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“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

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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 *

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