Why is it important that a budget be balanced?

Answer 1

When a bugdet is balanced it means that you, whomever you are (whether an individual, a business, or a government) are spending the money that you have, but not going into debt in order to spend more money than you have. If your budget is not balanced, then you are borrowing money. In the case of the US government (or most other governments) the real problem is not that they have a budget that does not balance, but that they have budgets that do not balance year after year, decade after decade, and the debts keep getting larger. And the problem with that is that the larger the debt is, the more interest you have to pay on the debt, and at some point you can no longer afford the interest payments, and then your credit will fail, gradually or rapidly, and either the lenders will start charging even higher interest rates because they are losing confidence in you, or they will simply refuse to lend any more money. And they you are in trouble. If a government has not figured out how to meet its financial obligations without borrowing money, that is a big problem when lenders do not want to lend it any more money.

The nation of Greece has already renegotiated its national debt, with half the debt being written off as uncollectable. The other half may or may not be paid, that is still an ongoing struggle, even with massive help from the European Union. So, no one is going to lend any more money to Greece, the risk is not acceptable. You can't continue to have unballanced budgets even if you want to, because credit is not infinite, eventually it runs out. Even a wealthy nation such as the United States has a credit limit. It is very high, but it does exist. And the national debt of close to 17 trillion dollars has to be close to that limit.