It seems that most if not all advanced economies (US, Japan, UK to name a few) have been running budget deficits since basically the last 20 years. I understand that current debts lose value over time because of inflation and economies grow, but how can they do this for basically ever? I can’t wrap my head around the maths that makes this possible, and the markets don’t seem all that worried
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So first, deficit really doesn’t matter. Only debt does as that affects what rate lenders will lend money out to you. And same as a person, the more a nation makes the more comfortable lenders are to lend at a lower rate. So as long as the gdp:debt ratio doesn’t change much over time, lenders are fine lending at low rates. Which lets you do deficit spending to make your economy grow even faster.
Generally about 1:1 is considered to be acceptable for modern, robust economies.
A bit of an addendum as I misread a later comment: Why run a deficit?
Because targeted spending will create more growth than it costs. Infrastructure is the classic example of this. While it does not directly generate any wealth (toll roads excluded), good infrastructure will both increase business productivity by reducing transportation cost. Which both increases tax revenue and encourages even more business investment which generates even more tax revenue.
Education is another great example of this, but the benefits can be delayed by years.
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