CandleFocus Glossary Editor
Budget Surplus, a term of fiscal prudence and stability, denotes when a government or private entity has a larger amount of income or revenue than the expenditure it incurs. In other words, where revenues are ‘higher’ than the expenditures, a government or business can enjoy the benefits of a budget surplus instead of a budget deficit. Examples of typical revenues include taxes on individuals and businesses, but also non-tax revenues earned from things like sale of state assets, user fees, sale of government products, and even transfer payments from abroad. Various elements like public services, investment in infrastructure, grant-in-aid, subsidies, and public wages etc. come under the purview of expenditure for governments.
The presence of a budget surplus can enable the public sector to reduce public debt and steadily move towards a sustainable fiscal policy. The budget surplus can also be utilized for the growth and development of various sectors of the economy, providing the government with more flexibility to actively spend to achieve desired results. At the same time, it enables government to withdraw any investments if needed in time.
Politically, a budget surplus is likely to benefit the ruling party, since it shows the efforts taken to reduce public debt and also generate prosperity. It also allows the government to reduce or cut taxes, since it has the sufficient funds to cover its expenses. Also, since there is no requirement to borrow money, both central and state governments have an added benefit of avoiding high-interest payments that might be required otherwise.
The United States last witnessed a budget surplus in 2001 when the then President, Bill Clinton declared this feat. In the year 2023, the U.S. ran a budget deficit of more than $421 billion. Despite the budget deficits, the U.S still ranks among the top countries in terms of economic prowess and gross domestic product (GDP). Countries like Germany, Japan and China also ran revised budget deficits amounting to about $67.4 billion, $512.8 billion and $372.2 billion, respectively, during the same period.
In conclusion, budget surpluses should be the goal of all governments and private entities, regardless of the economic environment. It helps them in safeguarding the future of their economies demonstrating the prudent efforts taken to sustain its long-term fiscal stability. As the world progressively moves ahead, these should be the focal stakeholders of all governments, big or small, to effectively manage their funds and be mindful of their expenditure.
The presence of a budget surplus can enable the public sector to reduce public debt and steadily move towards a sustainable fiscal policy. The budget surplus can also be utilized for the growth and development of various sectors of the economy, providing the government with more flexibility to actively spend to achieve desired results. At the same time, it enables government to withdraw any investments if needed in time.
Politically, a budget surplus is likely to benefit the ruling party, since it shows the efforts taken to reduce public debt and also generate prosperity. It also allows the government to reduce or cut taxes, since it has the sufficient funds to cover its expenses. Also, since there is no requirement to borrow money, both central and state governments have an added benefit of avoiding high-interest payments that might be required otherwise.
The United States last witnessed a budget surplus in 2001 when the then President, Bill Clinton declared this feat. In the year 2023, the U.S. ran a budget deficit of more than $421 billion. Despite the budget deficits, the U.S still ranks among the top countries in terms of economic prowess and gross domestic product (GDP). Countries like Germany, Japan and China also ran revised budget deficits amounting to about $67.4 billion, $512.8 billion and $372.2 billion, respectively, during the same period.
In conclusion, budget surpluses should be the goal of all governments and private entities, regardless of the economic environment. It helps them in safeguarding the future of their economies demonstrating the prudent efforts taken to sustain its long-term fiscal stability. As the world progressively moves ahead, these should be the focal stakeholders of all governments, big or small, to effectively manage their funds and be mindful of their expenditure.