what is the golden rule of government spending 
the golden rule of government spending is a fiscal policy that a government should borrow only to invest not to fund current spending in other words the government should borrow money only to make investments that will produce long term benefits for the future current spending or spending on short term needs should be funded by tax revenues understanding the golden rulesupporters of the golden rule of government spending which limits borrowing to funding investments generally seek to protect future generations from being overburdened by debt attributable to borrowing for current expenditures some economists emphasize that other policies also affect future generations debt burden they contend that the golden rule is not the optimal way to achieve intergenerational fairness 1 others support the golden rule to realize a different goal limiting the size of government 2the golden rule in fiscal policy has been implemented in a number of countries while its application varies from country to country the basic premise of spending less than the government takes in is always at its foundation most countries that have adopted the rule the united states is not one of them have had to make changes in their constitution or statutes some countries have experienced a reduction in deficits as a share of gross domestic product gdp as a result 3 governments may also need more flexible fiscal policies during economic downturns and emergencies the golden rule in government spending is different than the ethical golden rule do unto others as you would have them do unto you which can be found in the places like talmud the new testament and the koran international applications of the golden ruleover the last 30 years a number of countries particularly nations with advanced economies have adopted fiscal policies incorporating some form of the golden rule whether effected as law or as the policy of a governing party these policies generally provided exceptions for economic emergencies at various times golden rule policies have helped canada new zealand sweden switzerland andgermany reduce spending growth and debt levels 2 the united kingdom adopted a golden rule policy in 1998 by 2007 economic problems and shortfalls in tax revenues undercut compliance even before the international financial crisis in 2008 the economy s need for government support and stimulus led the uk to abandon the policy 4the european union s experience with the golden rule indicates that because of economic unpredictability the policy operates better as a guideline than as an absolute requirement in 1997 the european union adopted a stability and growth pact sgp to monitor and stabilize the economic and monetary union and to coordinate fiscal policy among eu members eu member states were to implement fiscal policies designed to achieve deficits no higher than 3 of gdp and maintain a debt level below 60 of gdp in 2005 the rules were revised to allow greater flexibility additional rules and oversight policies were adopted following the 2008 financial crisis 5as a result of the covid 19 pandemic in 2020 the eu suspended the sgp borrowing limits until 2023 6 some members are seeking further amendments to provide more flexibility in the future and in may 2022 the eu announced that it was proposing a further suspension of the limits through 2023 7no golden rule for the united statesthe united states federal government has not adopted a fiscal policy reflecting the golden rule although some commentators on u s fiscal policy urge the adoption of a golden rule others recommend a more flexible multi faceted approach 89 from time to time policymakers have proposed legislation even a constitutional amendment that would require a balanced budget currently the federal government is subject to a legislated budget ceiling when the government s borrowing authority nears its limit the debt ceiling is increased by congressional action often generating political debate in 1985 congress passed the gramm rudmann hollings bill whichspecified annual deficit targets that if missed would trigger an automatic sequestration process the following year the supreme court ruled that the law was unconstitutional 10on jan 13 2023 treasury secretary janet yellen warned that the u s was expected to reach the 31 38 trillion borrowing ceiling congress approved in december 2021 on jan 19 on that day she announced that treasury can take extraordinary measures to forestall a shutdown until early june 11 after that point congress will need to take action to avert a government shutdown and a default on the federal government s debt obligations 