The Federal Budget Deficit And National Debt

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The Federal Budget Deficit and National Debt Basically, what the federal budget deficit is a shortage of funds that are available for the government, where more money is being spent than what the government receives. But, national is where the government borrows money through various ways. The data for national debt and federal budget deficit from the year 2001-2013 is given in the chart above. As we can see in the graph, the deficit is still remains in our economy even though there had been a surplus in 1999 to 2001. But, we could see a lot if decreases such as from the year 2004- 2007, 2009-2010 and also from 201-2014, but generally the deficit kept increasing yearly. The data provided is in trillions and a positive value means …show more content…

From the graph above, for instance, we could say that the budget deficit increased rapidly from 2007-2009 and we could say that the main is due to the Great Recession. The governments act trying to counter-attack this effect by improving fiscal policy for the betterment of business cycle lead to more outlay than revenue, which resulted in the increase of the deficit promptly. So, therefore borrowing the money to deal with deficit lead to increase in the national debt. Crowding out occurs when spending by an individual or an organisation or to be more precise, private spending decreases and by increasing the government spending. People sometimes use this as an alternative replacement and lets the government to spend more. This is a very big problem causer because as the government decided to spend more, it leads to higher budget deficit and debt and the overall spending may decline rapidly. So, therefore if they let the government to spend more instead of them it results to the lesser consumption of resources and spending on it. This can lead to decreasing the interest rates which results in less investment by people and major drop in the business sector. In order to shift the economy up from the times and effect of the great recession, government tend to raise the budgets at times, government give more outlays in the form of social security and other fiscal policy techniques. As a result, the government borrows capital to pay for this,

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