U S Budget Deficit Good or Bad
... ” , Is it a good idea? Why does the U.S. run a deficit? Since 1980 the deficit has grown enormously. Some say its a bad thing, and predict impending doom, others say it is a safe and stable necessity to maintain a healthy economy. When the U.S. government came into existence and for about a 150 years thereafter the government managed to keep a balanced budget. The only times a budget deficit existed during these first 150 years were in times of war or other catastrophic events. ... However, as soon as the war ended the deficit would be eliminated and the economy which was much larger than the amounted debt would quickly absorb it. The last time the budget ran a surplus was in 1969 during Nixon’s presidency. Budget deficits have grown larger and more frequent in the last half-century. ... Also, the deep recession of the early 1980s reduced revenues, raising the deficit and forcing the Government to spend much more on paying interest for the national debt at a time when interest rates were high. ... Then, U.S. ... This brings up the idea that the deficit could be run without cost. How could a deficit increase productivity without any cost? The idea of having a balanced budget is challenged by the ideas of Keynesian Economics. Keynesian economics is an economic model that predicts in times of low demand and high unemployment a deficit will not cost anything. Instead a deficit would allow more people to work, increasing productivity. A deficit does this because it is invested into the economy by government. For example if the government spends deficit money on new highways, trucking will benefit and more jobs will be produced. ... If deficit spending eliminates non-productivity then its direct monetary cost will be offset if not surpassed by increased productivity.