Deficits And Debt In The United States Economy – Essay Example

The paper "Deficits And Debt In The United States Economy" is an outstanding example of an essay on macro&microeconomics. The government gets to borrow to the public or private sectors. When there is a debt of any kind, there are securities terms, the principles being used and the interest rates that come in hand with the loan. The deficit in economic terms means the excess expenditure that is used over the revenue at any given time by the government. At a particular time, the government found itself with a debt of $7.1 trillion that was all federal debt. $3.6 of the debt was with federal agencies of the country and the trust funds. $3.5 trillion was the amount of debt that was owed by the private investors (John, 2007). Working with debts and deficits has consequences that face the country at large. The economy gets to be affected in a way that the rate in interests gets to increase and this goes a step further to reduce the kind of investment expected to take place. The growth of the economy gets to effect automatically and this brings the economy down and makes the country to rag beside. According to John Seater who is a professor of economics, as from 2010, the government has been able to have negative real interest rates when it comes to the government debts which all say that the rate of inflation is greater than the rate of interest being paid in regard to the debt. This means that the government will continue to borrow as their borrowing goes a long way to save the taxpayers money and this expands the credit affluence (John, 2007). In order to be able to control the levels of debt, the debt ceiling mechanism and it calls for the limitation on the amount of money of the national debt. For this to be reduced, the treasury of the country needs to stop the payment of expenses whenever the limit has been reached. This alone would go a long way to reduce the debts and the deficits that face United State.