Structural deficit


A structural deficit is a persistent budget deficit that exists even when the economy is operating at its full potential. This differs from a cyclical deficit, which occurs due to economic downturns when revenues fall and expenditures rise temporarily. Megan McArdle, on the , explains that a structural deficit remains a concern because it indicates systemic issues in government fiscal policies. If unaddressed, it could lead to severe economic problems over time by continuously widening the gap between revenues and expenditures, potentially leading creditors to lose confidence and charge higher interest rates for loans 1.

The Cyclical vs Structural Deficit

Megan and Russ discuss the difference between the cyclical and structural deficit, emphasizing the long-term consequences of the structural deficit and the need for fiscal responsibility in managing the national debt.


Megan McArdle on Debt and Self-Restraint