Analysis Of The Federal Budget Deficit And The National Debt

It is a difficult decision to know when and where to disburse money during a recession. Deficit spending can have several advantages, when done correctly. Deficit spending can be a major stimulus to economic growth and actually lower long term government debt (Amy, 2007). The government can borrow money at a lower rate while investing in the future. Injecting money into the economy can help achieve increases in aggregate demand and economic activity (Government Spending, n.d.). One advantage that can come from deficit spending is investing the money to enhance infrastructure. Spending money on infrastructure, such as

In addition, the government spending is one of the components of aggregate demand, consequently, lower GDP. In a demand-deficient recession, consumption and investment tend to decrease due to lower income and revenue, the (X-M) component tends to level off or worsen in short run, which makes government spending an essential device to stimulate the economy. Therefore a decrease in the government spending will cause an even deeper recession and a larger budget deficit.

Overspending is a pertinent problem facing the lawmakers in Congress. In 2012 discretionary spending reached $1.3 trillion and mandatory spending $2 trillion, while only bringing in $2.5 trillion in revenue. Since the turn of the century back in 2000, non-mandatory spending by the government has topped out a whopping $16.1 trillion just in the past 13 years (Boccia, Frasser & Goff 2013). This persistent overspending on programs and services that are not necessary to the functionality of the country is what is causing the deficit to rise year after year. To remedy this issue the government must either increase the revenue it brings in through taxes and trade or reduce the amount of money it spend or perhaps even both. In 2012 thirty-one cents of every dollar that Washington spent was borrowed (Boccia, Frasser & Goff 2013). Most of which went to large programs such as Social Security and Medicare and if these large, growing programs, or just the budget in general, do not undergo financial reform it could spell disaster for the economy and fiscal state of the nation.

An economic downturn automatically paves way to a decline in taxation and an increase in government spending. This causes deficit. Nevertheless, if the government tries to reverse the situation by increasing tax rates, it would further result in a deflated economy leading to more unemployment and lower economic growth. A negative multiplier effect may give rise to an increase in deficit. Thus, deficit increases AD in a recession (Carbaugh, 2011).

Leo: Before the end of his term, President Bush passed TARP. TARP was a program that increased government spending to buy all the garbage CDOs. This program involved $800 billion in government spending which was limited to $475 billion due to the Dodd-Frank Act (TARP Programs 1). President Obama continued using expansionary fiscal policy by passing the American Recovery and Reinvestment Act which increased government spending by $787 billion and lowered taxes (Amadeo 1).

In response to a rapidly increasing national debt, President Barack Obama signed into law in August of 2011 the Budget Control Act (BCA) which mandated $1.2 trillion in across-the-board spending cuts, known as sequestration, over a 10-year period (Matthews, 2013). The BCA of 2011 was intended to serve as motivation for the Joint Select Committee on Deficit Reduction to come up with a deal for achieving equivalent spending cuts and avoid a mandatory sequestration (Matthews, 2013). The committee

Many contend that deficit reduction is imperative to our prosperity and economic recovery. The deficit is blamed for a variety of economic ills including high interest rates, unemployment, the trade deficit, the low rate of national saving and low productivity growth (Shaviro, 1997).

President Obama has introduced a variety of fiscal policy changes during his presidency; some of his ideas, however, did little to strengthen the economy as they were intended to do. For example, in 2001, as President Bush had just entered office, he ushered a reduction of income tax rates in addition to other tax cuts for the middle class, through Congress. While these policies were initially quite slow in boosting the economy, the economic benefits eventually began to surface around 2003 and the economy did begin to exhibit stronger growth. However, President Bush’s tax policy was set with an “expiration date”, set by Congress through a budget process called “reconciliation”

Federal debt has been increasing for at least the past ten years. Currently, federal debt is $19,929,184,161,352.13 (Chantrill). The national debt has nearly doubled throughout Obama’s presidency and President elect Trump’s ideas do not look promising for change. It is estimated that Trump’s tax cuts will raise federal debt by $7.2 trillion within the next decade (Mauro). Many debt crises have occurred because of declines in growth. When

Any person struggling through difficult times will seek out other means of financial support including borrowing money that may be harder to pay back in the future. The United States will often follow a similar path and spend more money than it earns. Deficit spending in the United States comes with some advantages, disadvantages, and strong criticism. Some feel deficit spending is good for getting the economy back in motion while others contend it does nothing for the economy. The effects of deficit spending are carefully examined to determine if the United States is improving or degrading the future of the economy.

The federal budget is known as the notorious economic tank from which money is distributed to various programs. The money used every fiscal year, which begins October 1st and ends September 30th the next year, belongs to the people. The government raises this money through taxes and they spend it on national defense, Medicare, and social security. The federal budget is an exercise in making choices, and those options will certainly affect individuals living in the U.S. These choices cause debt to pile up on the government, who is struggling to make it disappear. The deficit and debt of a government gauges how well it is being run and how well it has been run in the past. According to The Economist the national debt is the total

In 2009 the debt was amounted to about $12 trillion , or 83.4 percent of the country’s GDP (“Budget of the United States Government: Historical Tables Fiscal Year 2011” table 7.1). Since 2003, the debt has been increasing by more than $500 billion annually. The increase in 2009 was $1.9 trillion. According to the Congressional Budgeting Office, this debt will keep increasing at least for the next decade (“The Budget and Economic Outlook : Fiscal Years 2010 to 2020” 21).

The historical federal spending of the government has already done significant damage to America; spending habits have increased the federal budget deficit at alarming rates adding $2.7 trillion to the national debt in two years, $1.4 trillion in the 2009 fiscal year and $1.3 trillion in 2010. (Montgomery)   These deficits are largely caused by increases in spending rates. The current Obama Administration has used the recession in their favor to expand both the government and spending.

For as long as Americans can remember there has always been a federal deficit. In fact, the only time in American history when there was no federal debt was under president Andrew Jackson, and it only lasted a single year(Wall Street Journal). The federal government never managed to pay off the debt again, although some administrations, like Coolidge’s and Clinton’s, have managed to run brief surpluses(Wall Street Journal). Yet today there seems to be no limit on the debt and deficit spending, and a key question has been pressed into the forefront of politics and fiscal policy, “is

The United States has seen a growth in the deficit beginning in 1991. The deficit equated to 3.6% of the GDP in 1999 and rose to 4.4% during 2000. “For instance,