Can someone explain why the Budget Deficit...?

Question

...Has little to no real impact. I know that the Federal Budget deficit is more a talking point than a real financial strain, but I don't know exactly how that is. Can someone explain it "in English"....as opposed to "in Accountant?"

Answer 1

Unfortunately, you have to be an accountant to understand how absolutely ridiculous governmental accounting standards are.

The "deficit" is really and estimate of the shortfall which will occur based a projection future income and expenses. These projectoins are based on very linear long term forcasts of expected income (from taxpayers) and expenses (for government programs).

In the mid-late 90's, the expected rate of income was much higher than the expected rate of expenses, which is why a budget "surplus" was expected. Of course, when the economy slowed after 2001, these projections were revised and a budget "deficit" was projected.

Answer 2

When the government runs a deficit, it means that they have to finance their debt by issuing government bonds. They sell bonds to get some short term money from people, and they pay back that money in installments over 30 years or whatever. The issue here is whether or not people are going to purchase those bonds if the deficit starts to get really big. For example, the government of China, yes that China, holds about 25% of the U.S. debt, as sort of a favor to the U.S. government. What happens if they stop buying U.S. debt because it starts to look like a bad investment? The price of U.S. debt goes down and the cost to the U.S. goes up, further worsening the deficit. If no one buys because the U.S. suddenly looks like a bad investment, then the government can't function because it can't pay for anything any more.

Answer 3

I am as baffled as you are???

Answer 4

huh?

Answer 5

Ah.......,