Monday
July 28, 2014

Homework Help: Economics

Posted by gerima on Tuesday, October 10, 2006 at 7:36pm.

Is the federal budget deficit harmful to the U.S. economy? Should we consider a Constitutional Amendment to balance the federal budget?


I think it is because to much money is going into things we don't need.Yes we should that way we could keep it all balance and secure.I am not sure if that helps but can you help me?


A tough question to answer.

Borrowing in moderation can be a good thing, even for governments. We certainly want governments to borrow to deal with national or even local crises. For example, the U.S. government borrowed hugh sums in WW-II to defeat Japan and Germany. We dont mind government borrowing for investments in such things as highway infrastructures. Such investments can have hugh payoff in terms of economic growth.

That said, the current monsterous federal debt and large annual deficits are certainly causing significant economic problems. The single biggest item in the federal budget is interest payments on the debt. Further, large ongoing borrowing can only be crowding out private investment as the federal government sucks up the supply of available funds. Obviously, we cannot go on borrowing huge sums forever.

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