Should Fiscal Policy Resemble Private Budgets?
The threat of a US government shutdown underscores the dilemma facing many countries trying to balance their budgets and stimulate economic growth. In the aftermath of the COVID-19 pandemic, a growing number of economists are questioning the notion that a balanced budget should take precedence over all other considerations.
NEW HAVEN – Every few months this year, the US government appears on the verge of shutting down. It happened in May, when congressional Republicans initially refused to raise the debt ceiling, and in September, when Congress managed to avert a last-minute shutdown by passing a stopgap bill to keep the federal government open until November 17.
In the event that Congress fails to reach an agreement to fund federal agencies by the next deadline, millions of government employees, including millions of military personnel, will be furloughed, disrupting critical public services.
While government shutdowns are a uniquely American phenomenon, the United States highlights the dilemmas facing fiscal policymakers today. It also sheds new light on the ongoing debate among economists over whether government budgets should be balanced, particularly in the aftermath of the COVID-19 pandemic.