Are deficits always a bad thing?

Abstract

A MAJOR debate on the deficit issue has been on for quite some time, involving questions such as the following: Do deficits really matter? If they do, how should they be measured? Are deficits always a bad thing? If so, how should they be reduced—through tax increases, or through spending cuts? If through tax increases, which of the taxes need to be raised? If through spending cuts, which of the expenditures need to be reduced—interest payments? defence spending? expenditure on public employees* wages, salaries and allowances? subsidies? If subsidies need to be slashed, which ones—subsidies to cover the losses of public enterprises? subsidies to encourage the use of a particular input in the interest of the national economy? export subsidies? subsidies to lower the prices of particular consumer goods for the benefit of all consumers or particular groups of consumers?