Balanced Budget

Definition

A balanced budget is a financial plan where the total expected revenues are equal to or greater than the total expected expenditures for a given period, typically a fiscal year. This means the government is not running a budget deficit and is able to pay for its expenses without borrowing additional funds.

5 Must Know Facts For Your Next Test

1. Achieving a balanced budget was a key economic goal for the Clinton administration in the 1990s as part of the New Economy agenda.
2. The balanced budget was facilitated by a combination of increased tax revenues, reduced government spending, and a strong economy that generated higher than expected tax receipts.
3. The balanced budget helped to reduce the national debt and improve the government's fiscal position, which contributed to economic growth and stability during the Clinton presidency.
4. Maintaining a balanced budget was seen as important for promoting long-term fiscal responsibility and ensuring the government's ability to respond to future economic challenges.
5. The balanced budget was achieved through a combination of spending cuts, tax increases, and economic growth, which required bipartisan cooperation between the Clinton administration and the Republican-controlled Congress.

Review Questions

• Explain how the balanced budget policy was a key component of the Clinton administration's New Economy agenda.
  • The balanced budget was a central part of the Clinton administration's New Economy agenda, which aimed to promote long-term economic growth and stability. By eliminating the government's budget deficit, the balanced budget policy helped to reduce the national debt, improve the government's fiscal position, and create a more favorable environment for investment and economic expansion. This, in turn, contributed to the strong economic performance and prosperity of the 1990s, which was a hallmark of the New Economy.
• Describe the factors that enabled the Clinton administration to achieve a balanced budget during the 1990s.
  • The Clinton administration was able to achieve a balanced budget through a combination of increased tax revenues, reduced government spending, and strong economic growth. The administration worked with a Republican-controlled Congress to implement spending cuts and raise taxes, while the robust economy generated higher than expected tax receipts. These efforts, combined with a focus on fiscal responsibility and long-term economic stability, allowed the government to eliminate its budget deficit and achieve a balanced budget, which was a significant accomplishment during the New Economy era.
• Analyze the broader significance of the balanced budget policy for the Clinton administration's economic and political legacy.
  • The balanced budget policy was a key component of the Clinton administration's economic legacy, as it demonstrated the government's ability to exercise fiscal discipline and manage the nation's finances responsibly. By eliminating the budget deficit and reducing the national debt, the balanced budget policy helped to strengthen the government's financial position and create a more stable economic environment. This, in turn, contributed to the strong economic growth and prosperity of the 1990s, which enhanced the Clinton administration's political standing and reputation as effective economic managers. The balanced budget policy also set an important precedent for future administrations, underscoring the importance of fiscal responsibility and long-term economic planning in promoting sustainable economic growth and development.

Related terms

Budget Deficit: A budget deficit occurs when a government's total expenditures exceed its total revenues, requiring the government to borrow money to finance the difference.

Fiscal Policy: Fiscal policy refers to the government's decisions regarding taxation and spending, which can be used to influence the economy's performance and stability.

Surplus: A budget surplus occurs when a government's total revenues exceed its total expenditures, resulting in excess funds that can be used to pay down debt or invest in other priorities.