows of the period. In regular for-profit accounting, the payment of a salary is treated as an expense while the acquisition of a building, say, is treated as an investment. Government does not make this distinction. Were businesses to keep their books the way that the government does, a large number of them would be running a deficit. Yes we desperately need a balanced budget but it needs to be a balanced operating budget. Anything else is nonsensical and shows a sad misunderstanding of government accounting. Continue reading →