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How and When to Balance the Government Budget

In: Debates in Monetary Macroeconomics

Author

Listed:
  • Steven Pressman

    (Colorado State University)

Abstract

The doctrine of functional finance seeks to get around the argument that government deficit spending crowds out other forms of spending and has no positive economic benefit. Instead it holds that if people are willing to lend money to the government there should be no crowding out, a view that inspired modern monetary theory. This paper argues against these views and makes a case for cyclically balanced government budgets. Following Keynes, governments should run surpluses in good economic times and roughly equivalent deficits to stimulate the economy during recessions. Following Piketty, the paper opposes government budget deficits because of their distributional consequences. Taxing the rich is better than borrowing from them, except during times of recession.

Suggested Citation

  • Steven Pressman, 2022. "How and When to Balance the Government Budget," Springer Books, in: Steven Pressman & John Smithin (ed.), Debates in Monetary Macroeconomics, chapter 0, pages 69-91, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-11240-9_4
    DOI: 10.1007/978-3-031-11240-9_4
    as

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