... ” , 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.
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