Economics
Budget Surplus
A budget surplus occurs when a government's income exceeds its expenditures during a specific period. This results in a positive balance, allowing the government to pay off debt, invest in infrastructure, or save for future expenses. A budget surplus is generally seen as a positive economic indicator, reflecting fiscal responsibility and the potential for economic stability.
Written by Perlego with AI-assistance
Related key terms
1 of 5
6 Key excerpts on "Budget Surplus"
eBook - PDF- David Shapiro, Daniel MacDonald, Steven A. Greenlaw(Authors)
- 2022(Publication Date)
- Openstax(Publisher)
The sum of all past deficits and surpluses make up the government debt. 17.2 Taxation The two main federal taxes are individual income taxes and payroll taxes that provide funds for Social Security and Medicare; these taxes together account for more than 80% of federal revenues. Other federal taxes include 434 17 • Key Terms Access for free at openstax.org the corporate income tax, excise taxes on alcohol, gasoline and tobacco, and the estate and gift tax. A progressive tax is one, like the federal income tax, where those with higher incomes pay a higher share of taxes out of their income than those with lower incomes. A proportional tax is one, like the payroll tax for Medicare, where everyone pays the same share of taxes regardless of income level. A regressive tax is one, like the payroll tax (above a certain threshold) that supports Social Security, where those with high income pay a lower share of income in taxes than those with lower incomes. 17.3 Federal Deficits and the National Debt For most of the twentieth century, the U.S. government took on debt during wartime and then paid down that debt slowly in peacetime. However, it took on quite substantial debts in peacetime in the 1980s and early 1990s, before a brief period of Budget Surpluses from 1998 to 2001, followed by a return to annual budget deficits since 2002, with very large deficits in the recession of 2008 and 2009. A budget deficit or Budget Surplus is measured annually. Total government debt or national debt is the sum of budget deficits and Budget Surpluses over time. 17.4 Using Fiscal Policy to Fight Recession, Unemployment, and Inflation Expansionary fiscal policy increases the level of aggregate demand, either through increases in government spending or through reductions in taxes. Expansionary fiscal policy is most appropriate when an economy is in recession and producing below its potential GDP.
eBook - PDF- Irvin Tucker(Author)
- 2018(Publication Date)
- Cengage Learning EMEA(Publisher)
Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 382 PART 3 • The Macroeconomy and Fiscal Policy 17–2 Budget SurplusES AND DEFICITS IN OTHER COUNTRIES Exhibit 4 shows several countries with government budget deficits as a percentage of GDP in 2016. Iceland had a Budget Surplus of 17 percent of GDP and Latvia had a balanced budget. Conversely, Spain had the highest deficit percentage of the countries shown in the exhibit. 17–3 WHY WORRY OVER THE NATIONAL DEBT? In 2011, Greece was in financial crisis with a national debt-to-GDP ratio of 170 percent. Fearing default on Greece’s debt, creditors have demanded solutions. In response, Greece cut civil service salaries, froze pensions, and enacted new taxes on a long list of items, EXHIBIT 4 A Global Comparison of Government Surpluses and Deficits as a Percentage of GDP, 2016 In 2016, Iceland had a Budget Surplus of 17 percent of GDP and Latvia had a balanced budget. Conversely, Spain had the highest deficit percentage of the countries shown in the exhibit. 17% Government sur plus (+) or deficit (–) as a percent of GDP Country Norway German y F rance United Kingdom Latvia Iceland United States Spain Canada –15 –10 –5 0 5 10 15 20 –20 3% –3% –5% –3% –2% –3% 1% 0% Source: O eCD (2017), G eneral government deficit (indicator). doi: 10.1787/77079edb-en, https://data.oecd.org/gga/general-government-deficit.htm. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
eBook - PDF- Rhona C. Free(Author)
- 2010(Publication Date)
- SAGE Publications, Inc(Publisher)
3 6 GOVERNMENT BUDGETS, DEBT, AND DEFICITS BENJAMIN RUSSO University of North Carolina at Charlotte T his chapter describes the economics of govern-ment budgets, with particular attention to gov-ernment borrowing in the United States at the federal, state, and local levels. The next section provides definitions and describes some principles of federal, state, and local budgeting. The third section focuses on major issues pertaining to federal government borrow-ing. The final section is a summary. Definitions and Principles of Government Budgeting Preliminaries Equity and efficiency are crucial concepts in econom-ics, so it is useful to begin by defining these terms. Two principles guide evaluations of the effect economic poli-cies have on equity. The benefit principle is the viewpoint that it is equitable for citizens who benefit from govern-ment services to pay for them. The ability-to-pay princi-ple is the viewpoint that it is equitable for a citizen's tax liabilities to be correlated with the citizen's economic resources. It follows that taxpayers with equal abilities to pay should be taxed equally (horizontal equity) and that tax liability should increase as ability to pay increases (vertical equity). Resources are allocated efficiently if and only if they are used where they have the highest social value. Operating and Capital Budgets State and local governments report operating budgets and capital budgets. In general terms, an operating budget is an enumeration of (a) expenditures on current operations and (b) the revenue inflows required to finance those oper-ations (current operations take place each period). Typical expenditures on current operations include purchases of services and of tangible items. Services are commodities that cannot be stored, for example, state employee salaries and interest payments on government debt. Tangibles are items that are used up each period, for example, stationery and gasoline.
No longer available |Learn more- United Nations Economic Commission for Latin America and the Caribbean(Author)
- 2010(Publication Date)
- United Nations Publications(Publisher)
4 2 For example, when it was announced that the target for the primary surplus would be lowered from 3.8 % of gross domestic product ( GDP ) to 2.5 % in April 2009, public-debt projections were published without estimating the repercussions of the fiscal stimulus on GDP , which was the main purpose of the measure. 3 It is important to consider existing proposals for the measurement of fiscal indicators. Hemming and Ter-Minassian (2004) recognize that the primary-surplus concept can cause sacrifices that have repercussions for long term growth, including cutbacks in infrastructure investment. Nonetheless, they claim that many countries are not technically prepared to adhere to an alternative rule, such as the golden rule that seeks to balance the budget using the target for the current balance rather than the capital balance. One possibility is the proposal developed by Blanchard and Giavazzi (2004) to exclude investment from the concept of primary surplus. Here, Brazil has gained relevant experience with the procedure through the Projeto Piloto de Investimentos-PPI . For further information on the Brazilian case see Silva and Pires (2008). 4 Nonetheless, the institutional characteristics of the domestic financial system make the lower bound on the interest rate different from zero. In reality, in Brazil it is around 8.5 % , owing to the yield paid by savings banks, which impose a very firm limit on the action of monetary policy. I Introduction 137 fIsCAL PoLICy In tIMEs of CRIsIs: MACRoEConoMIC EffECts of thE PRIMARy suRPLus • MAnoEL CARLos DE CAstRo PIREs, fáBIo Goto AnD BRuno RoChA C E P A L R E V I E W 1 0 2 • D E C E M B E R 2 0 1 0 The third criticism is that countercyclical fiscal policy would worsen the Brazilian economy’s external deficit by stimulating aggregate demand, causing an excessive exchange-rate devaluation and fuelling inflation (Bacha, 2008).
eBook - PDFThe Reform of Macroeconomic Policy
From Stagflation to Low or Zero Inflation
- J. Perkins(Author)
- 2016(Publication Date)
- Palgrave Macmillan(Publisher)
It is not surprising Budget Deficits and Macroeconomic Policy 141 that many studies have found conflicting or uncertain relationships between changes in the budget balance and the level of activity. For this is what one would expect if different forms of government outlay and of taxation have different effects on activity. But that conclusion should not be distorted to say that fiscal measures are ineffective in influencing activity. That would be true only if changes in the budget balance were indicative of the expansionary or contractionary effects of a budget – which they certainly are not. For, as we have seen above, different outlays and forms of revenue have different effects on output or employment for a given effect on the budget balance. It may be mentioned in passing that the argument that business confidence may be increased by cutting the budget deficit does not have any bearing on the foregoing discussion, as it will (if it is valid) operate equally for all the fiscal instruments having a given effect on the budget balance, and so not affect their ranking in relation to their effects on output or employment. To sum up: the budgetary balance is important only because it is the resultant of the various forms of outlays and taxation that make it what it is; and it is those various forms of government outlay and taxa- tion that require to be considered each on its own merits. The social costs and benefits of reducing government borrowing as such should certainly come into the calculation of what policy is appropriate, but only in the context of the costs and benefits of measures that are adopted on the outlay and revenue sides to bring about a given change in that balance.
eBook - ePub- Scott Brenton(Author)
- 2016(Publication Date)
- Palgrave Macmillan(Publisher)
Measuring debt and deficits, particularly over several years, is very challenging and imperfect. Methods and accounting techniques change, and in some countries like Germany, the currency and the country are also different. In this section, gross debt rather than net debt is generally used (unless noted), and the focus is on the central government. However, what is counted as part of the central government across countries differs, particularly when sub-national governments have separate budgets, and social security or other liabilities are treated in special ways. Many countries now have independent agencies for reporting these statistics, which gives greater consistency. Similarly, Budget Surpluses and deficits mean slightly different things across countries, and generally is what needs to be borrowed. Thus, the figures used are for the purposes of establishing patterns within each country.US
The Office of Management and Budget (OMB) within the Executive Office of the President of the US maintains an extensive range of budget statistics, with some dating back to 1789. It is clear that debts and deficits are not a recent phenomenon, although the size of the debt has grown. Since the Second World War, larger deficits have generally been recorded during times of war (Korea, Vietnam, Iraq, Iraq again, Afghanistan) and in response to recessions (OMB 2015 , p. 8). While there have been only 12 surpluses, the deficits were often less than 2 per cent of GDP. This changed after 1975, as larger deficits became the norm, peaking at 5.9 per cent in 1983. Coincidentally, most of the larger deficits occurred during Republican administrations, while most of the rare surpluses were under Democrats.Under Democratic President Bill Clinton, surpluses were achieved for the first time in three decades. The deficit reduction under Clinton was the greatest in the history of the US in dollar terms, and relative to the economy was the best since the Second World War. The expansion of the economy was also the longest in history. This continued into the first few months of Republican President George W. Bush’s administration, before deficits returned and peaked at 3.4 per cent of GDP in 2004. In Bush’s second-last budget, the crowning achievement when it came to ‘budget discipline’ was ‘better spending restraint, [which] resulted in cutting the deficit in half in 2006—three years ahead of the goal set forth by the President in 2004’ (Office of Management and Budget 2007
Index pages curate the most relevant extracts from our library of academic textbooks. They’ve been created using an in-house natural language model (NLM), each adding context and meaning to key research topics.
