10 Facts About Budget deficit

Government Budget deficit spending is a central point of controversy in economics, with prominent economists holding differing views.

The state's Budget deficit enables a correspondent buildup of money assets for the private sector and prevents the breakdown of the economy, preventing private money savings to be run down by private debt.

Some Post-Keynesian economists argue that Budget deficit spending is necessary, either to create the money supply or to satisfy demand for savings in excess of what can be satisfied by private investment.

Chartalists argue that Budget deficit spending is logically necessary because, in their view, fiat money is created by Budget deficit spending: fiat money cannot be collected in taxes before it is issued and spent; the amount of fiat money in circulation is exactly the government debt—money spent but not collected in taxes.

Opposite of a budget deficit is a budget surplus; in this case, tax revenues exceed government purchases and transfer payments.

In other words, Budget deficit spending permits the private sector to accumulate net worth.

Similarly, running a government surplus or reducing its Budget deficit reduces consumer and business spending and raises unemployment.

Also, if the government's Budget deficit is spent on such things as infrastructure, basic research, public health, and education, that can increase potential output in the long run.

Cyclical Budget deficit is a Budget deficit that is related to the business or economic cycle.

Cyclical Budget deficit is the Budget deficit experienced at the low point of this cycle when there are lower levels of business activity and higher levels of unemployment.