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Budget Deficit Essay

1190 words - 5 pages

Budget Deficit

For many decades, there has been a concern for the deficit within the United States. Many politicians, authors, newscasters, and citizens have expressed their distress in order to resolve or control the issue. Keynesian economic theory states that running a budget deficit is okay, as long as the deficit is not exorbitantly large and is not carried for a long period of time. Even though many experts agree with this notion, having a deficit at all is important to the present and future economic stability of a country. For the most part, the uncontrolled increases in spending and reckless tax cuts in the past have damaged the federal budget, which the White House and ...view middle of the document...

” It is also possible that there were other factors in the economy that lead to the increased tax revenue from personal incomes and corporate taxes, that helped lead to the reduction of the deficit. None the less, there are various ways to reduce and stabilize the deficit and it is an ever increasing importance in the political landscape today. There could be major economic ramifications if the deficit is not controlled properly.
The Brookings Institute report on the deficit, entitled Restoring Fiscal Sanity: How to Balance the Budget, gives an economically reasonable assessment of the future of the federal budget. The report suggests three ways to balance the budget while simultaneously making room for new priorities. In addition, all three are designed to restore fiscal sanity over the coming decade and help prepare for the baby boom's retirement.
A fundamental problem in the United States is that the government and the American people want a perfect society with social programs to make everyone’s life better, in addition to low taxes. Unfortunately, this is not a viable option while running a large scale deficit in the government. The government should not be trying to cut taxes while increasing spending on social programs for its citizens. In fact, the authors believe that matters will get far worse once the baby boom generation begins to retire, if nothing is done to reduce the deficit. The national debt is projected to increase by $5.3 trillion in the next decade alone. In addition, the interest on this extra borrowing will cost the average household $3,000 a year, and the economic effects of the deficits will also lower its income an estimated $1,800. However, there are many variables that could change in the estimations, not to mention all of the unpredictable events that can occur throughout that time.
Government officials do not have much incentive to reduce spending and increase taxes in order to control the deficit, unless the public is aware of the dangers and accepts the responsibility. Again, as Keynesian economics states, running a deficit by increased government spending, to stimulate the economy, is not harmful during a recession. However, after the economy has recovered, the deficit becomes a problem. In the event that the current deficit is not handled properly, the country will begin to see the weakening of the production of goods and services, in turn forcing wages to decrease. Interest rates will rise, which will make it harder for households and businesses to acquire loans. These factors will increase the strain on the American public and unfortunately...

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