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Argentina Case Points to Balanced Budgets

January 05, 2002

The cause of Argentina's economic problems lies at the feet of the voters of that country and their elected representatives. For decades, Argentina's government has spent far more than it took in taxes.

There are only three ways of financing a government: taxes, borrowing and printing money. (The government can confiscate things, but taxes really are confiscation.) Too much of an increase in money leads inevitably to inflation. Over the years, many gimmicks have been tried, including dollarization and bank withdrawal rules, to prevent inflation. No action by the IMF or the U.S. can help, unless we want to lend money to the Argentine government.

The whole economy is going into the tank because the people did not want to pay enough in taxes to finance the amount of government they desired. It is always in a political candidate's interest to promise more spending and lower taxes. This is why we have a balanced budget provision in our California state Constitution.

Walter J. Rountree

Anaheim

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