When the federal government operated under a budget deficit, from whom were they borrowing?
Great question. Before we discuss who the creditors are, let s first take care of some definitions. Simply put, a government operates at a budget deficit when its expenditures exceed its revenues. Conversely, a budget surplus implies that revenues are exceeding expenditures. Government revenues are generated through personal income taxes, payroll taxes, corporate income taxes, and other miscellaneous taxes. Expenditures include social security, national defense, education and health, and so on. One major federal government expenditure is the interest payments on the national debt. For the year 2000, interest payments on the debt are estimated to account for over 12 percent of total government expenditures. Currently estimated at over $5.7 trillion, the national debt was created through a series of annual budget deficits. So how can a government operate in a deficit? Governments cover budget shortfalls by generating additional revenues. One method used to produce additional funds is the
