Balanced budget

See also: Government budget balance
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Detail from the mural "Government" by Elihu Vedder in the Library of Congress
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A balanced budget (particularly that of a government) is a budget in which revenues are equal to expenditures. Thus, neither a budget deficit nor a budget surplus exists (the accounts "balance"). More generally, it is a budget that has no budget deficit, but could possibly have a budget surplus.[1] A cyclically balanced budget is a budget that is not necessarily balanced year-to-year but is balanced over the economic cycle, running a surplus in boom years and running a deficit in lean years, with these offsetting over time.

Balanced budgets and the associated topic of budget deficits are a contentious point within academic economics and within politics. Some economists argue that moving from a budget deficit to a balanced budget decreases interest rates,[2] increases investment,[2] shrinks trade deficits and helps the economy grow faster in the longer term.[2] Other economists,[3] especially (but not limited to) those associated with Modern Monetary Theory (MMT), downplay the need for balanced budgets among countries that have the power to issue their own currency, and argue that government spending helps boost productivity, innovation and savings in the private sector.[4]

  1. ^ O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall. pp. 376, 403. ISBN 0-13-063085-3.
  2. ^ a b c "Winners and Losers In a Balanced Budget". The Washington Post. 4 May 1997.
  3. ^ "Paul Krugman: Does America have too much debt?". The Irish Times. Retrieved 2024-02-18.
  4. ^ Matthews, Dylan (2019-04-16). "A very detailed walkthrough of Modern Monetary Theory, the big new left economic idea". Vox. Retrieved 2021-05-18.