Balanced Budget - Economic Views

Economic Views

Mainstream economics mainly advocates a cyclically balanced budget, arguing from the perspective Keynesian economics that budget deficits provide fiscal stimulus in lean times, while budget surpluses provide restraint in boom times.

Alternative currents in the mainstream and branches of heterodox economics argue differently, with some arguing that budget deficits are always harmful, and others arguing that budget deficits are both beneficial and in fact necessary.

Schools which often argue against the effectiveness of budget deficits as cyclical tools include the freshwater school of mainstream economics and neoclassical economics more generally, and the Austrian school of economics. Budget deficits are argued to be necessary by some within Post-Keynesian economics, notably the Chartalist school.

Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity.