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Budget Deficit: Our Nations Budget Deficit and How It Relates To Economic Theory and Crisis Research Paper

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Updated: Apr 30th, 2019

The United States of America is faced by a financial crisis where its recent budget allocations have deficits. Although the Obama administration had proposed a deficit reduction of $1.1 trillion, over a period of ten years, the republicans feel that the reduction is not enough, and they feel that the white house is overspending.

They are proposing a reduction in the amount of cash spent by the white house (Grebler 2). In fact, they are planning to shut down government departments if the white house is not going to honor their proposal to tame budget deficit. A panel of business forecasters proposes that the government’s decision to invest in long term securities to curve inflation should be reversed. This is because the move has no impact on inflation hence it is of no use to the government.

This article is related to our topic since many aspects we are learning in economics theory are addressed in the article. For example, government spending affects budget allocation, and that is why in the article, the republicans feel that the manner in which the white house is spending money is affecting the budget in USA.

It is, therefore, necessary for leaders in government to revise government spending with the aim of bringing into control the annual budget. For the government to reduce the budget deficit, they must come up with laws and strategies to minimize their expenditure and maximize on the gross domestic product.

The effects of politics to the economy are also evident in the article. This is where the republicans are threatening to shut down governmental operations if the white house fails to follow their suit. If they paralyze government departments, the economy will have to suffer a lot of losses since people will be jobless.

People will lack wages hence affecting the spending habits of individuals also decreasing the rate of investments in stock and other physical assets (Henning 87). The use of treasury securities to control the budget deficit is also highlighted in the article. In economic theories, we learn in class, it is clear that governments issue treasury securities to its citizens in order to raise funds to fund some projects.

This helps in reducing strain in the national budget because money is obtained from investors who are paid in later dates (Henning 87). These treasury securities are issued in the form of treasury bonds and treasury bills. Investors give money to the government in exchange for these bonds and bills, and they are paid premiums every year until the maturity date.

For all this time, the government uses funds from these investors to run their operations until the maturity date when they pay the whole amount to back to investors. Therefore, the government gets surplus to perfect its operations without straining the treasury further to extract money that was not budgeted.

The article I used was extracted from Reuters, and it was reported by Rachelle Younglai, and edited by Dan Grebler. It is an online business news article. The author of the article is a news reporter. The article is reporting straight from what is happening in the economy.

In fact, it is an analysis of public information because it includes information from panelists. It also includes arguments of opposing sides of the government which is the republican and the white house represented by the democrats. The article does not include personal opinions of the author.

Works Cited

Grebler, Dan. Economists list U.S. budget deficit as No. 1 worry. Reuters. Feb 28, 2011. Web.

Henning, Randall C. Accountability and oversight of US exchange rate policy. New Jersey: Peterson Institute, 2008. Print.

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"Budget Deficit: Our Nations Budget Deficit and How It Relates To Economic Theory and Crisis." IvyPanda, 30 Apr. 2019, ivypanda.com/essays/budget-deficit-our-nations-budget-deficit-and-how-it-relates-to-economic-theory-and-crisis-research-paper/.

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IvyPanda. "Budget Deficit: Our Nations Budget Deficit and How It Relates To Economic Theory and Crisis." April 30, 2019. https://ivypanda.com/essays/budget-deficit-our-nations-budget-deficit-and-how-it-relates-to-economic-theory-and-crisis-research-paper/.

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IvyPanda. 2019. "Budget Deficit: Our Nations Budget Deficit and How It Relates To Economic Theory and Crisis." April 30, 2019. https://ivypanda.com/essays/budget-deficit-our-nations-budget-deficit-and-how-it-relates-to-economic-theory-and-crisis-research-paper/.

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IvyPanda. (2019) 'Budget Deficit: Our Nations Budget Deficit and How It Relates To Economic Theory and Crisis'. 30 April.

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