This article revisits the aggregate stability property of fiscal policies with balanced budget
rules using a standard one-sector growth model. As in Schmitt-Grohe and Uribe (1997)
aggregate instability is driven by self-filling beliefs in the presence of multiple equilibrium
paths. However, I find the existence of an indeterminate balanced growth path with a
continuum of competitive equilibrium paths when productive public spending on aggregate
production is endogenously financed by a predetermined rate of income taxes under
balanced budget rules. In this economy, local and global indeterminacy emerges when labor
supply is highly elastic and a slope of aggregate (not necessarily individual) labor demand is
positive by the productivity of public spending, independent of the usual indeterminacy
conditions under fiscal policies such as types of distortionary taxes, sources of government
revenue, composition of government expenditure, countercyclical taxation, and
predetermined public spending.