Few words spark more anxiety in public debate than “national debt” and “government deficit.” National debt is the total amount of money the government owes, accumulated over years of running deficits. Government deficit is when the government spends more money than it collects in taxes and other revenues.
Dating back at least to the 1930s, the idea that government budgets should mimic household finances continues to dominate public discourse.
Politicians, pundits and even some economists routinely warn that deficits are inherently dangerous and must be minimized — arguing that, like households, governments must ensure their spending does not exceed their income, or else bankruptcy looms.
But what if this analogy is…