Rath said:
There is no reason not to run a deficit in the face of a short term loss such as a natural disaster other than some moral problem with it. It's the sensible thing to do economically. Edit: And in your plan to save money for a crisis - spending assets built up over previous years would still be running a deficit in that particular year. |
For a country as geographically large as the United States, spending on natural disasters should be budgeted for because the regional variation ensures fairly consistent spending on disaster relief. Certainly, there would be some years where you might need to pull additional money out of your 5% to 10% budgetary surplus to cover the spending and other years where you would have surplus money to add to the 5% to 10% budgetary reserve but it would demonstrate a remarkable lack of foresight to run a deficit due to a natural disaster.
Now, you're correct that it would technically be a budgetary deficit when you spent some of your reserves but it is not problematic deficit spending because there is no built up debt. When you pay for recurring spending through debt as a government you're not that much different from an individual who pays for their rent or groceries with debt; you’re participating in behavior which is unsustainable, and the total cost of what you’re paying for today is dramatically higher than you believe because of the cost of interest over the lifetime of debt.
