Conventional measures of the budget deficit largely show the change in public sector debt. Ideally, the measured deficit would reflect the change in public sector net worth.
Many people consider it impractical to try to measure public sector assets.
This paper does not discuss what the deficit would measure, but instead proposes a positive and testable theory of how governments actually behave. When an outside agent forces a reduction in a government's conventional deficit and debt accumulation, the government responds by lowering asset accumulation or increasing hidden liabilities. Since government net worth is unchanged, such fiscal adjustment is an illusion.