When inflation is perceived to be a greater problem than unemployment, the government can run a budget surplus, helping slow down the economy. Do...

While I agree with the statement in theory, I would argue it is unlikely to ever happen in real life. Let us examine the reasons for each part of this statement.

According to Keynesian economic theory, it is absolutely a good idea to run a government surplus in boom times.  When the economy is booming, it is much easier to run a surplus because tax receipts increase and the government does not have to spend as much on programs like unemployment benefits. In addition to it being easier to run a surplus, it is also a good idea. In good economic times, economists generally worry about the prospect of demand-pull inflation. In this situation, people have more money because they are working more. Since they have more money, they can demand more goods and services and can afford higher prices. These factors can lead the economy to “overheat,” which leads to excessive inflation.

If the government runs a surplus, it reduces the chances of rapid inflation. When the government runs a surplus, it increases taxes and/or decreases spending. This, in essence, takes money out of the hands of consumers. Now that consumers don’t have as much money, their demand for goods and services does not increase as much. This makes inflation less likely. For these reasons, it makes good economic sense for a government to run a surplus during boom times.

I do not think that this is very likely to happen, however.  Governments are typically not very willing to raise taxes.  Voters hate having their taxes raised, even in good times.  This restrains governments from implementing tax hikes. In addition, most people do not really want the government to spend less. People may think some government programs are wasteful, but they like the government programs that benefit them. This makes it hard to cut spending. Moreover, when times are good, government officials and others often feel the government should do more. Since there is plenty of money in that moment, they feel that the government should create more programs to attack more problems. People generally support this because those programs will help them in some way.

What all of this adds up to is a situation in which it is very difficult for the government to actually run a surplus, even if that would make good economic sense. Therefore, while I agree with the economic logic of this statement, I do not believe it is likely to happen very often.