Is there a reason the federal government wouldn’t want to start paying down the deficit? What are the negatives to having more money coming in than going out?
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Government budgets don’t work the same way as household budgets, or even the same way as business budgets.
Deficits are not (necessarily) a bad thing. Neither are they necessarily a good thing, of course.
Governments don’t really care about “how much money they have right now” in the way that a person might care about their bank account. First, because they care about long-term flows rather than a moment in time; second, because they don’t treat money as a resource in the same way.
To governments, money flow is more about *promises* and *actions* (that fulfill promises).
A government deficit means that the government is, by a specific metric, creating more promises than it’s fulfilling at that moment.
But this is generally fine, because a (healthy) government’s ability to fulfill promises grows over time. There’s a bunch of reasons for this, the simplest of which is that human productivity grows over time.
Imagine you’re a carpenter. You know that you can build more tables every week, because you have a magic table-making-gnome that continually gets better at building tables.
You promise someone to make them 10 tables over a week. The next week, you make and deliver 10 tables, and promise to make them 11 tables. The week after that, you deliver 11 tables, and promise to make them 12 tables.
You’re running a “deficit” of one table; each week, you are making one less table than you’re promising. But since the promises are for the future, you’re fine – and will continue to be fine for as long as your table-making keeps getting better over time.
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