Deficit Spending: The Deficit Good or Bad
"Spending financed not by current tax receipts, but by borrowing or
drawing upon past tax reserves." , 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. The Government, for instance, generated deficits
during the War of 1812, the recession of 1837, the Civil War, the depression of
the 1890s, and World War I. 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. In the 1980s they soared to record levels. The
Government cut income tax rates, greatly increased defense spending, and didn't
cut domestic spending enough to make up the difference. 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. As a result, the national debt grew in size after
1980. It grew from $709 billion to $3.6 trillion in 1990, only one decade later.
Increase of National Debt Since 1980
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