Budget Deficit & National Debt :: essays research papers

The purpose of this paper is to discuss the short- and long-term effects of current budget deficits and the nation debt. In order to do this; I first had to find out exactly what they were. I will also discuss whether I think the government should operate with a balanced budget. Budget deficit is the amount by which total government spending is more than government income during a specified period; the amount of money which the government has to raise by borrowing or currency emission in order to make up for the shortfall in tax revenues. National debt denotes the total sum of the outstanding debt obligations of a country's central government. I discovered that many people use the term somewhat more broadly to refer to the total indebtedness of all levels of government, including regional and local governments and sometimes also the indebtedness of government owned business entities such as local transit and communications systems or nationalized industries as well. The national debt represents the accumulated total of all the government budget deficits of past years, less the accumulated total of all the government budget surpluses of past years. In the United States, the national debt consists almost entirely of interest-bearing "IOU" instruments that are usually re-sellable on organized financial markets such as, for example, U.S. bonds, U.S. treasury notes, and U.S. treasury bills. These IOUs are originally purchased from the Treasury by private individuals, private corporations, insurance companies, pen sion funds and banks (both inside the United States and outside its borders), and the Treasury then uses the money it raised to bridge its spending gap when its budget is in deficit. The Treasury also sells IOUs to other Federal agencies that operate so-called trust funds -- primarily the Social Security Administration and other Federal retirement programs. The complication here is that since this is money that the government "owes to itself," it is not counted as part of the national debt in any realistic system of accounting. I find this to be really strange. Money to pay the annual interest owed to the owners of the government's debt instruments has to be provided through appropriations in every year's Federal budget. These interest payments on the national debt constitute as one of the largest spending categories in the budget. Gross Domestic Product (GDP) is an estimate of the total money value of the entire final goods and services produced in a given one-year period using the factors of production located within a particular country's borders.