Classic and modern theories regarding budget balance

Dobre Alin Stelian

Impact of Socio-economic and Technological Transformations at National, European and International Level (ISETT), 2015, vol. 7

Abstract: The theories of budget deficit have known many developments and divergent views along time. Economist Paul Krugman see in the budget deficit one of the greatest inventions in the field of finance, an important basis for future development. Keynesian economist Robert Eisner said that a deficit is like a sin, often perceived as wrong in terms of morality and extremely difficult to avoid. If a state has high budget deficits not necessarily mean a weak state. State strong US, Japan, etc. had large deficits over time but they also had a favorable net real investment position. The effects of budget deficits on economic indicators (interest rates, public spending, private consumption, national income, private investment) differ from country to country. In the modern view, Laffer's theory says that tax cuts stimulate the economy in certain conditions and can bring greater public budget revenues, while tax increases may decrease in budget revenues if it passes a certain level of endurance tax burden. In the classic view of David Ricardo, a deficit, a reduction of current taxes, result in higher taxes in the future that have the same present value as the initial reduction. Basically delays the tax deficits.Ricardian equivalence can be interpreted as a decrease in government saving leads to an increase in private savings, leaving national saving unchanged.

Keywords: budget deficit; modern view; classic view (search for similar items in EconPapers)
JEL-codes: A11 B22 F02 G18 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
http://nos.iem.ro/bitstream/handle/123456789/235/D ... quence=1&isAllowed=y (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iem:imptrs:v:7:y:2015:id:2822000009382107

Access Statistics for this article

Impact of Socio-economic and Technological Transformations at National, European and International Level (ISETT) is currently edited by Simona Moagar Poladian, PhD

More articles in Impact of Socio-economic and Technological Transformations at National, European and International Level (ISETT) from Institute for World Economy, Romanian Academy Contact information at EDIRC.
Bibliographic data for series maintained by Ionela Baltatescu ( this e-mail address is bad, please contact ).