The budget deficit is not an issue that many people want to discuss. Yet, it is an integral part of the U.S. economy and without it, would cause significant damage to the United States . The annual federal budget deficit provides a number of key services in the United States economy that would be otherwise impossible to achieve without it.
Economist Paul Krugman explains, “the current budget deficit is the least of our problems. A more immediate problem is that too many people are unemployed and businesses are not hiring” (Krugman).
This statement suggests how important the employment sector in the United States economy truly is. The federal budget deficit provides a solid foundation for financial investments throughout the small business sector. These investments are vital to economic success and without them, unemployment rates would be much higher than the 7 percent that they currently stand at.
The federal budget deficit provides a solid foundation for financial investment throughout the small business sector. This is important both before and after investments are made in order to support employment within the United States economy . Without these investments, unemployment rates would be much higher than the 7 percent that they currently stand at.
Without a federal budget deficit, interest rates would need to increase in order to attract individuals looking for safe investments with their money. This means that those who have invested heavily in government bonds would not be able to make as much income because of the increased interest rate on these investments.
Further complicating this issue is that many small businesses rely on loans from banks and other institutions to run their business; if these banks had no access to federally backed loan programs, then it could significantly inhibit the economic success of many small businesses, leading to a greater number of unemployed workers.
On the contrary, there are dangers associated with allowing the federal budget deficit to remain unchecked over a period of time. If the current federal budget deficit continues to increase and is not controlled, inflation may become an issue that must be dealt with says Ben Bernanke.
This would force interest rates to rise rapidly in order to keep up with rising prices. At this point, small businesses would no longer be able to rely on loans from banks because of the increased cost associated with them. The result could potentially be a major economic downturn for the United States .
Economist Kenneth Rogoff warns about what might happen if there is not a change in direction regarding our current federal budget deficit policy: “While it’s widely recognized that continued high unemployment will cause long-term damage to workers’ skills and career paths, it’s easy to forget that austerity policies can cause damage too, especially when they are adopted during a weak recovery” (Rogoff).
The general consensus on the issue of the federal budget deficit is that it should be reduced over time. However, many economists also support increases in federal spending in order to help stimulate long-term economic growth by improving infrastructure and creating incentives for businesses to do business within the United States .
It is important to note that while there are dangers associated with failing to control or reduce the size of our current federal budget deficit, cutting government spending would only make things worse. This is because both individuals and small businesses rely heavily on government services for their day-to-day operations. For example, those who wish to drive through roads funded by tax dollars rely heavily on these roads in order to transport goods and provide a meaningful service to their customers. If the roads become clogged with traffic, then businesses will not be able to transport products and services efficiently or reliably; this would be detrimental to their success.
There are many factors associated with what makes the annual federal budget deficit important for United States economy success. Highlighting these benefits helps to shed light on why both individuals and small businesses rely heavily on government programs throughout all stages of our nation’s economic cycle . The ability of the federal government to invest in business by providing them with loans at low interest rates allows them to grow into successful organizations that can employ more workers within the United States economy . By investing money in key infrastructure, we are allowing people who have jobs as well as small businesses to be able to complete their daily operations with ease.
For all these reasons, the annual federal budget deficit is critical for United States economy success .