Suppose the media report that the federal deficit this year is $200 billion?
The national debt was $5000 billion last year and it is $5200 billion this year. The price level this year is 3% higher that it was last year. According to Eisner, what is the real deficit?
Answer:
It is first important to understand the difference between the US Debt and the US deficit as they are not the same.
The Debt is the amount owed by the US.
The deficit is the budget shortage, more specifically, the difference between government revenues (taxes) and government expenses. When the government brings in more in taxes than it spends, it has a surplus.
It is obviously possible to have a surplus but still have large debt. Be careful, anyone trying to explain this answer to you without knowing the simple difference between these truly simple concepts is not knowledgeable enough to give a qualified answer.
In reference to how bad the current debt and deficits might be...well, first let's clarify what they are. The current US debt is approximately $8.84 trillion ($8,840 billion). The current US deficit is approximately $400 billion. This means that this year the debt will grow by another $400 billion (although the deficit is a projection until year end).
As a percentage of GDP, the US debt is not the highest in history. That period occurred in the 1980's. The larger this percentage the more risky the debt becomes and thus we generally see higher interest rates.
While the concept of $8.84 trillion seems mind boggling, you have to also consider that the US currently brings in over $2 trillion, meaning the debt is about 4.5 times the size of revenues. This number gives one perspective especially when you consider how much the average household mortgage is compared to household income, and suddenly that 4.5 seems slight more manageable.
The deficit on the other hand is more problematic. $400 billion by percentage represents less than 20% of revenues, but the reality is this means the US government is spending 20% more than they are brining in, specifically 120% of earnings. Imagine how volatile your situation would be if your household expenses amounted to 120% of your household income. The only way out would be to get a bigger loan, and this in fact is what the US is doing every time it has a running deficit.
When running a deficit, the only 2 ways to fix it are to either bring in more tax revenues (raising taxes rates with a stable base, maintaining tax rates with a growing economy, or lowering tax rates with a substantially growing economy) or to cut expenses. Cutting expenses is the far easier concern because its 100% controllable, whereas tax revenues requires a lot of guesswork on the condition of the economy.
Sadly, the neither major party is willing to do what it takes to control federal spending thus the only way to reduce the deficit is more taxes.
When you start talking about federal deficits in the $5,200 billion dollar range, you have gone far beyond any concept of 'real' debt or deficit. We all know it's a debt that will never be paid, and we also know that the feds don't run by the same economic rules that govern the rest of the populance. So at this point, it's just numbers and the numbers themselves are meaningless.
More Questions and Answers:
More Questions and Answers:
Why only 10 % of the worlds population is enjoying its wealth and the rest 90 % are living in poor condition s
some economic questions?
Is capitalism possible only in a democracy? or it could flourish in other forms of government?
discuss why they the government should support small business??
What Are The Chances Of.?
how does monetary policy affect the economy?
How do you calculate a weighted mean?
How do countries decide their net population growth rate?
I want slogans on 'the role of reservations n the development of our country'? immediately?
Answer:
It is first important to understand the difference between the US Debt and the US deficit as they are not the same.
The Debt is the amount owed by the US.
The deficit is the budget shortage, more specifically, the difference between government revenues (taxes) and government expenses. When the government brings in more in taxes than it spends, it has a surplus.
It is obviously possible to have a surplus but still have large debt. Be careful, anyone trying to explain this answer to you without knowing the simple difference between these truly simple concepts is not knowledgeable enough to give a qualified answer.
In reference to how bad the current debt and deficits might be...well, first let's clarify what they are. The current US debt is approximately $8.84 trillion ($8,840 billion). The current US deficit is approximately $400 billion. This means that this year the debt will grow by another $400 billion (although the deficit is a projection until year end).
As a percentage of GDP, the US debt is not the highest in history. That period occurred in the 1980's. The larger this percentage the more risky the debt becomes and thus we generally see higher interest rates.
While the concept of $8.84 trillion seems mind boggling, you have to also consider that the US currently brings in over $2 trillion, meaning the debt is about 4.5 times the size of revenues. This number gives one perspective especially when you consider how much the average household mortgage is compared to household income, and suddenly that 4.5 seems slight more manageable.
The deficit on the other hand is more problematic. $400 billion by percentage represents less than 20% of revenues, but the reality is this means the US government is spending 20% more than they are brining in, specifically 120% of earnings. Imagine how volatile your situation would be if your household expenses amounted to 120% of your household income. The only way out would be to get a bigger loan, and this in fact is what the US is doing every time it has a running deficit.
When running a deficit, the only 2 ways to fix it are to either bring in more tax revenues (raising taxes rates with a stable base, maintaining tax rates with a growing economy, or lowering tax rates with a substantially growing economy) or to cut expenses. Cutting expenses is the far easier concern because its 100% controllable, whereas tax revenues requires a lot of guesswork on the condition of the economy.
Sadly, the neither major party is willing to do what it takes to control federal spending thus the only way to reduce the deficit is more taxes.
When you start talking about federal deficits in the $5,200 billion dollar range, you have gone far beyond any concept of 'real' debt or deficit. We all know it's a debt that will never be paid, and we also know that the feds don't run by the same economic rules that govern the rest of the populance. So at this point, it's just numbers and the numbers themselves are meaningless.
The answers post by the user, for information only, FunQA.com does not guarantee the right.
More Questions and Answers:
More Questions and Answers: