Because checks received by the Treasury exceed the value of checks issued by the Treasury whenever there is a surplus, outstanding cash and bank reserves will be reduced. To restore cash and reserves, the private sector sells Treasury bonds. Movements of the budget position are largely automatic. Rapid economic growth, such as that experienced in the United States since 1992 or in Japan previous to 1990, tends to cause tax revenues to rise faster than government spending, resulting in surpluses. Recessions and depressions tend to cause tax revenues to fall as spending rises, resulting in deficits.
Many economists focus on the secondary or tertiary effects of government deficits and surpluses.
While they might agree that deficits increase disposable income and private sector wealth, they argue that deficits also increase interest rates and thus depress investment or that households reduce consumption on the expectation that tax rates will be increased in the future. They argue that while surpluses might reduce disposable income and private sector wealth, they also lower interest rates and thus spur private capital formation. While I believe these arguments are based on faulty reasoning, it is possible that under some conditions the secondary effects might outweigh the primary effects so that, at least for a while, deficits might depress the private sector and surpluses might stimulate it. However, history suggests that over the longer run, deficits stimulate the economy and surpluses are harmful. Our own history suggests not, and we can also look to the recent experience of Japan.