What are the problems to the economy due to the federal budget deficit?
The effects on the economy are drastic if little understood. There is a direct correlation between a high deficit and a stagnant, even shrinking economy. Meanwhile, low federal deficits are associated with a growing economy. Basically, when deficits are low, the federal government can spend more money – real money that it actually has. And the government is spending money on real stuff: oods and services produced by Americans. This puts money in the pockets of manufacturers and workers and all the people who service those people and everybody wins. On the other hand, when the goverment has a high deficit, it must either shrink spending or spend money it doesn’t have. If spending goes down, less money gets put in the hands of American workers. If borrowing goes up to pay for continued spending, whatever goes into the hands of the workers is offset by the massive penalties that must be paid to a very few, very rich lenders who do not employ workers with whom to share the wealth. The Bush
