We analyze how different budgetary rules affect the stability of an economy

in a basic endogenous growth model with public debt and a state-dependent consumption

tax rate. We show that a discretionary policy implies that the government

violates its inter-temporal budget constraint along a balanced growth path, whereas

a balanced budget rule guarantees that the economy is stable. A rule based debt

policy gives rise to stability if the reaction of the primary surplus to higher public

debt is sufficiently large. Further, in case of a strongly regressive consumption tax

rate over a certain range, multiple balanced growth paths may emerge. The main

results can be generalized to hold for any endogenous growth model with infinitely

lived households.