Efforts to Reduce the Budget Deficit
Efforts to Reduce the Budget Deficit
ECO 203
May 6, 2013
Efforts to Reduce the Budget Deficit In view of these possible surprises, fiscal adjustment plans must thus be designed in a way that makes them sufficiently flexible to accommodate the impact of shocks, but also sufficiently resilient so as to preserve their medium-term fiscal consolidation objectives even when the underlying economic environment turns out differently than initially expected, Mauro (2011). According to Amacher & Pate (2012), between 1980 and 1993, budget deficits grew steadily in dollar terms, and the size of the national debt tripled. Since 2003, the public debt has grown by more than $500 billion each year; as of July 2012, nominal U.S. GDP was $15,880 billion. The most striking change, however, was in the ratio of debt to GDP. That ratio reached a 10-year low in 1981 at 32.8%, only to shoot up to 72% in 1993 and to almost 100% in 2012. For FY 2014, the U.S. Federal budget deficit is projected to be $744 billion. That 's because U.S. government spending is budgeted at $3.778 trillion, while U.S. government revenue will only be $3.034 trillion. Although this deficit is huge, it 's almost half of the record budget deficit of $1.4 trillion set in FY 2009, Amadeo (2013). During the Reagan era, the United States experienced a recession which occurred in 1980. The economy recovered from this recession, but experienced a rise in unemployment and payments for food stamps. The deficit increased, but only a small bit of that could be contributed to the recession. The 1980’s had a period of armistice development until the early 1990’s when inflation began to increase. The United States continued to experience brief periods of recession all the way up until 2009 and the Federal Government created solutions such as The American Recovery and Reinvestment Act of 2009; which provided relief for many businesses and individuals effected most by the recession.
ECO 203
May 6, 2013
Efforts to Reduce the Budget Deficit In view of these possible surprises, fiscal adjustment plans must thus be designed in a way that makes them sufficiently flexible to accommodate the impact of shocks, but also sufficiently resilient so as to preserve their medium-term fiscal consolidation objectives even when the underlying economic environment turns out differently than initially expected, Mauro (2011). According to Amacher & Pate (2012), between 1980 and 1993, budget deficits grew steadily in dollar terms, and the size of the national debt tripled. Since 2003, the public debt has grown by more than $500 billion each year; as of July 2012, nominal U.S. GDP was $15,880 billion. The most striking change, however, was in the ratio of debt to GDP. That ratio reached a 10-year low in 1981 at 32.8%, only to shoot up to 72% in 1993 and to almost 100% in 2012. For FY 2014, the U.S. Federal budget deficit is projected to be $744 billion. That 's because U.S. government spending is budgeted at $3.778 trillion, while U.S. government revenue will only be $3.034 trillion. Although this deficit is huge, it 's almost half of the record budget deficit of $1.4 trillion set in FY 2009, Amadeo (2013). During the Reagan era, the United States experienced a recession which occurred in 1980. The economy recovered from this recession, but experienced a rise in unemployment and payments for food stamps. The deficit increased, but only a small bit of that could be contributed to the recession. The 1980’s had a period of armistice development until the early 1990’s when inflation began to increase. The United States continued to experience brief periods of recession all the way up until 2009 and the Federal Government created solutions such as The American Recovery and Reinvestment Act of 2009; which provided relief for many businesses and individuals effected most by the recession.
References: Amacher, R., Pate, J., (2012). Principles of Macroeconomics. San Diego, California: Bridgepoint Education, Inc Amadeo, K (2013) Current U.S. Federal Budget Deficit. Retrieved from http://useconomy.about.com/od/fiscalpolicy/p/deficit.htm Mauro, P (2011) Chipping Away at Public Debt : Sources of Failure and Keys to Success in Fiscal Adjustment. Hoboken, NJ, USA: Wiley, 2011. p x. http://site.ebrary.com/lib/ashford/Doc?id=10483271&ppg=12