How in just a few years can the federal budget go from a surplus, to over six trillion dollars in debt? What has happened in just a few years to cause such a substantial increase in our national debt? How can we fix this dramatic problem? These are all important questions that must be answered in order secure a safe future for our government and economy.
What is a budget deficit? Well simply put, it is when you spend more money this month than your income. So instead of simply ceasing your spending,, you decide to borrow money, and now you have a deficit or a debt. Well, if you keep spending more than you earn and repeat this cycle over many months, before soon all you can do is pay for the interest on your loans. Therefore each month your debt is increasing, growing larger and larger. Until, one day your interest is more than you can borrow and you have to file for bankruptcy.
Why does our country, one of the richest nations in the world, have such an enormous debt? Our country had a repetition of annual deficits from about 1962 to 1997. In 1997 the Clinton administration and Congress managed to provide a surplus from 1998 to 2001. But after the events of September 11th our debt is growing once again. The main causes of this new increase in deficit, is the expenditures on fighting terrorism, a war in Iraq, a recession, and a tax cut. Historically our country has been in debt for a very long time in 1791 we owed over 75 million dollars, by 1814 it was over 80 million. As we can see budget deficit is not a new problem that our nation is plagued with.
The federal deficit is called the gross federal debt and consists of two factors, the public debt, and the money the government owes itself. "The public debt is the value of all the federal securities that have been sold to the public and are still outstanding; it represents the governments past borrowing from the public to finance past deficits less past surpluses that have been used to retire the public debt.