The Future Effects of Current Budget Deficits

Ashford University

ECO 203

Current Budget Deficits

Since the U.S. government ran budget deficits each year from 2002 to 2008, economists generally agree that high budget deficits today will reduce the growth rate of the economy in the future. The reason being budget deficits cut into gross domestic product (GDP) which is, "total investment in capital-that is, the purchase of new housing, plants, equipment, and inventory by the private (or nongovernment) sector" (Case, Fair, & Oster, 2009, p. 109). The difference in what the government spends and collects in taxes in a specified period is a budget deficit. Budget deficits can result from a number of economic factors and is an event that can occur whether the economy is in a contraction or...