Definition
A balanced budget occurs when government spending does not exceed revenue over the relevant period.
Political Dictionary
Balanced Budget
A balanced budget has revenues equal to expenditures.
Why It Matters
It is associated with fiscal discipline, but strict balance requirements can limit responses to recessions or emergencies.
How It Works
Officials adjust taxes, spending, or reserves to align projected revenues and expenditures.
History
Many states have constitutional or statutory balance requirements, while the federal government does not.
Example
A state may reduce planned spending when revenue forecasts decline.
Common Misconceptions
- A balanced budget eliminates all debt.
- The federal Constitution requires annual balance.
- Accounting rules are identical across governments.
Related Terms
- Fiscal Policy
- Monetary Policy
- Inflation
- Economic Growth
- Government Spending
Related Topics
See Also