There are reasons why a balanced budget is a good thing, but none of those reasons are considered worthwhile in our current Keynesian paradigm.
As for cutting the deficit, there is not now and there has not been for decades any actual impetus to cut the deficit. Considering that if you look at the whole budget (not just the on-budget items) that the revenues come to about 2/3 of the expenditures, cutting the deficit would be a very difficult task. One option is significant tax hikes, across the board, nobody left out. Another option is significant cuts, including all the large sacred cows, including programs you think are some of the best things the government does. The third option is some mix of the two, but in this option there are still plenty of hard decisions to make and nothing is left off the table.
Raising taxes on only the rich isn't enough. Cutting waste isn't enough (unless, like me, you think over half of what the government does is waste).
There isn't anyone in Washington with the testicular fortitude to even say this, much less act on it.
What are the worthwhile reasons for balancing the budget? The ones that aren't being considered now.
In order to respond to this, I have to discuss this with two different groups that both disagree with me. One are Neo-Keynesians like Krugman who actually have no problems with ongoing deficits, unlike Keynes who believed that half the time the government should run a deficit and the other half the time it should run a surplus. The other are proponents of Modern Monetary theory or Modern Money Theory (the advocates can't even agree on the name) (Or Magic Money Tree as critics call it). Even Krugman doesn't agree with MMT.
Keynesians and Neo-Keynesians both believe in deficits as a way to stimulate the economy. I disagree that it is even possible, as the economy is a dynamic system with many parts. Focusing on Aggregate Demand is like pushing on a thread, it fails to address what the demand is, what it is for, who is making the demand, etc. Although Macro and Micro are distinct, they do interrelate. It is a free-market view that attempts to manipulate this complex system create imbalances that further distort the market leading to preventing a smaller decline by causing a later greater decline. The recession of 2001 was nipped in the bud by creating the crash of 2008 and Great Depression II, for example.
Although K and N-K both agree that a crowding out effect exists, they never see it in the borrowing market. When the government borrows, it does impact the borrowing market. The effect is hidden but not erased by the use of central banking fiat currency, in which the end result is decreased purchasing power of the dollar. To me that eventually creates two separate market distortions. The first is of course what the money is spent on to stimulate the economy, and the other is the ongoing inflation problem. I do not agree there is a target inflation rate.
Here's the crux. People might be fooled in the short run, but seldom in the long run. If the inflation rate exceeds the treasury bond rate, the result is that bonds become an unattractive source of investment. Not completely unattractive, it is still better than holding currency because at least you are losing value slower. That is one of the points ignored by K and N-K, that the value of the dollar is separate from the dollar itself. All currencies are accepted on the belief that they can be redeemed for goods and services at a future date, the alternative is the primitive system of barter.
So, not only do deficits imbalance the economy in two ways, borrowing itself has a limit, unless the Federal Reserve actually completely monetizes the debt at which point the problem of the value of the currency is compounded. That is slowly happening now, by the way.
Taxes are the income of the government, that is a basic fact that even K and N-K agree on but the MMTs don't.
The reason K and N-K say it can't be balanced now is so much is needed right now. Cut anything, and we get forecasts of doom and gloom. And people say Miseans are predictors of gloom. Look what happens if there is a proposal to cut anything from the budget. It is true that people have become addicted to government largess, and quitting cold turkey may not be possible right now, but even so that doesn't mean you should never try to quit.
Then there's MMT, who have completely reversed economic understanding, and actually think that taxes exist only to withdraw money from the economy. They have severed the last link between currency and value which Ks and N-Ks still have. It is their belief that deficits don't matter because the government creates the money by spending and then pulls some of it back by taxes. Goodness it is hard to know where to start with something so not-even-wrong. Every Keynesian and Neo-Keynesian error is compounded, such as looking at aggregates at the cost of looking at a more complex economic system, but even then the do it backwards. I can't even come up with good analogies for them yet. They are not Neo-Keynesian, but are definitely post-Keynesian. They don't believe in crowding out, since the government creates the money. They don't believe there will be a time when there are no more borrowers, and if they do acknowledge it they don't see it as a problem. They believe that if inflation becomes a problem taxes can be raised to compensate but don't think it has any relation to the deficit.
Market distortions, currency distortions, borrower fatigue.
The last president to run a surplus was Eisenhower. Think about the strength of the US economy under Eisenhower. No, we didn't have a massive collapse because he had a brief surplus.
