A balanced budget can and does have a place in a responsible fiscal policy, but it is not the only element. That was the message presented April 12, when the Economic Policy Institute (EPI) hosted a panel discussion entitled "Beyond Balanced Budget Mania." Indeed, a strict concentration on balancing the budget could have deleterious effects on the economy, continue to leave health care out the reach of millions, and contribute to the ongoing decay of national infrastructure. Bucking the trend in recent policy discussions, EPI presented a series of speakers who challenged the notion that a balanced budget deserves the undivided attention of fiscal policy planners. Nobel laureate Joseph E. Stiglitz, who served as chair of President Bill Clinton's Council of Economic Advisers and Chief Economist at the World Bank, delivered the keynote speech. Following Stiglitz was a three-person panel composed of: Henry J. Aaron, Brookings Institution Economic Studies Program Senior Fellow and former Assistant Secretary for Planning and Evaluation at the Department of Health, Education, and Welfare; EPI economist Max Sawicky; and Joan Lombardi, Director of The Children's Project and former Deputy Assistant Secretary for External Affairs in the Administration for Children and Families at the U.S. Department of Health and Human Services. To be sure, a balanced budget can have significant benefits for the nation. Expenditures on the national debt are becoming a larger part of the federal budget every year. For Fiscal Year 2006, interest payments on the national debt totaled $227 billion. This amount was 46 percent of non-defense discretionary spending and nine percent of all federal spending last year. Additionally, procedures and rules that give rise to a balanced budget force Congress to carefully consider the ramifications of their spending decisions, so there is an increased likelihood that national priorities receive funding. But, as the panel's speakers reminded the audience, focusing solely on the deficit does not guarantee this outcome, and it perniciously excludes other important fiscal policy objectives. Deficits and the Economy: Context Matters Stiglitz opened the event by speaking to the macroeconomic impacts of fiscal policy. A budget deficit, while not inconsequential, is not always undesirable. Running a deficit can be used to jump-start an ailing economy, but closing a deficit during a downturn can hasten the onset of a prolonged recession. Responding to a question about the fiscal restraint enacted during the sour economic climate of the early 1990s, Stiglitz offered that it was a combination of good luck and poor banking regulatory policy that produced a fortunate outcome. This explanation challenges the idea that the balanced-budget policies implemented by Clinton Treasury Secretary Robert Rubin were directly responsible for the economic boom of the 1990s. Rising Cost of Health Care, not Deficits, Responsible for Long-Term Imbalances The concern among many deficit hawks is that entitlement spending increases in the next twenty years will push budget deficits to an "unsustainable" level, so the hawks agitate for "entitlement reform." Are deficit hawks appropriately addressing the future financial obligations of the federal government by imposing tight budget controls today and "reforming" entitlement programs? Aaron of the Brookings Institution says "not necessarily." The cost of health care, not an increase in entitlement spending, is the long-term fiscal challenge, and balancing the federal budget does little to address this fact. Government Accountability Office chief David Walker recently told Congress that only by tightening budget controls and "restructuring existing entitlement programs" will we avoid unsustainable deficits. Aaron provided a stark contrast to these remedies, stating the driving force behind the "entitlement crisis" is solely the rapidly rising costs of both public and private health care. Reforming entitlement programs will not change this, he believes. Responsible Fiscal Policy More Than Just Deficit Reduction The message of the EPI briefing is that reducing spending on public investments in favor of balancing the budget is a short-sighted approach to fiscal policy. It ignores the financial returns in years to come as the result of the government making solid, long-term investments. Lombardi's and Sawicky's presentations focused on public investment expenditure as a tool to increase not only economic growth, but also the general welfare of the nation. Lombardi highlighted empirical studies that demonstrate early childhood development programs generate significant financial returns, not only to the individual, but to the nation as a whole. Sawicky illustrated the extent to which spending on other forms of public infrastructure has declined over the past thirty years. Like early childhood development, federal spending on research and development, bridges and roads, physical plants, and education will result in returns on investment and serve to increase economic growth. Restraining government spending on public investments with the singular purpose of balancing the budget could ultimately weaken the fiscal position of the nation. EPI's attempt to move the fiscal policy discourse "beyond balanced budget mania" is an attempt to address aspects of fiscal policy that are too often ignored. Congress should address deficit reduction in the context of competing national priorities. Given the state of the economy and the level of public investment, a too-narrowly focused policy of reducing the budget deficit could negatively impact the short- and long-term economic and fiscal state of the nation. The pursuit of a balanced budget is laudable, but only insofar as it is part of a fiscal policy that seeks to fully fund national priorities.