View the step-by-step solution to:

Is the federal budget deficit a problem? And if it is, what can be done about it?

Is the federal budget deficit a problem? And if it is, what can be done about it?

Here is the 2014 version of the answer: This is not really a Ricardian equivalence question. While the deficit has fallen sharply in the past three years, it is still well above balance and will get worse because of demographic factors. While the economic relationship of deficits to economic performance is not strong in the short-run, persistent deficit threaten to erode economic growth over time (termites versus wolves analogy). And debt to GDP ratios are in the 90% range which has led eventually to much slower growth. So some solution is needed restore a surplus so the debt/GDP ratio had move back towards a "safe" 60%. How? A balanced approach of some tax increases, and restraints on entitlement spending growth are needed. Discretionary spending has been cut about as much as it can without being counterproductive. Some pro-growth policies to boost GDP growth even though they might make the deficit worse in the short-run



BUT could I get a more up-to-date answer to this question (2018 version)?

Top Answer

I would say controlled budget deficit is important in sparking economic growth by raising the level of household income.... View the full answer

1 comment
  • All the best in your studies
    • DrKakilo
    • May 14, 2018 at 4:41am

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online