Is It Sometimes Good to Run Budget Deficits? if So, Should We Admit It (Out Loud)‪?‬

I. INTRODUCTION There are bad deficits and there are good deficits. What makes a fiscal deficit good or bad depends on both the context in which the deficit is run and the reason that the deficit is rising. (1) The belief that it is unquestionably foolish to adopt policies that directly or indirectly increase the government's annual borrowing on the financial markets--which is what it means to run a budget deficit (2)--is not the universal truth that the current conventional wisdom might imply. Budget deficits are potentially dangerous and must be monitored carefully, but they are not always, inevitably, completely, and irreversibly horrific. Far from it. For example, just as families can sensibly take out mortgages to buy homes and float student loans to finance higher education, so too can governments borrow money to finance investments that will produce greater returns to society than their costs.