Federal budget deficit

Federal budget deficit

Federal budget deficit.

The federal budget deficit is probably the most cited economic statistic in the world. In the past years, the federal budget deficit has risen in an alarming rate, almost tripled since 1981. However, this debt started falling from 1998.

Economists concerned about huge federal budget deficits argue that such deficits let off the current generation for settling bills incurred by the government. The economists deduce that the current generations spend and consumer more than the previous generations.

This fact minimizes the save and invests aspect of America. A reduced investment rate translates to a less capital per individual worker and therefore, very low growth in productivity. The rate of capital returns rise when the capital is scarce, and the rates of interest shoots up.

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They normally lose their elections because of the rising taxes and high rates of unemployment. The current generations spend and consume more than the previous generations.

These minimize the save and invest American aspect. The rate of capital returns rise when the capital is scarce, and the rates of interest shoots up. A condensed investment rate translates to a less capital per individual worker and therefore, very low growth in productivity.

In order to counter their budget deficits, the federal government can embark on promoting growth in their economies, increasing taxes, and minimizing government expenditures (Shaviro, 2007). The confidence in business can also be improved through simplifying tax regimes and minimizing onerous regulations.

References

Baumol, W. J., & Blinder, A. S. (2011). Macroeconomics: Principles and policy. Australia: South-Western, Cengage Learning.

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