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Why might it make sense to allow for the federal government to have deficits in some...

Why might it make sense to allow for the federal government to have deficits in some years and surpluses in others?

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Answer #1

Time-series graphs highlight one striking justification to account for deficits: the federal government spent much more than it took in during World War II. A government, like a family, sometimes faces unforeseen emergencies which require it to borrow. Had the United States been limited at the time of World War II by a balanced budget obligation, the outcome of the war may have been very different. For a second purpose, the family metaphor is relevant: borrowing enables an individual to pay for a durable good that is consumed over time.

For most people, it makes sense to take out a mortgage to buy a home, because that investment provides benefits for several years. Likewise, many policy programs offer long-term benefits. Surpluses and deficits may also have positive macroeconomic consequences, such as helping a fragile economy stabilize.

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