The Current Status of the U.S. Budget Deficit

It has been the economic policy of the United States government to operate at an (at times) severe budget deficit. Over the decades, the United States has been reasonably successful at maintaining this budget deficit while also establishing a proper balance between their incoming payments (taxes, et al) and their outgoing payments (their debt). However, in this recent administration, the budget deficit has climbed to such an astounding amount, that it may have economic repercussions as a result. Though the United States economy is currently experiencing economic growth, if the economy were to take a downturn, then consequently the budget deficit could continue to increase at rapid amounts. A time and point may come when creditors begin to lose faith in the American government's ability to repay their debts, and thus it is an important issue to resolve.

The Bush administration has devised a plan in which they say the federal budget deficit can be diminished and a balance of payments can occur, by 2012. However, some economists believe that such a plan may be overly optimistic and doesn't take into account the unpredictability of the economy. The Bush administration plans to pay down approximately $145 billion of the budget deficit in the second fiscal quarter, which would be the largest payment they've made in the past six years. For the foreseeable future, economists don't believe that the economy will suffer from a slowdown, unless the dollar continues to rapidly depreciate (they also believe it will plateau soon).

The current federal budget deficit is $8.8 trillion dollars, and in the year 2006, the U.S. government made approximately $406 billion in interest payments on that amount. The U.S. has operated at a budget deficit since 1969, and the interest payments on the debt are the third largest government expenditure. Thus, one can see why it is important to try and eliminate a majority of that debt and to balance the government's books, so that tax-payers do not have to continue to pay interest on the rising amount.