Why Do Governments Now Rely on Deficit Budgets?

Deficit budgeting became widespread after World War II as a way for governments to spend more than they collect. This shift marked a departure from earlier practices of running annual surpluses. Before the war, many administrations maintained healthy coffers. In Nigeria’s Western Region, for example, the government offered free education, free healthcare, and funded local industries through its investment corporation. They even sent hundreds of students abroad on scholarships while still ending the year with extra revenue. Today, borrowing is framed as necessary for investment when revenues fall short. Yet a government that employs or regulates most economic activity should, in theory, generate excess funds and grow its investment portfolio each year. Some nations continue to record surpluses, showing that balancing a budget is possible. Should running a surplus once more become the norm?

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