Chapter 36: Government Budgets, Debt, and Deficits

Benjamin Russo

Government budgets, debt, and deficits This chapter describes the economics of government budgets, with particular attention to government borrowing in the United States at the federal, state, and local levels. The next section provides definitions and describes some principles of federal, state, and local budgeting. The third section focuses on major issues pertaining to federal government borrowing. The final section is a summary. Equity and efficiency are crucial concepts in economics, so it is useful to begin by defining these terms. Two principles guide evaluations of the effect economic policies have on equity. The benefit principle is the viewpoint that it is equitable for citizens who benefit from government services to pay for them. The ability-to-pay principle is the viewpoint that it is equitable for a citizen's tax liabilities to be correlated with the citizen's economic resources. It follows that taxpayers with equal abilities to pay should be taxed State ...

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