Chris Dillow does sectoral balances

Let's imagine GDP is at its potential level. What should government borrowing be? It all depends upon the private sector's financial balance; this, by definition, is the counterpart of the government's financial balance. If the private sector has a net deficit - because it is investing more than it is saving, then the government will have a surplus. And because, ex hypothesi, GDP is on trend, it'll have a cyclically-adjusted surplus.This is what happened in the late 80s.

If, however, the private sector has a surplus, then the government will have a deficit. This is what happened in 2007.Companies and foreigners were then running surpluses. So someone had to run a deficit. Because households weren't running a big enough deficit, that someone had to be the government.

To put this another way, companies weren't investing as much as they should have, and foreigners weren't buying enough of our goods. Government spending filled the gap. Yes, economic activity was strong. But this was because the government ran a deficit to sustain economic activity. In this sense, the deficit was entirely consistent with orthodox Keynesianism.

Stumbling and Mumbling
In Defence Of The Structural Deficit
Chris Dillow | Investor's Chroncle (UK)