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World War II Essay, Research Paper

here’s one on the deficit for those economics classes

Subject: the deficit good or bad

Deficit Spending

?Spending financed not by current tax receipts, but by borrowing or

drawing upon past tax reserves.? , Is it a good idea? Why does the U.S.

run a deficit? Since 1980 the deficit has grown enormously. Some say its

a bad thing, and predict impending doom, others say it is a safe and

stable necessity to maintain a healthy economy.

When the U.S. government came into existence and for about a 150 years

thereafter the government managed to keep a balanced budget. The only

times a budget deficit existed during these first 150 years were in

times of war or other catastrophic events. The Government, for instance,

generated deficits during the War of 1812, the recession of 1837, the

Civil War, the depression of the 1890s, and World War I. However, as

soon as the war ended the deficit would be eliminated and the economy

which was much larger than the amounted debt would quickly absorb it.

The last time the budget ran a surplus was in 1969 during Nixon?s

presidency. Budget deficits have grown larger and more frequent in the

last half-century. In the 1980s they soared to record levels. The

Government cut income tax rates, greatly increased defense spending, and

didn?t cut domestic spending enough to make up the difference. Also, the

deep recession of the early 1980s reduced revenues, raising the deficit

and forcing the Government to spend much more on paying interest for the

national debt at a time when interest rates were high. As a result, the

national debt grew in size after 1980. It grew from $709 billion to $3.6

trillion in 1990, only one decade later.

Increase of National Debt Since 1980

Month Amount

12/31/1980 $930,210,000,000.00 *

12/31/1981 $1,028,729,000,000.00 *

12/31/1982 $1,197,073,000,000.00 *

12/31/1983 $1,410,702,000,000.00 *

12/31/1984 $1,662,966,000,000.00 *

12/31/1985 $1,945,941,616,459.88

12/31/1986 $2,214,834,532,586.43

12/31/1987 $2,431,715,264,976.86

12/30/1988 $2,684,391,916,571.41

12/29/1989 $2,952,994,244,624.71

12/31/1990 $3,364,820,230,276.86

12/31/1991 $3,801,698,272,862.02

12/31/1992 $4,177,009,244,468.77

12/31/1993 $4,535,687,054,406.14

12/30/1994 $4,800,149,946,143.75

10/31/1995 $4,985,262,110,021.06

11/30/1995 $4,989,329,926,644.31

12/29/1995 $4,988,664,979,014.54

01/31/1996 $4,987,436,358,165.20

02/29/1996 $5,017,040,703,255.02

03/29/1996 $5,117,786,366,014.56

04/30/1996 $5,102,048,827,234.22

05/31/1996 $5,128,508,504,892.80

06/28/1996 $5,161,075,688,140.93

07/31/1996

$5,188,888,625,925.87

08/30/1996 $5,208,303,439,417.93

09/30/1996 $5,224,810,939,135.73

10/01/1996 $5,234,730,786,626.50

10/02/1996 $5,235,509,457,452.56

10/03/1996 $5,222,192,137,251.62

10/04/1996 $5,222,049,625,819.53

* Rounded to Millions

Federal spending has grown over the years, especially starting in the

1930s in actual dollars and in proportion to the economy (Gross Domestic

Product, or GDP).

Beginning with the “New Deal” in the 1930s, the Federal Government came

to play a much larger role in American life. President Franklin D.

Roosevelt sought to use the full powers of his office to end the Great

Depression. He and Congress greatly expanded Federal programs. Federal

spending, which totaled less than $4 billion in 1931, went up to nearly

$7 billion in 1934 and to over $8 billion in 1936. Then, U.S. entry into

World War II sent annual Federal spending soaring to over $91 billion by

1944. Thus began the ever increasing debt of the United States.

What if the debt is not increasing as fast as we think it is? The

dollar amount of the debt may increase but often times so does the

amount of money or GDP to pay for the debt. This brings up the idea that

the deficit could be run without cost.

How could a deficit increase productivity without any cost? The idea of

having a balanced budget is challenged by the ideas of Keynesian

Economics. Keynesian economics is an economic model that predicts in

times of low demand and high unemployment a deficit will not cost

anything. Instead a deficit would allow more people to work, increasing

productivity. A deficit does this because it is invested into the

economy by government. For example if the government spends deficit

money on new highways, trucking will benefit and more jobs will be

produced. When an economic system is in recession all of its resources

are not being used. For example if the government did not build highways

we could not ship goods and there would be less demand for them. The

supply remains low even though we have the ability to produce more

because we cannot ship them. This non-productivity comes at a cost to

the whole economic system. If deficit spending eliminates

non-productivity then its direct monetary cost will be offset if not

surpassed by increased productivity. For example in the 1980?s when the

huge deficits were adding up the actual additions to the public capital

or increased productivity were often as big, or bigger than the

deficit. This means as long as the government spends the money it gains

from a deficit on assets that increase its

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