What issues do federal budget deficits raise, apart from concern about default and policy sustainability?
The first issue is generational equity, or concern about unduly benefiting current generations at the expense of future generations. The second issue is what macroeconomic effects deficits generally have. At one time, they were lauded by Keynesians as the cure for recession or even significant unemployment, based on the claim that they increased current consumer spending and thereby stimulated the economy. Today, the same causal claim leads many to condemn deficits as a cause of the low rate of national saving. The third issue concerns their effects on the size of the national government. Some supporters of limited government identify deficit spending as a major cause of undesirable government growth, and therefore advocate the adoption of a balanced budget amendment to the U.S. Constitution. Each concern rests on a common causal claim: that deficit spending reduces the perceived (whether or not the actual) cost of government spending to current consumers and voters, thus inducing them
