Fiscal Responsibility

Keynesians insist that we can spend our way out of a recession.  They are half right.  We can spend our way out of a recession, but only if we've saved our way out of a boom.

Arguably, were government properly managed, this is an obvious idea: when the economy appears to be overheating, raise taxes and buy assets such as gold, silver, so on.  This will slow the economy and reduce the risk of over production.  However, it is very important to not spend the money, as that will only recirculate it and not significantly slow the economy.

When the economy slows, the government can reduce taxes and live off its assets, either securing loans against them or selling them outright.  Then, the spending the government is committed to does not have to go down.  Further, this is just good fiscal responsibility, as things the government does that are big-ticket one-time costs, such as building a new road, can be done during a down time with the money that has been saved, thus reducing unemployment making things the country actually needs.  This behavior is not at all inflationary, as the funding comes from previous saving.

Of course, to do this, the country would have to learn to live well within its means and would have to learn to raise taxes during flush times and lower them during lean, the exact opposite of what currently happens.  The easiest way to accomplish this is to enforce that all taxes be of sales/use taxes, which will naturally track economic trends up and down.  The mere act of saving during times of high economic activity will slow down the economy.

However, during a recession, prices decrease, so the government must save significantly more than the current value during the boom in order to cover the bust.  Fortunately, booms generally last longer than busts.