Prior to the great depression, federal deficits were generally regarded as sinful. The traditional view had two outstanding virtues: It embodied a standard of fiscal conduct that was clear, simple and universally understood, and it commended itself to the moral judgment of a community raised on the puritan ethic. It failed, however, to recover its popularity following the continuous deficits of the depression and World War II.

The basic idea that emerged in its stead was to set tax rates at a level that would yield a surplus at full employment, a deficit in recession and a balanced budget over the entire business cycle. Profoundly suspicious of economic forecasts, proponents of this so-called “stabilizing budget” expressly repudiated any attempts to make countercyclical adjustments in tax rates and expenditure programs.

In contrast, the “new economics” of the early ‘60s urged fiscal activism. Unlike the stabilizing budget, which was designed to cushion recessions, “fine tuning” was supposed to prevent them—to maintain continuous full employment. The only fiscal discipline in the new economics was the obligation not to run larger deficits than necessary. But how much was necessary?

The new economics was over the ordinary mortal’s head—full of esoteric theorizing and professional jargon. The consequent erosion of lay influence on fiscal policy, combined with the absence of an expert consensus, produced the natural result: After 1969, annual deficits were continuous, aggregating since that year over $400 billion.

What is needed now is a fiscal philosophy that condemns this profligacy and provides a workable standard for preventing its recurrence. The stabilizing budget, with balancing over the business cycle, is the only alternative to annual balancing that has attained any significant following. Converting it into a practical discipline may be the only way out.