Why are deficits bad?

Because deficits reduce income over the long run. Essentially, by spending money now, we're taking money from future generations (or ourselves at a later date). So the Democrats' tax lots and spend more policies, and the Republicans' tax less and spend more policies, are irresponsible in every sense of the word (financial crises are probably an exception, though we should still seek to minimize damage even in emergencies). Economists Gale and Orszag:

Each percent-of-GDP in current deficits reduces national saving by 0.5 to 0.8 percent of GDP, and that each percent-of-GDP in anticipated future permanent unified deficits raises forward long-term interest rates by 25 to 35 basis points. . . .

Assuming a marginal product of capital of 6 percent, those missing assets will reduce national income by 1 to 2 percent in 2015—or about $1,500 to $3,000 per household, on average. The budget deficits will also raise interest rates by 80 to 120 basis points—or about $1,000 per year on a 30-year, $150,000 mortgage.

Deficits (a) reduce income and (b) raise interest rates (so that house you want to buy will cost a lot more). Current projections of deficits (click on images for larger version):



Entitlements will be the largest driver of deficits in the next few decades:



As Spikers reminded us, Social Security is less of a problem than health care.

Lesson: there's (still) no such thing as a free lunch. Turns out your parents were right.

Source

The Budget Outlook: Projections and Implications by William Gale and Peter Orszag