Deficit funding

Deficit spending is when a government's spending exceeds its revenue, thus adding to the budget deficit.

Since 1970, the US government has used deficit spending for all but four years, with larger budgets of spending that revenue. To close the gap, governments typically borrow by issuing Treasury bonds, adding to the national debt.

The virtues and vices of deficit spending are highly contested, increasingly so in recent years. John Maynard Keynes famously quipped: "Anything we can actually do, we can afford", suggesting that so long as the economy's productive capacity remains underutilized, deficit spending can stimulate economic activity, to the benefit of all.

Countervailing opinions, especially those of the neoliberal paradigm, argue that any deficit spending negatively impacts the economy, and should be strictly avoided.


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