THE FEDERAL DEFICIT

Richard Dekaser draws a distinction between cyclical deficits and structural deficits, and maintains that cyclical deficits are not necessarily detrimental. Indeed, he suggests that they are desirable (Dekaser, 2004).

Cyclical deficits are those that occur when the economy weakens and tax revenues fall. This results in a shortfall of revenues compared to spending at the government level, and hence to deficits. Reducing government spending at this point would weaken the economy further and make the situation worse, so the deficit arises. The situation is short-term, and when the economy recovers, the deficit is erased.

Structural deficits, on the other hand, do not arise because of a temporary downturn in the economy, but rather are the result of the government making a conscious decision to spend more money than it takes in. A cyclical deficit occurs when the economy is performing at less than its maximum level; a structural deficit occurs when the economy is operating at its maximum level, but revenues still do not keep pace with expenditures. Without drastically reducing expenditures or increasing revenues, the deficit will continue.

If the government were financing capital expenditures with borrowed funds, it is possible that economists could support deficit financing, according to Dekaser. However, the government now uses deficit financing to support its debt, and pay for retirement and healt

. . .
Some common words found in the essay are:
Richard Dekaser, Budget Office, ECONOMIC ARTICLES, ARTICLE RESPONSE, GDP Extending, According Dekaser, Federal Reserve, Journal April, cyclical deficits, Banking Journal, REFERENCE Dekaser, á á, structural deficits, deficit financing, richard dekaser, business company resource, according dekaser, economy operating, retirement health, structural deficit, cyclical deficit, retirement health care, á business company, deficits structural deficits, cyclical deficits structural,
Approximate Word count = 980
Approximate Pages = 4 (250 words per page)

More Essays on THE FEDERAL DEFICIT