Fiscal Deficits And Government Debts - 3391 Words

Fiscal deficits and Government Debts. The growth of government debt can have disastrous consequences for an economy in the long-run. How can one explain these occurrences and how, if at all, can they be stopped or prevented? When federal revenues and government spending are equal in a given fiscal year, then the government has a balanced budget. When the revenues are greater than spending, the result is a surplus. But if government spending is greater than tax collections, the result is a deficit. The federal government then must borrow money to fund its deficit spending. Debt and deficits are considered by some to be a major economic problem, indeed one that threatens the stability of the US economy with serious, possibly†¦show more content†¦As mentioned above, one of the purpose for this research is finding what led to an accumulation of deficit that turned into a huge national debt. The U.S. national debt will be defined as the sum of all outstanding debt owed by the Federal Government. Despite the United States having the largest debt burden in the world, I will keep in account that there were some precipitating events which contributed greatly. If you observe around the globe, there is not a powerful state that can be run without an efficient economic system. The economic effectiveness of a country usually determine its power around the world. Despite the effectiveness of the economic system, some government still have to borrow money to completely satisfy its country’s needs. The borrowing usually starts as a deficit and accumulate to bigger debts. The growth of government debt will have disastrous consequences for an economy in the long run. A prolonged crisis could hurt economic growth significantly. And a default on the debt would almost certainly create big disruptions in the financial markets. It is hypothesized that the government have reached its debt ceiling and that will put the government into default and precipitate an acute fiscal crisis. It is predicted that the government s ability to finance its operations, like providing for the national defense or funding entitlements such as Medicare or Social Secu rity could potentially be