Efforts to Reduce the Budget Deficit
David “Craig” Franklin
ECO203
Prof. Shane Thompson
June 3, 2013
When government expenditures exceed government tax revenues in a given year, the government is running a budget deficit for that year. The budget deficit, which is the difference between government expenditures and tax revenues, is financed by government borrowing; the government issues long-term, interest-bearing bonds and uses the proceeds to finance the deficit. The total stock of government bonds and interest payments outstanding, from both the present and the past, is known as the national debt. Thus, when the government finances a deficit by borrowing, it is adding to the national debt. When government expenditures are less than tax revenues in a given year, the government is running a budget surplus for that year. The budget surplus is the difference between tax revenues and government expenditures. The revenues from the budget surplus are typically used to reduce any existing national debt. In the case where government expenditures are exactly equal to tax revenues in a given year, the government is running a balanced budget for that year.
Every year from 1970 through 1997 the United States government worked with a budget deficit. In 1998 the government finally recorded a surplus budget and the surplus continued from 1998 through 2001. Every since 2002 the budget has had a deficit with the most drastic increases coming between 2009 and now. Continuing this tread will have devastating consequences for the United States in the future. We continue to barrow money from programs that really don’t have the money to lend or we barrow from other countries which is never good.
One of the first steps taken by congress in 1985 was the enactment of the Balanced Budget and Emergency Deficit Control Act of 1985, which is also called Gramm-Rudmand-Hollings (GRH). This act was passed to try and mandate a balanced budget. It set targets each year for six...