The virtues of a balanced government budget have long been a subject of controversy among economists, politicians, and the general public. Debate on this subject again has heated up in view of the persistence of inflation and what some consider the inadequate growth of private investment and the excessive growth of government. Recently, a widespread movement has developed to institutionalize the balanced budget doctrine via a constitutional amendment. This article will show that the difference between public debt financing and current taxes depends upon whether taxpayers correctly anticipate the future taxes that debt issuance implies. This discussion has important implications for the presumed evils of debt issuance, including reduced investment and economic growth, debt burden on future generations, increased inflation, and greater growth of the government sector, as well as the efficacy of fiscal policy actions.