One tenet of Keynesian economics is that a government can improve long term economic efficiency, and individual well-being, by deficit spending during recessions.
Some examples of that might be:
- US ABC agencies during the Great Depression
- deficit spending during the 2008 financial crisis
- most importantly from our current point of view, the current Covid-related schemes to support furloughed workers
I have no conceptual issues with the above, but I am also not very keen on long term deficit spending, especially when the %GDP value of the debt continuously goes up. This is doing future voters no favor to be saddling them with ever-increasing debt and it limits capacity to respond to future emergencies. For those with a more left-leaning viewpoint, high interest payments on large debts risk eventually crowding out education, health and welfare spending.
Keynes' focus on the business cycle implies that, for the growth parts of those cycles, the government should be running a surplus, not a deficit.
Now, some governments, like France, have no rules and have managed to run a deficit 45 years running.
Some governments, like the US, have debt ceilings but then always wave them away.
Some governments, like Germany, have a no-deficit rule, but then waived it for the COVID emergency. To some extent, it looks like this is an answer to my question, but it doesn't totally suit me: there is no official recognition of emergency spending until the emergency happens, so there is in fact no formal rule for Keynesian type save/spend cycles.
At the state level, many US states indeed have balanced budget requirements. But that's basically abdicating responsibility of responsible deficit spending and appealing to the Feds to make it up.
Canada lowered its debt from 1997 to 2008, but then has been running a deficit ever since. While it was good to address both the 2008 financial crisis and 2020 Covid, I find it disheartening that no attempt was made to lower deficit from say 2013 to 2020. And that's despite the fact that, after the initial adjustments in 1997, the notion of a surplus enjoyed broad popular support in Canada. A more formal policy might have steered us back towards balanced budgets, now it's too late for a while.
Short-term, it's always easier to spend money to buy goodwill and votes than it is to cut spending to balance a budget. Keynesian stimuli are a useful mechanism to improve economies and the lives of individuals. But constant debt increases is not what Keynesian economics postulate either.
What are examples of nations that have formalized the need to save in good times? I.e. not a year-to-year balanced budget rule, but a cyclical balanced budget rule, or perhaps a rule that says "no more than 5 years of deficit spending in a row".