Central to the budget is the elimination of the deficit. Deficit hawks argue that eliminating the deficit will lower interest rates and raise national savings. Secondly, the view that deficits stimulate growth and employment is nonsense.
Budgets occur when spending exceeds revenue.
Now government borrowing usually drives up interest rates, it also directs savings from private investment to government consumption. The effect will be to destroy marginal investments and lower economic growth. Inflation funded deficits create balance of payments problems and distort the pattern of production which also gives us stagflation. Unfortunately, the baleful influence of Keynesianism has blinded economic commentators like Fred Argy to these economic truths. In his Keynesian view, then, budget cuts will increase unemployment.