Is persistent deficit sustainable?

For a private corporation, if it runs persistent loss, it will go bankrupt soon.

However, it has become a norm for many governments to run persistent deficits. Many economists highlight the benefit of deficits in stimulating economy and downplay the harm of deficits. Is persistent government deficit really normal?

A strong argument for government deficit is that government spending stimulates economy. As a result, private wealth increases and total wealth of the society increases, although governments accumulate heavy debts.

While total wealth of the society may increase, the distribution of wealth is uneven. The politically more powerful, a small minority, get more government spending while the political less powerful, a majority, get more taxation. By increasing government spending, the politically connected get more government spending. This further increases inequality. This also cause more efforts being allocated to distribution and politics, less efforts being allocated to production.

The years since 2008 are thought to be a great success for America. In 2009, total US government debt was 11.9 trillion. As of now in 2025, the debt level is 36.2 trillion. The debt level balloons. In 2009, total US stock market valuation was 11.8 trillion. As of now in 2025, the stock market valuation is 62.2 trillion. The increase of stock market valuation far outpaces the increase of debt level.

However, taxation and deduction obligations are not proportional to wealth level. Working class, the majority population, being politically less powerful, are heavily burdened with various taxations and deductions. Persistent deficit is an effective vehicle to transfer wealth from the working class to the upper class. As a result, fertility rate in US dropped sharply after 2008. In 2000, US fertility was 2.0. In 2020, US fertility dropped to 1.7. This indicates the majority of Americans are not better off, although the stock market valuation soars. With fertility rate far below the replacement rate, the society becomes unsustainable.

Many countries run chronicle government deficits. Some countries, typically those with strong government power, have high percentage of government spending in GPD. These countries are especially vulnerable to persistent deficits.