The Myth of the Balanced Budget

The notion that a balanced national budget is inherently good while a deficit is bad is a pervasive myth in public discourse. This belief is often rooted in the way households manage their finances, leading many to incorrectly equate government spending and budgeting with personal finance. In reality, the federal government functions differently by having the unique ability to issue its own currency, which means it does not face the same constraints as individuals or businesses. The greater risk for governments is not insolvency but inflation, which can arise from excessive spending without corresponding productive capacity.