The New Palgrave Dictionary of Economics

Living Edition
| Editors: Palgrave Macmillan

Budget Deficits

  • William G. Gale
Living reference work entry


This article describes alternative measures of the federal budget deficit, discusses traditional and non-traditional channels through which deficits can affect the economy, and summarizes research on the effects of deficits on national saving and interest rates.


Aggregate consumption Budget deficits Consumption function Crowding out Euler equations Financial market expectations Fiscal policy Generational accounting Interest rates Labour supply National income National saving Public debt Ricardian equivalence theorem Ricardo, D Small open economy view 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Ardagna, S., F. Caselli, and T. Lane. 2004. Fiscal discipline and the cost of public debt service: Some estimates for OECD countries, Working paper No. 10788. Cambridge, MA: NBER.CrossRefGoogle Scholar
  2. Auerbach, A.J., J. Gokhale, and L.J. Kotlikoff. 1991. Generational accounts: A meaningful alternative to deficit accounting. In Tax policy and the economy, ed. D. Bradford. Cambridge, MA: NBER.Google Scholar
  3. Auerbach, A.J., W.G. Gale, P.R. Orszag, and S.R. Potter. 2003. Budget blues: The fiscal outlook and options for reform. In Agenda for the nation, ed. H.J. Aaron, J.M. Lindsey, and P.S. Nivola. Washington, DC: Brookings Institution.Google Scholar
  4. Ball, L., and N.G. Mankiw. 1995. What do budget deficits do? In Budget deficits and debt: Issues and options. Kansas City: Federal Reserve Bank of Kansas City.CrossRefGoogle Scholar
  5. Barro, R.J. 1974. Are government bonds net worth? Journal of Political Economy 82: 1095–1117.CrossRefGoogle Scholar
  6. Barro, R.J. 1989. The Ricardian approach to budget deficits. Journal of Economic Perspectives 3(2): 37–54.CrossRefGoogle Scholar
  7. Barth, J.R., G. Iden, F.S. Russek, and M. Wohar. 1991. The effects of federal budget deficits on interest rates and the composition of domestic output. In The great fiscal experiment, ed. R.G. Penner. Washington, DC: Urban Institute Press.Google Scholar
  8. Bernheim, B.D. 1987. Ricardian equivalence: An evaluation of theory and evidence. NBER Macroeconomics Annual 2: 263–304.CrossRefGoogle Scholar
  9. Bernheim, B.D. 1989. A neoclassical perspective on budget deficits. Journal of Economic Perspectives 3(2): 55–72.CrossRefGoogle Scholar
  10. Congressional Budget Office. 2005. The long-term budget outlook. Washington, DC: Congressional Budget Office.Google Scholar
  11. Congressional Budget Office. 2006. The budget and economic outlook: Fiscal years 2007 to 2016. Washington, DC: Congressional Budget Office.Google Scholar
  12. Elmendorf, D.W., and N.G. Mankiw. 1999. Government debt. In Handbook of macroeconomics, vol. 1C, ed. J.B. Taylor and M. Woodford. Amsterdam: North-Holland.Google Scholar
  13. Engen, E.M., and R.G. Hubbard. 2004. Federal government debt and interest rates. In NBER macroeconomic annual 2004, ed. G. Mark and K.S. Rogoff. Cambridge, MA: MIT Press.Google Scholar
  14. Feldstein, M.S. 1986. Budget deficits, tax rules, and real interest rates, Working paper No. 1970. Cambridge, MA: NBER.Google Scholar
  15. Friedman, B. 1988. Day of reckoning: The consequences of American economic policy under Reagan and after. New York: Random House.Google Scholar
  16. Gale, W.G., and P.R. Orszag. 2004. Budget deficits, national saving, and interest rates. Brookings Papers on Economic Activity 2004(2): 101–210.CrossRefGoogle Scholar
  17. Kormendi, R. 1983. Government debt, government spending, and private sector Behavior. American Economic Review 73: 994–1010.Google Scholar
  18. Laubach, T. 2003. New evidence on the interest rate effects of budget deficits and debt, Finance and economics discussion series No. 2003–12. Washington, D.C: Board of Governors of the Federal Reserve System.Google Scholar
  19. Rubin, R.E., P.R. Orszag, and A. Sinai. 2004. Sustained budget deficits: Longer-run U.S. economic performance and the risk of financial and fiscal disarray. Paper presented to the AEA-NAEFA Joint Session, Allied Social Science Associations Annual Meetings, 4 January, San Diego.Google Scholar
  20. Seater, J.J. 1993. Ricardian equivalence. Journal of Economic Literature 31: 142–190.Google Scholar
  21. Truman, E.M. 2001. The international implications of paying down the debt, Policy brief 01–7. Washington, DC: Institute for International Economics.Google Scholar

Copyright information

© The Author(s) 2008

Authors and Affiliations

  • William G. Gale
    • 1
  1. 1.