Is it sometimes good to run budget deficits? If so, should we admit it (out loud)?

There are bad deficits and there are good deficits. What makes a fiscal deficit good or bad depends on both the context in which the deficit is run and the reason that the deficit is rising. The belief that it is unquestionably foolish to adopt policies that directly or indirectly increase the gover...

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Bibliographic Details
Published inVirginia tax review Vol. 26; no. 2; p. 325
Main Author Buchanan, Neil H
Format Journal Article
LanguageEnglish
Published Charlottesville Virginia Tax Review 01.10.2006
Virginia Tax Review Association
Subjects
Budget
Budget deficits
Deficit financing
Government spending
Laws, regulations and rules
United States > US
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Summary:There are bad deficits and there are good deficits. What makes a fiscal deficit good or bad depends on both the context in which the deficit is run and the reason that the deficit is rising. The belief that it is unquestionably foolish to adopt policies that directly or indirectly increase the government's annual borrowing on the financial markets -- which is what it means to run a budget deficit -- is not the universal truth that the current conventional wisdom might imply. Knowing that deficits are not evil incarnate raises some difficult questions, however, most notably whether it is dangerous for policy makers or economists to admit publicly that deficits might sometimes be the result of wise policy choices. While there is always a danger that such knowledge can be distorted and misused, this article argues that policy makers or economists have a responsibility to adjust public discussion of budget deficits to admit that there are good deficits as well as bad.
ISSN:0735-9004