The balance of the state budget is the most important issue on which the well-being of citizens depends. The state budget is a financial document that determines the level of welfare of the state. And this has a great impact on the situation in society gives the state a certain place and prestige on the world stage. The best way to ensure a budget balance is to form a deficit-free budget.
The amount of expenditures, including expenses for servicing and repayment of state (municipal) debt, does not exceed the amount of income. Suppose it is impossible to avoid a budget deficit, even if the usual sources of financing are completely exhausted, to balance the budget. In that case, it is necessary to resort to various forms of borrowing, which requires minimizing the size of the budget deficit at all stages of the budget process. A long-standing argument in favor of urgent balancing of the US budget goes something like this: the ever-growing US debt will eventually make investors doubt the government’s ability to pay its debts, which will lead to a sharp increase in interest rates, which will also suppress private sector investment.
If interest rates rise too quickly, it will be very difficult for the government to afford to pay interest on the national debt, which will lead to default or even higher inflation. One of the reasons economists warn against taking drastic measures to balance the budget is their impact on the economy. Balancing the budget will require drastic spending cuts and tax increases, a double blow to the US economy. This could increase the deficit by reducing tax revenues and encouraging the government to spend more on social programs.
By way of conclusion, the presence of a budget deficit is important to distinguish it from a situation with a cash gap – a situation in which income and expenses are separated over time, which leads to a shortage of financial resources in a certain period. In addition, a budget deficit is planned since it is planned from the very beginning of the budget preparation process.