How does the US government fund its budget deficit?
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Archived from the IMDb Discussion Forums — Economics, Business, Money, Finance
matjusm — 17 years ago(February 02, 2009 10:24 AM)
How does the US government fund its budget deficit? Where does all that money come from that is spent but isn't gotten from taxes? Is this loaned to it by the Federal Reserve since it has in a way the power to create money (unless I have misunderstood something, that is essentially how the Fed works)?
mmm, doughnut
-Homer J. Simpson -
miltonebx — 17 years ago(February 02, 2009 01:12 PM)
Basically, the government raises funds by taxing and by issuing Treasury bills, notes and bonds. The total of the Treasuries is the National Debt. If more funds have to be raised, taxes can be raised and more Treasuries issued.
The above is in it's simple form. It gets more complicated. -
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miltonebx — 17 years ago(February 03, 2009 08:32 AM)
It seems that you are now editorializingwhen all I want to do is reply to your cynical question. I will answer your cynical question. Treasuries are bought by individuals, pension funds, insurance companies,any investor who wants a safe investment. The interest on the treasuries (the national debt interest) is therefore paid to "ourselves" and the earned interest is put back in circulation.
The interest expense is part of the budget, and has remained approximately the same percentage of the budget for many years. -
matjusm — 17 years ago(February 03, 2009 01:07 PM)
Ok, thanks. Though I find it hard to believe that there are enough private investors out there to buy enough US treasuries to make a significant impact on the country's budget.
mmm, doughnut
-Homer J. Simpson -
babe — 17 years ago(February 08, 2009 03:09 PM)
"Though I find it hard to believe that there are enough private investors out there to buy enough US treasuries to make a significant impact on the country's budget. "
Quite so, there aren't enough private investors to buy all the bills/bonds etc. A LOT of the debt was bought by Japan and now its China to the "rescue"
Babe