The Budget Deficit

Paper Summary:

This paper explains that the budget deficit, defined as the amount the government borrows in order to fulfill the budgetary allocations in the federal budget, is at an all-time high, which is not that concerning because most often expenditures exceed revenues and the bridging of the gap between the two requires government borrowing from foreign or private entities. The author points out that, if the deficit increases 2.5% in one year, but GDP also increases by this same amount, the deficit as a portion of the federal budget has remained the same. The paper concludes that the examples show that the vast majority of current federal budget programs demonstrates that increased operating deficits do not necessarily mean poorer performance; in fact, the percentage of debt as a portion of GDP is a much better predictor of effectiveness in the federal budget mechanism.

From the Paper:

"With these criteria in mind, we will turn attention to the current federal budget, which has been in deficit status since 2002, and seems destined to remain so for the next several years. The FY2006 proposed budget includes a $390 billion deficit, not including potential expenditures in Iraq and Afghanistan or any social security reform measures undertaken-a seemingly huge discrepancy between government revenue and spending. President Bush has vowed to reduce deficit spending by half in the next five years-and appears to be holding true to that promise, as the 2006 deficit is smaller than the $427 billion deficit in the FY2005 budget."

More papers on The Budget Deficit:

• Essay # 18050 : "The Budget Deficit of the United States"
• Term Paper # 121248 : "Budget Deficit and National Debt"
• Analytical Essay # 3936 : "The American Budget Deficit."

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