How Would Not Having A federal Deficit Affect The Economy?

Question

I keep hearing a federal deficit is good, But don't really understand why.

Answer 1

It would lower interest rates, add value to the dollar, save 30% of the governments discretionary spending,and lead to lower taxes and/or more services.

Another thing no one like to talk about is who is buying our debt. Currently, the majority of our federal debt is held by China, giving us reduced leverage at the bargaining table.

Answer 2

If there is no federal deficit, the government's income is equal or greater than its obligations. The net result is that the treasury does not have to sell treasury bonds to the federal reserve, which in turn pays for these interest bearing bonds with federal reserve notes -that it creates out of nothing! These newly created federal reserve notes would have been introduced into circulation by the treasury in paying the obligations of the government, thereby inflating the currency.

So, not having a deficit means no inflation. Incidentally, if we went back to a gold-backed dollar, there would be no deficits - and no inflation.

Answer 3

Eliminating the deficit would lower interest rates. It would also dramatically reduce government expenses, as at present 30% of the discretionary budget is used to pay interest on the debt. Whether this would translate into lower taxes is anybody's guess.