All governments face a budget constraint: none can spend more than the sum of current government revenues plus the amount that creditors are willing to lend. Why, then, do government budget deficits matter?

What will be an ideal response?

Deficits matter because they are costly, and because they can become unsustainably large. The interest cost of the debt must be paid by spending less on other worthy goods and services, and repayment of principal has the same opportunity cost. Credit extended to the government might have been borrowed and spent in the private sector. While it might be reasonable for a government to borrow to meet crisis needs, it might be reluctant later to raise taxes and/or reduce spending in order to pay down the debt. The next crisis won't wait for repayment of the preceding crisis's debt. The debt makes the economy more vulnerable to crisis and the government less able to respond appropriately. If creditors become reluctant to lend more at a reasonable rate of interest, the government might feel compelled to borrow from the central bank, fueling inflation.