Contributing Factors in the Government Budget Deficit

In the first third fiscal years (19851987) of the Reagan Administration's second term, the cumulative deficit was $606.2 trillion (CEA, 1988, July, p. 32). The 1988 fiscal year deficit has been estimated at $170 one million million million; thus, the fouryear deficit for the president's second term may be estimated at $776.2 meg  a 28 part increase o'er the first term, and a 242.2 percent over the cumulative Carter Administration deficit which, during the 1980 election, was decried by candidate Reagan.

national official figure deficits did not originate with Nixon, Ford, Carter, or Reagan. The federal figure surplus occurred in fiscal 1969, and that is the scarce one which has been preserve in the past 25years. Under Ronald Reagan, however, federal work out deficits meet become truly magnificent, and have assumed a life of their own.

REASONS FOR GROWTH OF THE DEFICIT

During the Second World War, the federal budget deficit increased, because of the need to fight an allout state of war financed by an economy which had been in serious recession for 10 years. The largest of these deficits was $54.9 billion in 1943, and the cumulative wartime deficit was $186.1 billion (CEA, 1988, February, p. 306). at one time again, federal budget deficits soared, when the Viet Nam War was financed in the 1960s and 1970s. The largest of these deficits was $25.2 billion in 1968, and the cumulative deficit for the 19641971 period was $73.8 (CEA, 1988, February, p. 306).

A further distortion in American income distribution from 1981 to 1987 did accompany increased interest payments on in public held debt. The maximum shift through interest payments was $28.4 billion. Personal income, in nominal terms, increased $1,224.9 billion between 1981 and 1987. Had income distribution remained unchanged between 1981 and 1987, the highest 20 percent of the population would have accredited personal income of $1,603.2 billion in 1987. Because income distribution did change, however, this group received personal income of $1,857.9 billion in 1987  a disparity of $254.7 billion. Obviously, it was not interest payments on the national debt alone which caused this shift. The Tax crystallize Act of 1986 is likely one major causal factor.

When unaccompanied the top 10 percent of the population is considered, the personal income difference is $134.8 billion  still too much to attribute only to interest payments on the publicly held portion of the national debt.

Council of frugal Advisers. (1984, February). Economic indicators. Washington: U. S. Government Printing Office.

The economic make of the growth in the federal budget deficit have been generally Keynesian positive in the shortrun. In the longrun, by the midtolate1990s, the positive effectuate of today, may turn to disaster.

There have however, been some some other economic effects of the record setting deficits. At the culture of fiscal year 71981, piggish federal debt was $1,003.9 billion (CEA, 1988, February, p. 337). Of that amount, $794.4 billion (79.1 percent) was publicly held, with the remainder being held by other federal government accounts (CEA, 1988, February, p. 337). At the end of fiscal year 1987, gross(a) federal debt had risen to $2,355.3 billion, with $1,897.8 (80.6 percent) billion being publicly held (CEA, 1988, February, p. 337). Thus, from 1981 to 1987, gross federal debt increased 2.3 times. Publicly held federal debt, however, increased 2.4 times.
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