U.S. Deficit, Surplus and Debt in the Essay

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U.S. Deficit, Surplus and Debt

In the last three years, the deficit in U.S. budget has increased enormously. When the governments spends more than what has been earned as revue the economy has to face deficit. The amount of money spent by the U.S. government minus the revenues is considered to be the federal budget deficit. Surplus occurs when the government takes in more money that what has been spent in a year (Hall, 2012).

When the economy of a country is weak, as a result the income of the people tends to decline. Thus, the government started to collect less tax revenues and spends more on the safety-net programs, including the unemployment insurance. This can be considered to be one of the major reasons for an economy's deficit to grow during the period of recession. On the other hand, in instance when the economy is strong the deficit shrinks and the surplus grows (Colander, 2010).

The budget surpluses and deficits are a key to help an economy stabilize. As a result of recession the earned taxes, income and employments rates of a country begin to fall. Simultaneously, there will be an increase in the government spending since people are compensated with unemployment compensation along with other transfers; including welfare payments. These sorts of changes in revenue and expenditures make the economy suffer and result in deficit. However, in case inflation with help of budget surplus an economy can stabilize itself. In such scenario, taxes are increased along with income and employment rates as well. When more people are put back to work there is a decrease in the compensation funds and welfare payments.

Government debt can be defined as the credit or money that is owed by a central government. When a government is drawing majority of its income from the population then the government debt is considered to be an indirect debt of the taxpayers. One can classify the government debt as internal debt that is owed to lenders within the country. Conversely, external debt is owed to the foreign lenders (Colander, 2010).

A taxpayer is highly affected by the surplus, deficit and debt of the U.S. government. For instance, when a country is running deficits it implies that the supply of money is low thus the taxpayer is affected as a result of deficit. In these times, the taxpayers are asked to alleviate the low supply of money which the government is making use of in order to run. In addition, although a country might be running a surplus due to which the taxes do decrease, yet these taxes are still present and need to be paid by the taxpayers. The citizens are required to pay the taxes even though the country is running a surplus. Most of all, debt is what affects the taxpayers the most, since it is the tax revenue that is utilized in order to pay back the debt.

Due to spending more than what has been earned in that year, the U.S. economy goes into deficit. Every year, this deficit keeps on adding to the debt as a result of which the debt amount increases. Since, the social security funds and disability insurance is not considered as part of the government budget thus, it doesn't count as part of the revenue. However, these funds are handled by the department of treasury.

Even though the Medicare spending has been increased whilst, the health care costs have been steady at the same level. On the other hand, social security at present is running a surplus of millions of dollars. The deficit of U.S. budget will have a negative effect on future social security and Medicare users if the deficit doesn't decrease. If overspending keeps on increasing, then there…

Sources Used in Document:

References

Colander, D.C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin.

Ginsburg, H. (2009) National Jobs for All Coalition: Increasing Unemployment Increases the Deficit. Reducing Unemployment Reduces the Deficit. [online] Retrieved from:www.njfac.org/us1.htm [Accessed: 3 July 2013]

Hall, S. (2012) How does the government surplus affect the economy? [online] Retrieved from:www.ehow.com/about_6193482_government-budget-surplus-affect-economy_.html [Accessed: 3 July 2013]

Moffatt, M. (1965).The Economic Effect of Tariffs. [online] Retrieved from: http://economics.about.com/cs/taxpolicy/a/tariffs_3.htm [Accessed: 28 Jun 2013].

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