Eco 203: Principles of Macroeconomics
The Budget Deficit
The further growth of the budget deficit has been caused by a weak economy and increased government spending in areas such as: health care, education, defense spending, and lowered taxes. The government and/or Federal Reserve Bank can often hurt the economy trying to balance out high budget deficits. There is no doubt that our national debt is increasing. Budget deficits today will reduce the growth rate of the economy in the future, proving where we invest our money matters. Fiscal and monetary policies also play a role in managing budget deficits. High budget deficits will certainly affect the overall economic growth and the debt that the U.S. has to struggle with.
High budget deficits today will reduce the growth rate of the economy. Economic growth is defined in the text, Principles of Macroeconomics, as “an increase in the total output of an economy. It occurs when a society acquires new resources or when it learns to produce more using existing resources” (Case, Fair & Oster, 2009, Pg. 422). It is assumed that future generations will be better off than we are now and that the economy will grow due to technological advances. However, technological growth has been slowing. “Global growth is slowing – especially in advanced-technology economies”. Future generations might be left with a debt they may not be able to pay off. This may leave the Federal Reserve Bank (Fed) to make drastic increases in interest rates and/or taxes. High budget deficits today can make it harder for future generations to prosper as it deprecates the value of the dollar and increases bill/fines. If new resources are not found, the debt can only increase with inflated prices that perpetually make it harder and harder for future generations.
It can be argued that the reasons we have such a high budget deficit don’t matter, but they do. “National debt would not exist if it did not have a benefit side” (Byrns, 2008). If the deficit is furthered by selling our
The further growth of the budget deficit has been caused by a weak economy and increased government spending in areas such as: health care, education, defense spending, and lowered taxes. The government and/or Federal Reserve Bank can often hurt the economy trying to balance out high budget deficits. There is no doubt that our national debt is increasing. Budget deficits today will reduce the growth rate of the economy in the future, proving where we invest our money matters. Fiscal and monetary policies also play a role in managing budget deficits. High budget deficits will certainly affect the overall economic growth and the debt that the U.S. has to struggle with.
High budget deficits today will reduce the growth rate of the economy. Economic growth is defined in the text, Principles of Macroeconomics, as “an increase in the total output of an economy. It occurs when a society acquires new resources or when it learns to produce more using existing resources” (Case, Fair & Oster, 2009, Pg. 422). It is assumed that future generations will be better off than we are now and that the economy will grow due to technological advances. However, technological growth has been slowing. “Global growth is slowing – especially in advanced-technology economies”. Future generations might be left with a debt they may not be able to pay off. This may leave the Federal Reserve Bank (Fed) to make drastic increases in interest rates and/or taxes. High budget deficits today can make it harder for future generations to prosper as it deprecates the value of the dollar and increases bill/fines. If new resources are not found, the debt can only increase with inflated prices that perpetually make it harder and harder for future generations.
It can be argued that the reasons we have such a high budget deficit don’t matter, but they do. “National debt would not exist if it did not have a benefit side” (Byrns, 2008). If the deficit is furthered by selling our
References: Byrns, R. (2008). Public Debt. Retrieved October 22, 2012, from Economicae website: http://www.unc.edu/depts/econ/byrns_web/Economicae/publicdebt.html Case, K.E., Fair, R.C., and Oster, S.E. (2009). Principles of Macroeconomics. (9th ed). Upper Saddle River, New Jersey: Pearson Prentice Hall. Thoma, M. (2012, October 2). Sustained Budget Deficits: Longer-Run U.S. Economic Performance and the Risk of Financial and Fiscal Disarray. Retrieved October 22, 2012, from http://www.brookings.edu/research/papers/2004/01/05budgetdeficit-orszag Vermeiren, M. (2012). THE GLOBAL IMBALANCES AND THE CONTRADICTIONS OF US MONETARY HEGEMONY. Retrieved October 22, 2012, from http://www.academia.edu/202135/ The_Global_Imbalances_and_the_Contradictions_of_US_Monetary_Hegemony