whats better for the US economy, A deficit or surplus? think about it. and Y?

Question

Both sides have a negative, and a positive. In the end I would most likely go with a deficit because with a surplus a lot of people would cash in their bonds and cause inflation. What do you think on the matter at hand?

Answer 1

Neither is "good" or "bad" as long as they're balanced in the long term.

A long-term surplus is bad because it means the government is unnecessarily tying up private funds.

A long-term deficit is obviously bad because it aggregates to government debt.

Answer 2

Intersting question. The answer as it stands today is everything in moderation. Too much of a surplus would hurt the economy. Prices for goods would go down but to the point were business could not afford them. If there is a deficit that is a problem because people are out of work. They system that controls these factors in the untied states is the federal reserve. They have the power to raise and lower interest rates.

Answer 3

I assume you are referring to the federal budget, and not to the trade balance?

If so, I think a mild deficit is definitely best. Better than a balanced budget, and certainly better than a surplus, which I think is atrocious. And nothing to do with inflation.

A surplus means:
- you are overtaxing the population;

- you are literally taxing the poor to give money to the rich;

- you are shifting debt from the wealthy government that enjoys low interest rates and cannot default, to struggling individuals who sometimes face outrageously high interest rates and do indeed go bankrupt and get foreclosed on.

- you are inhibiting economic productivity by diverting money from the productive private uses to typically unproductive, lobbying-induced political uses.

A deficit implies the opposite of each of those points. A deficit that is a smaller portion of GDP than nominal GDP growth (say, 1% or 2% GDP deficit vs 6% nominal GDP growth) is the sweet spot:
- The economy is growing faster than the debt,

- So the debt is becoming more manageable every day, without us overtaxing the population.

Answer 4

It really depends on what the US uses its imports for. If it is pure consumption, then a deficit doesn't make sense. However, if the imports are investment goods, then you can make the case that investment will add to the capital stock, which will increase the US' ability to produce goods and earn income in the future.