Do governments normally run primary surpluses?

I was looking at the excellent OLG sunspot paper referenced by Roger Farmer in his debt-is-always-a-burden post, and noticed that he calibrated his model assuming a primary budget surplus of 2%, even though historical the U.S. has run primary budget deficits, not surpluses. Indeed achieving a primary budget balance of 0 is one of the wishes of the anti-deficit Concord Coalition, and not even the mainstream takes them seriously anymore — so why assume a primary balance of 2%? Has any nation regularly run a primary balance? I needed some data.

Latest budget data (2014) can be found at the OMB site. God bless the army of statisticians employed by the U.S.  Long story short, from Table 6.1 shows net interest payments as a percentage of GDP. Table 1.2 has surpluses and deficits as a percentage of GDP (I used the total Federal government including off and on-balance sheet items, as net interest consists of interest payments on debt less interest payments received by the off-balance entities). The average primary deficit over that period was -1.4% of GDP, although that period featured in increase in the Debt/GDP from about 40% to about 72% in 2014.

US Debt/GDP 1940-2014
US Debt/GDP 1940-2014

Just eyeballing it, we can start at 1950 and get roughly identical Debt/GDP ratios from that point to 2014. In that case, the average primary deficit was only 0.4%. But something tells me that as we continue to fester in a low IR environment even as the Debt/GDP ratio falls, the rolling averages are going to take us well back to the negative. Here is a graph of Federal surpluses(+)/deficits(-) as well as Federal (unified) primary surpluses/deficits(-) as a percentage of GDP:

U.S. Primary Balance 1940-2014 (% GDP)


Looking at the UK, I found data here which does show that from 1948-2012, the UK ran an average primary balance of 0.46% of GDP. I suspect that recent events may have swung that number negative.

1948-2012 UK Primary Balance (% GDP)
1948-2012 UK Primary Balance (% GDP)


However in that time, debt/GDP fell from 216% to 73% — a massive reduction in debt/GDP.


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