Federal Budget Deficit And The National Debt

This growth in national debt has blunt consequences on inflation, interest rates and growing economy. Foreign control of large amounts of government debt means that the taxes will have to be raised to repay debt and percentage owned to overseas governments which is not acceptable. Assuming that trade deficiency also exists it will lead to depreciation of dollar which effect its position as a reserve currency, and if during this process any new currency emerge as a replacement of reserve currency, higher interest rates will be required to sell the debt to foreign countries (Inflation). Raised interest rates have a negative impact on the economy and high accumulation of debts leads to high interest rates (Spending). Hence the economy suffers. This means that the funds for government programs like Social Security and Medicare are not enough (Economic Progress Under Obama). Another consequence of high national debt is the reduced flexibility in fiscal policy (Spending).

The federal budget deficit is a much discussed and little understood subject in American politics. The current recession has dramatically decreased tax revenues, driving the United States federal government to increase spending in an attempt to stabilize the economy. As a result the current federal deficit is at over $1.3 trillion dollars. This is approximately $47,754 per U.S. citizen or $137,552 per U. S. taxpayer (U.S. Debt Clock: Real Time, 2012).

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.

Maria comes home one day earlier than usual. Her family, two daughters of age five and eight and a stay-at-home husband, is surprised to see her so early and unexpectedly. The tired look on her face reveals the experience she had at work. She brings out a sluggish smile as her daughters rush up to greet her with their warm embraces, reminding her of the happiness they constantly provide but also saddened by their questionable future. Quietly, she sits down in front of her anxious spouse as he patiently awaits the news, sensing the tension in the air.

In our textbook, “Principles of Macroeconomics,” the relationship between debt and deficit is described. A deficit is a shortfall in revenue for a particular year’s budget. Whereas, a debt is the total of all accumulated and unpaid deficits. An outlay is an amount of money spent on something. The federal government outlays are divided into government outlays and mandatory outlays. Government outlays are the part of the government budget that includes both spending and transfer payments. Mandatory outlays constitute government spending that is determined by ongoing long term obligations. Of the two, mandatory outlays is the largest portion of the federal budget. Lastly, Discretionary outlays compromise government spending that can be altered when the government is setting its annual budget. A budget surplus occurs when revenue exceeds outlays. A budget deficit occurs when government outlays exceed revenue.

A current elasticity issue is the U.S. Federal Government deficit spending that incurred a large national debt in which had a negative affect on our economy. “The U.S. Federal Government has spent more money than what it is bringing in for Americans. This is known as the ‘crowding-out effect’ which causes the Federal Reserve to increase unaffordable interest rates. In a recent Los Angeles Times article, 2011, Tom Petruno reports that, “as of June 18, 2011, the Federal Reserve has been trying to bail the U.S out of debt in the past year by purchasing the Treasury’s Net bond issuance and created $600 billion new paper bills for the financial system via bond purchases since November 2010.” (Petruno, 2011) On March 15, 2011, the Board of Governors of the Federal Reserve System (FBR) reported that, “the Fed Committee is promoting a stronger pace for economic recovery and have expanded its holdings on securities. They have reinvested principal payments from the security holdings and will invest an additional amount of $600 billion into long-term treasury securities by the end of the fiscal year. Feds state that household expenditures, business investments in equipment, and software continue to expand throughout the nation. The nonresidential structures remain weak at this time and the housing sector is still depressed. There have been some improvements in the labor market that is slowly decreasing the unemployment rate.” The Fed Board

Debt is nothing new to the United States government. Ever since 1790 when Alexander Hamilton successfully convinced the congress to assume state debt the US has had a constant record of debt. This type of budget issue has been a constant leadership challenge to every US President. The Obama administration continues this trend of deficit and debt which has created the highest total federal debt in US history. . There are unique challenges and decisions every US President has had to make in regards to the budget and the economic success of the United States. Whether you agree or disagree with decisions made by President Obama there is a particular pressure that comes with trying to work across party lines to get support from those who disagree with his priorities. When President Obama entered office he took over a historically high debt and deficit during a time of an economic disaster. The new President inherited the challenge of balancing the budget and reducing debt while still spending to increase future economic growth. Though there are many aspects of concern regarding the federal budget, Obama’s main efforts coming into the White House were to increase tax revenue, by closing loopholes for the wealthy and adjusting previous tax measures, while reducing income inequality, increasing educational spending and providing universal health care.

The United States deficit contributes to its debt and the debt contributes to the deficit. We know the longest running uninterrupted surplus for the Unites States was from 1920 to 1930 but spent most of it combating the war. This will show how the U.S. deficits, debt, and surplus affect the following areas; the taxpayers, future social security and Medicare users, unemployed individuals, University of Phoenix students, The United States financial reputation on an international level, a domestic automobile manufacturer (exporter), and a Italian clothing company (importer).

The United States of America has carried some amount of federal debt every year since the country was founded. From this empirical evidence, it can be said that debt itself is not damaging to an economy. After all, the country has had periods of rapid growth and economic booms while carrying different amounts of debt. It is also plain to see that a very large amount a debt, an amount that could not ever be eliminated without unreasonably inflating the dollar, could have devastating effects. The US dollar is a fiat currency, which holds value only when holders of the currency have confidence in the issuing institution, in this case the US government. In the event the government could not repay its debts, the value of the currency would drop as people lose confidence. The effects on the US economy, households, businesses, trading partners and foreign governments would be disastrous and widespread.

The Federal budget deficit is the amount of spending by the Federal government that is in excess of how much money the government brings in annually. While the Federal budget deficit has steadily decreased overall during the past fifteen years, our Federal debt continues to grow at a drastic rate. A review of how the Federal deficit has evolved over the past fifteen years, the rate of growth of the Federal debt during that same period, and how the two are connected will better explain this phenomenon.

At the beginning of President Obama’s term the federal deficit was nothing new. When the Obama Administration took control of the White House the federal deficit was at $11.657 trillion dollars. This was a dismal point to start at, but it has only gotten worse throughout his term in office with the federal deficit now at over $17 trillion dollars as his second term comes to an end. (About 1) Current debt increases is working on

He begins with the question, “ARE you confused about whether large federal budget deficits matter?” Robert H. Frank uses his article to clarify to the audience that deficits can actually be utilized to help the economy if used in the right ways. It’s obviously expensive to run such a superpower like the United States of America and as a result, deficits and debts are encountered. In simple terms, a federal deficit is when the government is spending more or outlays more than it is taking in revenue and national debt is the result of the federal government borrowing money to cover all of the years of budget deficits. People, such as Harvard economist, Martin Feldstein, have argued that failure to run large deficits could prolong economic downturn; however, most who have studied the issue possess a general consensus that “short-run deficits help end recessions, and that whether long-run deficits matter depends entirely on how the government spends the borrowed money.”

The National Debt consists of the total debt accrued by local, state and federal. Public debt is essentially the federal debt, thus compiling the staggering number that already exists. The debt deficit to me is astonishing. Currently, the total public debt in the United States, as of December 16, 2015, is $18,788,138,221,346.49. This includes $13,600,726,418,253.26 debt held by the public and $5,187,411,803,093.23 by intergovernmental holdings (usgovermentdebt, 2015). High GPD is not anything new to the United States. The all-time high was 121.70 percent ($18827323.00) in 1946 and a record low of 31.70 ($253400.00) percent in 1974 (United States Government Debt to GDP, 2015). The way we are spending, and the debt we are accruing, it would

In our textbook Principles of Microeconomics, it describes national debt as the sum of all past federal deficits, minus any surpluses. We always hear on the news politicians talk about how our national debt keeps growing in the United States and the government (political party in power) keeps spending, not staying on budget to cut spending or even pass legislation to that end, but just basically passing the burden to the new generations. While in essence that is true, but mainly it just sounds great for politics, I will discuss why our national debt figure (total number amount) is less informative than the national debt as a percentage of GDP about the state of an economy.

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