Deficit, Surplus, and Balanced Public Budgets

Budgeting is a crucial component of public administration that requires rigorous planning, meticulous implementation and management, and a deep understanding of the specifics of the systems that are being financed (Shafritz, Russell, & Borick, 2015, p. 472). Public administration budget is typically comprised of taxes, insurance, and borrowing, and it is spent on multiple sectors including social security and services, national defense, and debts (Shafritz et al., 2015, p. 473). Given the responsibility of handling public funds (Denhardt, Denhardt, & Blanc, 2013, p. 265; Shafritz et al., 2015, pp. 473-474), it appears useful to discuss the possible outcomes of administrative efforts at an appropriate investment of the receipts. These outcomes include budget deficits, surpluses, and balanced budgets, and while the latter appears to be the most desirable event, the remaining phenomena also have their advantages is managed properly.

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Budget Deficit

In the case of a budget deficit, expenses exceed receipts, which tends to lead to debts (Shafritz et al., 2015). The outcome is typically not regarded as a favorable one, but according to Shafritz et al. (2015), it is acceptable in certain cases. For example, during economic crises, the public budget can be used to create jobs and otherwise stimulate the economy. Similarly, the situations when additional social support is required (for example, in the case of natural disasters) can explain and justify public budget deficits. However, large and extended deficits are unlikely to be beneficial and can have grave impacts on the economy, including depressions and recessions (Shafritz et al., 2015, p. 474). The problem can be particularly acute during world economic crises; for example, the recession of 2008 had significant and lasting impacts on public budgets (Neaime, 2015, p. 1), including that of the US (Rubin, 2016, p. 201).

Thus, uncontrolled deficits are an issue (Neaime, 2015), and efforts have been made by public administrations around the world to control deficits. For example, Ryu (2015) reports that in the US, balanced budget requirements have been adopted by state and local administrations (p. 29). These requirements are supposed to help the authorities to avoid deficits, thus ensuring balanced budgets, even though Ryu (2015) demonstrates that they are not very effective because of their obscurity and the lack of transparency in some administrations (pp. 29-33). Still, one of their requirements demands to avoid carrying deficits from an accountability period to the following one, which tends to limit expenses (Ryu, 2015, p. 33). Therefore, public administrations can develop tools that might help them to avoid excessive and uncontrolled deficits and ensure that their deficits are justifiable.

Budget Surplus

Shafritz et al. (2015) regard budget surplus as a form of a balanced budget (p. 474), but Neaime (2015) explicitly states that this kind of budgeting outcome needs the receipts to exceed the expenses (p. 12). The budget surplus can be regarded as a more positive phenomenon than a budget deficit since no debt is implied by the former outcome. Surpluses can and often are used to reduce debts (Jochimsen & Thomasius, 2014, p. 396). However, as demonstrated by Denhardt et al. (2013), Neaime (2015), and Shafritz et al. (2015), the surplus of a public budget is supposed to be efficiently employed, which suggests that continuous and large surpluses are likely to indicate the lack of appropriate budget spending. In other words, excessive surplus might indicate issues in budgeting, which result in the underfunding of essential systems, without which a country or state cannot function. In this respect, the case of a budget surplus is similar to that of its deficit: it is appropriate when it is justifiable, but when it is excessive, it is likely to lead to negative outcomes.

Balanced Budget

In the case of a balanced budget, there is no budget deficit or surplus with expenses being equal to receipts (Rubin, 2016, p. 184). Shafritz et al. (2015) suggest that the advantages of such a budget are obvious: there is no deficit, and, therefore, no debts. Also, a balanced budget can indicate that the administration is meticulous about their spending and ensures effective use of its funding. Jochimsen and Thomasius (2014) assume that every finance minister aims to achieve this balance (p. 390). However, Neaime (2015) hints that this kind of budget can rarely be encountered; instead, deficits or surpluses are more common, and deficits are particularly common after the recession of 2008 (p. 1). Therefore, a balanced budget appears to represent a form of the perfect budgeting outcome; it does not exactly guarantee that there are no issues and inappropriate spending, but it tends to be associated with proper administrative work in the field of funding. Given the fact that this model outcome is used as a deficit control tool, which is discussed above (Ryu, 2015), there are apparent merits to the idea.

Conclusion

The present paper considers three possible budgeting outcomes, including deficits and surpluses as well as the notion of balanced budgets. The latter appears to be difficult to achieve, and it is not necessarily appropriate for any situation. In the cases when additional spending is required, deficits are not supposed to be avoided. Similarly, surpluses can be beneficial because they provide the funds that are necessary for extra expenses. However, uncontrolled deficits are harmful to the economy, and unjustified surpluses may result from inefficient spending and underfunding of crucial systems. As a result, the idea of a balanced budget is used as a tool that can help to control deficits and effectively use surpluses, but it does not have to be achieved for a budgeting process to be considered successful.

References

Denhardt, R., Denhardt, J., & Blanc, T. (2013). Public administration (7th ed.). New York, NY: Cengage Learning.

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Jochimsen, B., & Thomasius, S. (2014). The perfect finance minister: Whom to appoint as finance minister to balance the budget. European Journal of Political Economy, 34, 390-408. Web.

Neaime, S. (2015). Sustainability of budget deficits and public debts in selected European Union countries. The Journal of Economic Asymmetries, 12(1), 1-21. Web.

Rubin, I. (2016). The politics of public budgeting (8th ed.). Washington, US: CQ Press.

Ryu, J. (2015). The public budgeting and finance primer. New York, NY: Routledge.

Shafritz, J., Russell, E., & Borick, C. (2015). Introducing public administration. New York, NY: Routledge.

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StudyCorgi. (2021, January 9). Deficit, Surplus, and Balanced Public Budgets. Retrieved from https://studycorgi.com/deficit-surplus-and-balanced-public-budgets/

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1. StudyCorgi. "Deficit, Surplus, and Balanced Public Budgets." January 9, 2021. https://studycorgi.com/deficit-surplus-and-balanced-public-budgets/.


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StudyCorgi. "Deficit, Surplus, and Balanced Public Budgets." January 9, 2021. https://studycorgi.com/deficit-surplus-and-balanced-public-budgets/.

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StudyCorgi. 2021. "Deficit, Surplus, and Balanced Public Budgets." January 9, 2021. https://studycorgi.com/deficit-surplus-and-balanced-public-budgets/.

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StudyCorgi. (2021) 'Deficit, Surplus, and Balanced Public Budgets'. 9 January.

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