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CH 2] Business 101 2-11

A deficit occurs in a
Current Economic Challenges budget and with
Let us identify three significant economic challenges that affect contemporary spending when more
dollars are spent than
business: the annual federal budget deficit, the wages and take-home pay of one has. This “excess
employees, and America's global competitiveness. While many other economic issues spending” creates a
are identifiable, these three are continually in the news and before congress because of deficit and is termed
their impact on the U.S. economy. deficit spending, being
covered by borrowing,
which is taking on
The National Debt debt. When you 2
Spending is a budgetary and allocation function of Congress and not of the purchase on credit,
with your credit cards
President. The federal deficit is the annual amount of federal spending in excess of and do not pay off your
revenues received by the government through taxation; the budgetary is devised with credit card debt, you
an estimate of revenues (taxes) and expenses; planned (budgeted) expenses typically have engaged in
deficit spending just as
exceed planned revenue and that difference is a deficit and thus their budget is not the government has.
balanced. To pay for the excess spending, congress goes to the public financial market Thus a deficit is
and borrows money. Thus, the federal deficit is added to the national debt. This debt spending more than
is a financial burden that the American taxpayer must pay because congress indentures you have, and it is
covered by debt.
the taxpayer.
The federal budget debt is over $27.50 trillion (US Debt Clock: https:// federal deficit
usdebtclock.org/ ) as of this writing and is continually growing. This debt rises because The annual amount of
Congress does not control its spending. The National debt is added to annually by federal spending in
excess of revenues
each years’ Federal budget deficit. The cumulative deficit for fiscal year 2021 (FY21) received through
through November 2020 is $429 billion. There is no business or individual that can taxation.
spend 50% more each year as congress has from 1965 to present and remain solvent.
In this author’s opinion, the growth in the National debt is a direct result of President national debt
The sum total of all
Johnson’s (D) “War on Poverty” initiatives; a well-intentioned program flawed from federal deficits created
its inception because it assumed that government through transfer payments could by congress as a
eradicate poverty. The advantage that congress (who establishes the Federal Budget) financial burden on the
and the Federal bureaucracy's (who manage the federal budget) have is that each year taxpayer.

the American taxpayer underwrites this indebtedness. If the private individual handled transfer payments
his financial affairs as if it were the Federal Budget, their creditors would force them Taking money from one
into bankruptcy, because the taxpayer has no one to pass the debt onto. individual (or a group)
The amount of money the U.S. government owes its creditors, the national debt— and giving it to another
individual (or group).

Figure 2.4 National Debt Held by the Public (Trillions of Dollars)

Debt in Trillions of Dollars

SOURCE: Department of the Treasury, Monthly Treasury Statement, issues through September 2020

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