Reply #3: Short term vs. long term deficits [View All]

[Resistance Is Futile]

There are two types of deficits. Cyclical deficits result from governments spending borrowed money to push a slumping economy out of recession. Cyclical deficits are short term problems that go away when the economy recovers. They are a good thing because they mean the government is working to restart a stalled economy.

In contrast, structural deficits result from spending more money than the governments take in over the long-term average of the business cycle (recession, recovery, boom, downturn). Structural deficits are permanent and result from unsound public policy. They do not go away even during a boom.

Liberal fiscal policy believes in running cyclical deficits (and conversely, boom-time surpluses) to stabalize the business cycle. On average, however, the bills must be paid; it's just that bills from a recession will be paid during the next boom.

Conservative fiscal policy believes in balanced budgets regardless of the state of the economy. This ideology will result in a sound government balance sheet at all times but is not effective at insuring that an economy is producing at its full capacity.

The best description for people who want to run structural deficits is 'fiscally irresponsible.' Structural deficits are a very bad idea and are not sustainable as the bills simply aren't being paid. People who advocate these kind of policies are either ignorant of economics (as is frequently the base with hard-left leftists) or kleptocrats (as is the case with the right wing)