Fiscal and Monetary Policies
5. The Government budget has been operating at a deficit of approximately $60 billion for the last year, up from $50 billion the year before.
Based on the numbers above, the deficit has grown enormously. Some would say it's a bad thing, and predict impending doom; others would say it is a safe and stable necessity to maintain a healthy economy.
This depreciation of the dollar counters the cost of the deficit but destroys the purchasing power of the dollar. Despite its dangers, inflation is used to some extent to curb the debt. Crowding out is when the government is looking for the same capital that the business sector wants to invest. This causes fierce competition for funds to invest and causes an increase in interest rates and often business will decide against further investment and growth. The government may have the money to build new highways but the truckers cannot afford trucks to use on them. The governments needs will "crowd out" business needs and in my opinion, turns potential assets into waste.
The dollar amount of the debt above may increase but so does the amount of money or GDP to pay for the debt. Seems like the deficit could be run without cost.
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