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Unformatted text preview: Balancing the budget Debts and deficits are not the same thing. A deficit occurs when, in any given time period, spending exceeds revenue. A debt, on the other hand, is just the total amount one owes. So it is possible to run up a deficit in one year without going into debt, as long as excess money is available to cover the shortfall. And one can run up a surplus, and take in more revenue than gets spent, without necessarily erasing a large debt. Individuals and families usually cannot run up deficits for long. They quickly become buried in debt and find themselves unable to borrow more money. A national government, by contrast, can support deficit spending for many years. Creditors trust that the government will pay back loans as promised, because declaring bankruptcy would exact severe costs to both the economy and to national prestige. U.S. deficit spending increased sharply in the 1980s through a combination of tax cuts and prestige....
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- Spring '08