Advanced Search
MyIDEAS: Login

On the Budget Deficits and Capital Expenditure

Contents:

Author Info

  • Malcolm Sawyer

    (The Jerome Levy Economics Institute)

Abstract

It has almost become the conventional wisdom that there should be rules governing the size of the budget deficits, without regard for the impact of such deficits on the macro economy. This is reflected in the push for a balanced budget in the United States and the 3 percent deficit to GDP ratio convergence criteria in the Maastricht Treaty (and designed for observance by countries signing up for the single currency). The purpose of this paper is not to present further arguments against deficit reduction for its own sake or against the balanced budget for that has been done by others. The purpose is rather to consider the arguments which have been done by others. The purpose is rather to consider the arguments which have been advanced in favor of a budget deficit limited by the capital expenditure budget separate from the current expenditure. The structure of this paper is as follows. We first consider some possible rationales for the so-called ‘golden rule' that current expenditure by government should be covered by taxation and capital expenditure may be financed by borrowing. The next section points out the ways in which the government sector should be treated differently from the private sector in matters of deficits and their financing. The application of any ‘golden rule' is dependent on how capital expenditure is conceptualized and measured, and that is discussed in section 4. The next section suggests ways in which the ‘golden rule' may lead to some problems. Section 6 provides some further discussion on the debt stability condition, and section 7 is a brief conclusion. The central point which is at the heart of this paper is the current expenditure and capital expenditure by government have the essentially similarities that they use current resources, have to be financed but do not yield a direct monetary revenue for the government.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://128.118.178.162/eps/mac/papers/9802/9802012.pdf
Download Restriction: no

Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 9802012.

as in new window
Length: 16 pages
Date of creation: 06 Feb 1998
Date of revision:
Handle: RePEc:wpa:wuwpma:9802012

Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 16; figures: included
Contact details of provider:
Web page: http://128.118.178.162

Related research

Keywords:

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:9802012. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.