---What is Deficit?
The annual federal budget deficit is the amount that our federal government borrows each year.
It's the difference between what the federal government spends and the revenue it receives during a particular year.
---Debt & Deficit
Dt is this year's debt; Dt-1 is last year's debt; Gt is government spending; Tt is tax revenue; r is the interest rate we need to pay for the existing debt;
Total deficit=Gt+rDt-1-Tt
Dt = (1 + r)Dt - 1 + Gt - Tt
=Dt-1+total deficit
---Structural vs. Cyclical Component of Deficit
Cyclical component is related to economics condition, driven by business cycle. When we are at the peak of business cycle, higher rate of employment generates higher tax revenue and our government spends less for unemployment compensates and other social programs, and vice versa.
Structural component is relative stable, for instance debt interest, expenditures on social security and national defense.
---Deficit & GDP
Typically, the deficit increases as a percent of GDP during business slumps
The annual federal budget deficit is the amount that our federal government borrows each year.
It's the difference between what the federal government spends and the revenue it receives during a particular year.
---Debt & Deficit
Dt is this year's debt; Dt-1 is last year's debt; Gt is government spending; Tt is tax revenue; r is the interest rate we need to pay for the existing debt;
Total deficit=Gt+rDt-1-Tt
Dt = (1 + r)Dt - 1 + Gt - Tt
=Dt-1+total deficit
---Structural vs. Cyclical Component of Deficit
Cyclical component is related to economics condition, driven by business cycle. When we are at the peak of business cycle, higher rate of employment generates higher tax revenue and our government spends less for unemployment compensates and other social programs, and vice versa.
Structural component is relative stable, for instance debt interest, expenditures on social security and national defense.
---Deficit & GDP
Typically, the deficit increases as a percent of GDP during business slumps
---fiscal year
Begins Oct 1, ends Sept. 30
---What's going on now?
$400 billion deficit for the 2008 fiscal year ending Sept. 30
The bailout increases the deficit by another $110 billion
Estimate for next year's deficit: $490 billion (in Feb. the extimate was still $407 billion)
---Our two candidates
later...(lol)
4 comments:
I was not aware of how much money was involved. This is a great problem. Is there a way for the average man to help?
I didn't know that there was so much involved in general with debt and deficit. Thanks for clearing that up.
Reply to ivan kweku:
Sorry, I really cannot come up with an idea of what the average man can do to help. In fact,according to CBO(Congressional Budget Office), the federal government will run a deficit for the next ten years.
Reply to r.c.:
I was shocked by the amount too. I talked to my economics professor earlier, and he doesn't think the bailout will do help to the crisis at all. The worst thing I found these days is that economy condition is not the only threat to deficit, we have to face an increase cost in health care due to the retirements of baby boomers. What a mess!
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