Should we worry about the budget deficit, keeping the economy at equilibrium?

Question

If we implement expansionary or contractionary policies to help balance the budget, this could fuel an overheated economy, or move our economy away further from potential output. So should we accept deficit as a normal thing to happen? Or should we make balancing the budget our main goal? What do you think is more important?

During the dot com era, the state and federal government had huge amounts of income...but they did not realize that this is just temporary. Its not going to last forever. It is easy to forget that when you can spend the money on great things for the well-being of citizens. This will then create a huge budget deficit down the road as government spending (on all the infrastructure already put into place) exceeds tax revenues by a large amount...

European...do just say what you "think" sounds right? Or do you actually think about it?

Answer 1

Policy action to influence business cycles are almost aways badly timed because they must be enacted into law which takes months. However the Budget automatically falls into deficits as a recession starts because of the decrease in revenues, and no action should be taken to correct this. Likewise a surplus will be generated during a boom if the budget is balanced for normal economic activity. The fine tuning policy actions is better left to monetary policy. Running a long term structural deficit will not improve the economy because interest rates will need be higher to prevent inflation and will counteract the expansionary effects.

Answer 2

think about it. if your account is in arreas your bank will let you know and make you fix it.. right, A balanced budget is good for America, Bill Clinton left America with a trade surplus and a balanced budget and that translates into future investment into American business and infrastructure, by foreign investors, and on a moral level and for the feel good factor, everyone wants to think, at least in principal that they are debt free