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Macroeconomic Problems with Rising
Deficits
Deficits
represent the federal government’s yearly overspending. When government
spending exceeds tax revenue, budget deficits are created. For each year that
the government produces a deficit, America’s
national debt
increases.
This forces the government to sell treasury bonds to the public in order
to compensate for its excessive spending.
With the
current national debt at $8.2 trillion and growing, the American economy
is slowly creeping into an unsustainable situation. Currently, 8% of the
government’s budget is devoted to paying interest on this rising
national debt. This proportion will continue to rise unless Congress
changes its spending habits. If the national deficit continues to grow
faster that GDP, it poses a serious threat to the national economy.
While
deficits can stimulate a lagging economy out of recession, its effects
only benefit the economy in the short run. Escalating government
spending on welfare programs can provide a much needed boost during
times of recession. Today America is not in recession, and its deficits
are on a trajectory to reach unprecedented heights. The current situation is not one of
a beneficial short term deficit; rather, it is a sustained deficit that
threatens the nation’s future economic growth.
Such long
term deficits pose an array of problems to the economy both now and in
the future. The costs of government health care and Social Security, if
not trimmed, are expected to expand at unsustainable rates. These are
the core of the problem. Further increases in government spending will
only worsen an already rampant expansion of trade deficits. If nothing
is done to modify our spending habits, either through revised budget
reform, or restrained fiscal policy, America may be faced with a less
stable economic future.
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