How should a government spend a budget surplus? In California, the Californian government put some of its surplus in a “rainy-day fund” in 2014. The following year, the German government made plans to use any surplus in 2016 “to increase investment instead of repaying debt.” This means the government “could spend more to support the German economy and that of its neighbors.” Undoubtedly, the E.U. economy would benefit, especially if the U.S. dollar were to continue to appreciate against the euro. However, the decision not to use even a portion of the anticipated surplus to pay down some of the government debt is problematic.
The full essay is at “German Budget Surplus.”
1. Andrea Thomas, “Berlin Moves to Spend Now, Save Later,” The Wall Street Journal, March 14-15, 2015.