Definition
A balanced budget is a fiscal situation in which total revenues equal total expenditures during a specific time period, meaning no deficit or surplus occurs.
Why It Matters
Balanced budgets are central to debates about fiscal policy, government borrowing, and long-term public debt. Running persistent deficits increases debt, while maintaining a balanced budget can promote financial stability. However, economists often argue that temporary deficits or surpluses may be appropriate depending on economic conditions.
Example
If a government collects $3 trillion in taxes and spends exactly $3 trillion on programs, defense, and infrastructure in the same year, the government has achieved a balanced budget.