The Budget Deficit

When government spending exceeds tax collections during a �scal year, there is a budget de�cit. The government must borrow money to fund the

di�erence. The federal budget de�cit for March 2021 was $660 billion (Peter G. Peterson Foundation, 2021). Sometimes, the federal government

“prints  ” money, which causes it to lose value.

Reasons for Larger De�cits

Moderate de�cits

There are a number of reasons why de�cits have been larger than typically seen in the last decade.

In recent decades, the government uses the �rst part of Keynesian Economics to stimulate the economy without using the second part.

Keynesian Economics states the government should borrow and spend money to stimulate the economy AND pay back the

loans it took as soon as the economy improves (Maynardkeynes.org, 2021). Politicians tend to like to spend money for programs for their

constituents in order to be re-elected.

When a moderate de�cit in the budget is experienced, it increases economic growth and is not an immediate crisis. It gives businesses and

families the means to spend more money, and in turn help create a stronger economy. Under these circumstances, the United States always pays

back the debt that it incurs, giving its lenders no reason to worry. But when the debt-to-GDP ratio approaches or exceeds 100 percent, lenders

develop cause for concern.

The terrorist attacks that occurred on September 11, 2001, led to wars that increased military spending. •

Mandatory spending, which includes funds spent on programs such as Social Security and Medicare continues to increase. Changing

these expenditures would require an Act of Congress that would involve a majority vote in both houses. Current bene�ciaries of these

programs, who have shown to be a powerful voting demographic, would be the ones to su�er and would also be likely to show their

disapproval at the polling station.

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The Great Recession: E�orts to curb the Great Recession included several economic stimulus packages, spending billions of dollars each.•

The COVID-19 Recession: Several COVID-19 stimulus packages passed Congress, spending trillions of dollars each.•

Government Spending