Is the U.S. facing a budget deficit problem?

Is the U.S. facing a budget deficit problem?

A budget deficit is a gap between what the government spends and what it takes in through taxes and other sources of revenue. It occurs when expenses exceed revenue and indicate the financial health of a country. According to a forecast by the Congressional Budget Office, the federal budget deficit is expected to balloon to $1 trillion by the 2020 fiscal year.

 

According to Alan Clayton-Matthews, an associate professor of economics and public policy at Northeastern University, the good thing about it is that the growing national debt “never has to be paid off.” The bad news is the fact that the federal government is running out of tools it can deploy to bolster the economy when it dips into a recession. A parallel can be drawn between the federal budget and a household budget. Just like a household operating at a deficit and accumulating debt, the United States has been operating at a growing deficit and has accumulated national debt. The Congressional Budget Office predicts that by 2029, the federal debt held by the public will be the highest it’s ever been since the period just following World War II. However, if we accumulate debt, we have to pay it off by the time we retire. Thus, we have sources of income when we’re no longer working. The national debt doesn’t have to be paid off in the same way because the federal government is never going to retire.

 

The Federal budget deficits during the Great Recession ranged from $1.4 trillion to $1.1 trillion. The problem is that the U.S. economy is not currently in a recession and the federal government is still running a large deficit.

“The federal government would like to be in a position to be able to run a large deficit when the next recession comes, but that is very difficult to do if you’re already in a large deficit”, says Matthews

 

Shahjadi Jemim Rahman

 

Shahjadi Rahman
Shahjadi Rahman

shahjadirahman21@gmail.com

A firm believer of the Law Of Attraction. I say the glass is always filled half, fancying the world as a runway to fly with my wings on!

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