A Guide to the Deficit

Galbraith, James K.; Darity Jr., William
July 1995
Challenge (05775132);Jul/Aug95, Vol. 38 Issue 4, p5
This article presents information on the guidelines related to the issues of deficit sustainability in the U.S. The budget deficit is, of course, nothing more than the difference between the expenditures of government and the tax revenues that government receives. Since all three of these variables are measured in current or nominal dollars, one would call this the nominal deficit. The deficit itself is a time-limited concept. The deficit in the year 1995 may be a record, and next year's budget could be balanced. Many commentators speak of the effects of the deficit not only on this year and next, but on the children and grandchildren. The link between deficits today and their consequences in the future lays in the fact that today's government borrowings, which finance the deficit, generally take the form of interest-bearing bonds, which add to the national debt. When one turns to consider the effects of the deficit and the debt on the economy, perhaps the most important conceptual question concerns the role-played by inflation. The authors have been concerned with measuring deficits and changes in the debt in ways that avoid distortions imposed by inflation. Planners of fiscal policy make another type of distinction. It is based, not on inflation, but on employment and capacity utilization. This distinction concerns, not consequences, but causes of the deficit.


Related Articles

  • Deficit Delusions. Moore, Stephen // National Review;9/2/1996, Vol. 48 Issue 16, p66 

    The article argues against the claim made by U.S. President Bill Clinton that his administration is mainly responsible for reducing the budget deficit as of 1996. It reviews the record of the president from 1993 to 1996 on economic policy. It criticizes the failure of the president to endorse...

  • The Economic Consequences of Mr. Clinton. Levine, Robert A. // Atlantic;Jul96, Vol. 278 Issue 1, p60 

    The article examines the economic logic and history of U.S. President Bill Clinton's budget policy. According to the article, with zero inflation as the central goal of economic policy, the U.S. is on a dangerous path that is comparable to the stagnation of the British economy before the Great...

  • Do Budget Deficits Cause Inflation? Sill, Keith // Business Review (Federal Reserve Bank of Philadelphia);Third Quarter 2005, p26 

    Is there a relationship between government budget deficits and inflation? The data show that some countries--usually less developed nations--with high inflation also have large budget deficits. Developed countries, however, show little evidence of a tie between deficit spending and inflation. In...

  • The New Math. Rubenstein, Ed // National Review;8/23/1993, Vol. 45 Issue 16, p18 

    The article raises issues concerning the figures presented in the budget plan of the administration of U.S. President Bill Clinton for 1994. By analyzing the plan, the author claims that the $500 billion figure shown in the plan did not subtract the $170 billion in spending and tax cuts the...

  • The bill of particulars. Hage, David; Collins, Sara // U.S. News & World Report;3/1/93, Vol. 114 Issue 8, p20 

    Discusses how President Bill Clinton's economic program to drive down the deficit and restore long-term prosperity might well work. What most Americans like about Clinton's program; Reflection of his roots as a New Democrat; Falling interest rates, the linchpin of his new growth strategy;...

  • Inflationary Consequences of Anticipated Macroeconomic Policies. Drazen, Allan; Helpman, Elhanan // Review of Economic Studies;Jan90, Vol. 57 Issue 1, p147 

    Budget deficits implying an unbounded present value of government debt are infeasible and hence induce expectations of a future policy change. We study how expectations of a policy switch whose timing or mix between expenditure cuts, tax increases or increases in money growth rates may be...

  • DEFICITS FOREVER. Lee, L. Douglas // Challenge (05775132);Nov/Dec82, Vol. 25 Issue 5, p53 

    The article discusses the ever growing federal deficits in the U.S. economy. The enormous size of the federal deficit, and the fact that it is growing, not shrinking, has had a tremendous impact on the financial markets throughout much of the year. The worst is still to come. Tax increase will...

  • GOVERNMENT EXPENDITURES, DEFICITS, AND INFLATION: ON THE IMPOSSIBILITY OF A BALANCED BUDGET. Smith, Bruce D. // Quarterly Journal of Economics;Aug85, Vol. 100 Issue 3, p715 

    A model is presented in which governments can select real expenditure levels that are feasible, but are sufficiently high that a balanced budget is impossible. Thus, governments with large expenditures are committed to inflationary finance schemes. This is the case, even though the governments...

  • The Perpetual Roller Coaster. Buckley Jr., William F. // National Review;8/23/1993, Vol. 45 Issue 16, p70 

    The article comments on the economic and political situation in the U.S. and the performance of U.S. President Bill Clinton as of July 1993. Economist Herbert Stein allegedly suggested to his followers to approve the budget reconciliation bill proposed by Clinton. Stein reasoned that voters in...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics