Golden Rule

AAA

DEFINITION of 'Golden Rule'

The Golden Rule, as it pertains to government spending, stipulates that a government will borrow to invest, not to finance existing spending. In other words, the government should borrow money only to fund investments that will benefit future generations, and current spending must be covered by existing taxes.

INVESTOPEDIA EXPLAINS 'Golden Rule'

The term originates from ancient writings, including the New Testament, the Talmud and the Koran. Each has a story that teaches the Golden Rule: do unto others as you would have them do unto you. In fiscal policy, the Golden Rule seeks to protect future generations from debt by limiting borrowed money to investments, and not to indebt future generations for the benefit of current generations.

RELATED TERMS
  1. Fiscal Policy

    Government spending policies that influence macroeconomic conditions. ...
  2. Taxation

    Taxation refers to the act of a taxing authority actually levying ...
  3. Government Purchases

    Expenditures made in the private sector by all levels of government, ...
  4. Economics

    A social science that studies how individuals, governments, firms ...
  5. Monopoly

    A situation in which a single company or group owns all or nearly ...
  6. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
RELATED FAQS
  1. In what types of economies are regressive taxes common?

    Regressive taxation systems are more likely to be found in developing countries or emerging market economies than in the ... Read Full Answer >>
  2. What are the pros and cons of operating on a balanced-budget?

    Few issues are more complicated, contentious and controversial in contemporary American politics than balancing the federal ... Read Full Answer >>
  3. What causes politicians or governments to begin "pork barrel" spending?

    Pork barrel spending occurs when the government taxes the general population to hand out concentrated benefits to special ... Read Full Answer >>
  4. What is the purpose of the International Monetary Fund?

    The stated goals of the International Monetary Fund include offering policy advice to member governments and central banks; ... Read Full Answer >>
  5. What are some examples of "pork barrel politics" in the United States?

    So-called "pork barrel politics" has been present in the United States' legislative and, to a lesser degree, executive branches ... Read Full Answer >>
  6. How is the principle agent problem manifested in the government?

    The principal-agent problem describes challenges that occur when agents and principals have conflicting interests. Democratically ... Read Full Answer >>
Related Articles
  1. Economics

    What Is Fiscal Policy?

    Learn how governments adjust taxes and spending to moderate the economy.
  2. Taxes

    Do Tax Cuts Stimulate The Economy?

    Learn the logic behind the belief that reducing government income benefits everyone.
  3. Budgeting

    Current Account Deficits: Government Investment Or Irresponsibility?

    Deficit can be a sign of trouble for some countries, and of health for others. Find out what it means when more funds are exiting than entering a nation.
  4. Economics

    What Caused The Great Depression?

    Learn how government actions may have contributed to this major economic downturn.
  5. Economics

    How The GDP Of The US Is Calculated

    The US GDP may not be a perfect economic measure, but the ability to compare it to prior periods and other countries makes it the most applicable.
  6. Taxes

    Are Taxes the Solution for Income Inequality?

    Income inequality continues to increase. Why? And are taxes the solution?
  7. Taxes

    Presidential Candidates And Wall Street In 2016

    Wall Street's influence will play a large role in the 2016 presidential race. As election season begins, candidates are showing their true colors.
  8. Economics

    Presidential Candidates For Students In 2016

    Early 2016 Presidential candidates are already making clear their intended strategies for solving the country's growing student loan debt issues.
  9. Economics

    China And The Maritime Silk Road

    We provide an overview of China's planned Maritime Silk Road.
  10. Forex Education

    What Is A Currency War And How Does It Work?

    We look at what a currency war is, what factors may lead to it, the impacts of such a strategy, and whether there is a currency war currently.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center