Balanced budget
A balanced budget (particularly that of a government) is a budget in which revenues are equal to expenditures. Thus, neither a budget deficit nor a budget surplus exists (the accounts "balance"). More generally, it is a budget that has no budget deficit, but could possibly have a budget surplus.[1] A cyclically balanced budget is a budget that is not necessarily balanced year-to-year but is balanced over the economic cycle, running a surplus in boom years and running a deficit in lean years, with these offsetting over time.
See also: Government budget balanceBalanced budgets and the associated topic of budget deficits are a contentious point within academic economics and within politics. Some economists argue that moving from a budget deficit to a balanced budget decreases interest rates,[2] increases investment,[2] shrinks trade deficits and helps the economy grow faster in the longer term.[2] Other economists,[3] especially (but not limited to) those associated with Modern Monetary Theory (MMT), downplay the need for balanced budgets among countries that have the power to issue their own currency, and argue that government spending helps boost productivity, innovation and savings in the private sector.[4]
Political views[edit]
United States[edit]
In the United States, the fiscal conservatism movement believes that balanced budgets are an important goal. Every state other than Vermont has a balanced budget amendment, providing some form of ban on deficits, while the Oregon kicker bans surpluses of greater than 2% of revenue. The Colorado Taxpayer Bill of Rights (the TABOR amendment) also bans surpluses and requires the state to refund taxpayers in event of a budget surplus.
The last time that the budget was balanced or had a surplus was the 2001 United States federal budget.
Numerous sources have stated that as of 2023, a balanced budget is no longer possible without massive reductions in spending by the United States federal government according to the Congressional Budget Office[9] and several independent sources.[10][11] Extreme spending reductions on numerous entitlements would also not likely be popular, even if such cuts would be sufficient to bring a balanced budget to the United States, "Federal debt will rise from 98 percent of GDP in 2023 to 181 percent in 2053."[12]
Sweden[edit]
Following the over-borrowing in both the public and private sector that led to the Swedish banking crisis of the early 1990s and under influence from a series of reports on the future demographic challenges, a wide political consensus developed on fiscal prudence. In the year 2000 this was enshrined in a law that stated a goal of a surplus of 2% over the business cycle, to be used to pay off the public debt and to secure the long-term future for the cherished welfare state. Today the goal is 1% over the business cycle, as the retirement pension is no longer considered a government expenditure.
United Kingdom[edit]
In 2015 George Osborne, the Chancellor of the Exchequer, announced that he intended to implement a law whereby the government must deliver a budget surplus if the economy is growing.[13] Academics have criticised this proposal with Cambridge University professor Ha-Joon Chang saying the chancellor was turning a blind eye to the complexities of a 21st-century economy that demanded governments remain flexible and responsive to changing global events.[14]
Since 1980, there have been only six years in which a budget surplus has been delivered: twice when the Conservatives' John Major was Chancellor of the Exchequer, in 1988 and 1989, and four times when Labour's Gordon Brown was Chancellor, in 1998, 1999, 2000 and 2001.[15]