If your economy is growing in nominal terms it will need more high-powered money, unless you want your financial system to become brittle from increasing leverage.

There is precisely one way to inject high-powered money into the economy: Sovereign deficits. So on average over the long run, the sovereign should run deficits.

The fact that you should sometimes run surpluses during the boom part of the business cycle does not change the fact that the sovereign has to be in the red on a cycle-averaged basis, any more than a cold summer disproves global warming.

If you're talking short-run, then attempting to run surpluses is counterindicated at the moment. If you're talking long-run, then surpluses are wrong-headed, full stop.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.