Government budget balance

A government budget is a financial statement presenting the government's proposed revenues and spending for a financial year. The government budget balance, also alternatively referred to as general government balance,[1] public budget balance, or public fiscal balance, is the overall difference between government revenues and spending. A positive balance is called a government budget surplus, and a negative balance is a government budget deficit. A budget is prepared for each level of government (from national to local) and takes into account public social security obligations.

The government budget balance can be broken down into the primary balance and interest payments on accumulated government debt; the two together give the budget balance. Furthermore, the budget balance can be broken down into the structural balance (also known as cyclically-adjusted balance) and the cyclical component: the structural budget balance attempts to adjust for the impact of cyclical changes in real GDP, in order to indicate the longer-run budgetary situation.

The government budget surplus or deficit is a flow variable, since it is an amount per unit of time (typically, per year). Thus it is distinct from government debt, which is a stock variable since it is measured at a specific point in time. The cumulative flow of deficits equals the stock of debt.

Sectoral balances

The government fiscal balance is one of three major sectoral balances in the national economy, the others being the foreign sector and the private sector. The sum of the surpluses or deficits across these three sectors must be zero by definition. For example, if there is a foreign financial surplus (or capital surplus) because capital is imported (net) to fund the trade deficit, and there is also a private sector financial surplus due to household saving exceeding business investment, then by definition, there must exist a government budget deficit so all three net to zero. The government sector includes federal, state and local governments. For example, the U.S. government budget deficit in 2011 was approximately 10% GDP (8.6% GDP of which was federal), offsetting a capital surplus of 4% GDP and a private sector surplus of 6% GDP.[2]

Financial journalist Martin Wolf argued that sudden shifts in the private sector from deficit to surplus forced the government balance into deficit, and cited as example the U.S.: "The financial balance of the private sector shifted towards surplus by the almost unbelievable cumulative total of 11.2 per cent of gross domestic product between the third quarter of 2007 and the second quarter of 2009, which was when the financial deficit of US government (federal and state) reached its peak...No fiscal policy changes explain the collapse into massive fiscal deficit between 2007 and 2009, because there was none of any importance. The collapse is explained by the massive shift of the private sector from financial deficit into surplus or, in other words, from boom to bust."[2]

Economist Paul Krugman explained in December 2011 the causes of the sizable shift from private deficit to surplus: "This huge move into surplus reflects the end of the housing bubble, a sharp rise in household saving, and a slump in business investment due to lack of customers."[3]

The sectoral balances (also called sectoral financial balances) derive from the sectoral analysis framework for macroeconomic analysis of national economies developed by British economist Wynne Godley.[4]

Sectoral Financial Balances in U.S. Economy
Sectoral financial balances in U.S. economy 1990–2012. By definition, the three balances must net to zero. Since 2009, the U.S. capital surplus and private sector surplus have driven a government budget deficit.

GDP (Gross Domestic Product) is the value of all goods and services produced within a country during one year. GDP measures flows rather than stocks (example: the public deficit is a flow, measured per unit of time, while the government debt is a stock, an accumulation). GDP can be expressed equivalently in terms of production or the types of newly produced goods purchased, as per the National Accounting relationship between aggregate spending and income:

where Y is GDP (production; equivalently, income), C is consumption spending, I is private investment spending, G is government spending on goods and services, X is exports and M is imports (so XM is net exports).

Another perspective on the national income accounting is to note that households can allocate total income (Y) to the following uses:

where S is total saving and T is total taxation net of transfer payments.

Combining the two perspectives gives


This implies the accounting identity for the three sectoral balances – private domestic, government budget and external:

The sectoral balances equation says that total private saving (S) minus private investment (I) has to equal the public deficit (spending, G, minus net taxes, T) plus net exports (exports (X) minus imports (M)), where net exports is the net spending of non-residents on this country's production. Thus total private saving equals private investment plus the public deficit plus net exports.

In macroeconomics, the Modern Money Theory describes any transactions between the government sector and the non-government sector as a vertical transaction. The government sector includes the treasury and the central bank, whereas the non-government sector includes private individuals and firms (including the private banking system) and the external sector – that is, foreign buyers and sellers.[5]

In any given time period, the government’s budget can be either in deficit or in surplus. A deficit occurs when the government spends more than it taxes; and a surplus occurs when a government taxes more than it spends. Sectoral balances analysis shows that as a matter of accounting, government budget deficits add net financial assets to the private sector. This is because a budget deficit means that a government has deposited, over the course of some time range, more money and bonds into private holdings than it has removed in taxes. A budget surplus means the opposite: in total, the government has removed more money and bonds from private holdings via taxes than it has put back in via spending.

Therefore, budget deficits, by definition, are equivalent to adding net financial assets to the private sector, whereas budget surpluses remove financial assets from the private sector.

This is represented by the identity:

where NX is net exports. This implies that private net saving is only possible if the government runs budget deficits; alternately, the private sector is forced to dissave when the government runs a budget surplus.

According to the sectoral balances framework, budget surpluses offset net saving; in a time of high effective demand, this may lead to a private sector reliance on credit to finance consumption patterns. Hence, continual budget deficits are necessary for a growing economy that wants to avoid deflation. Therefore, budget surpluses are required only when the economy has excessive aggregate demand, and is in danger of inflation. If the government issues its own currency, MMT tells us that the level of taxation relative to government spending (the government's budget deficit or surplus) is in reality a policy tool that regulates inflation and unemployment, and not a means of funding the government's activities per se.

Primary balance

"Primary balance" is defined by the Organisation for Economic Co-operation and Development (OECD) as government net borrowing or net lending, excluding interest payments on consolidated government liabilities.[6] A federal budget that achieves primary balance has federal revenues equaling spending but with a remaining budget deficit as a result of interest payments on past debt. The Center for American Progress recommended on December 14, 2009 that the United States set as a goal achieving primary balance by 2014.

Primary deficit, total deficit, and debt

The meaning of "deficit" differs from that of "debt", which is an accumulation of yearly deficits. Deficits occur when a government's expenditures exceed the revenue that it levies. The deficit can be measured with or without including the interest payments on the debt as expenditures.[7]

The primary deficit is defined as the difference between current government spending on goods and services and total current revenue from all types of taxes net of transfer payments. The total deficit (which is often called the fiscal deficit or just the 'deficit') is the primary deficit plus interest payments on the debt.[7]

Therefore, if refers to an arbitrary year, is government spending and is tax revenue for the respective year, then

If is last year's debt (the debt accumulated up to and including last year), and is the interest rate attached to the debt, then the total deficit for year t is

where the first term on the right side is interest payments on the outstanding debt.

Finally, this year's debt can be calculated from last year's debt and this year's total deficit, using the government budget constraint:

That is, the debt after this year's government operations equals what it was a year earlier plus this year's total deficit, because the current deficit has to be financed by borrowing via the issuance of new bonds.

Economic trends can influence the growth or shrinkage of fiscal deficits in several ways. Increased levels of economic activity generally lead to higher tax revenues, while government expenditures often increase during economic downturns because of higher outlays for social insurance programs such as unemployment benefits. Changes in tax rates, tax enforcement policies, levels of social benefits, and other government policy decisions can also have major effects on public debt. For some countries, such as Norway, Russia, and members of the Organization of Petroleum Exporting Countries (OPEC), oil and gas receipts play a major role in public finances.

Inflation reduces the real value of accumulated debt. If investors anticipate future inflation, however, they will demand higher interest rates on government debt, making public borrowing more expensive.

Structural deficits, cyclical deficits, and the fiscal gap

Public Deficit of France
French government borrowing (budget deficits) as a percentage of GNP, 1960–2009.

A government deficit can be thought of as consisting of two elements, structural and cyclical. At the lowest point in the business cycle, there is a high level of unemployment. This means that tax revenues are low and expenditure (e.g., on social security) high. Conversely, at the peak of the cycle, unemployment is low, increasing tax revenue and decreasing social security spending. The additional borrowing required at the low point of the cycle is the cyclical deficit. By definition, the cyclical deficit will be entirely repaid by a cyclical surplus at the peak of the cycle.

The structural deficit is the deficit that remains across the business cycle, because the general level of government spending exceeds prevailing tax levels. The observed total budget deficit is equal to the sum of the structural deficit with the cyclical deficit or surplus.

Some economists have criticized the distinction between cyclical and structural deficits, contending that the business cycle is too difficult to measure to make cyclical analysis worthwhile.[8]

The fiscal gap, a measure proposed by economists Alan Auerbach and Laurence Kotlikoff, measures the difference between government spending and revenues over the very long term, typically as a percentage of Gross Domestic Product. The fiscal gap can be interpreted as the percentage increase in revenues or reduction of expenditures necessary to balance spending and revenues in the long run. For example, a fiscal gap of 5% could be eliminated by an immediate and permanent 5% increase in taxes or cut in spending or some combination of both.[9]

It includes not only the structural deficit at a given point in time, but also the difference between promised future government commitments, such as health and retirement spending, and planned future tax revenues. Since the elderly population is growing much faster than the young population in many developed countries, many economists argue that these countries have important fiscal gaps, beyond what can be seen from their deficits alone.

National government budgets

Data are for 2010:[10]

National Government Budgets for 2010 (in billions of US$)
Nation GDP Revenue Expenditure Budget Balance[11] Expenditure/GDP Balance/Revenue Balance/GDP[11]
US (federal) 14,526 2,162 3,456 -1,293 23.8% 14.88% -8.9%
US (state) 14,526 900 850 +32 7.6% +5.6% +0.4%
Germany 4,600 1,400 1,748 +266 38.0% -24.9% +5.6%
Japan 2,700 1,200 1,300 +199 48.2% -8.3% +6.1%
United Kingdom 2,100 835 897 -75 42.7% -7.4% -3.3%
France 2,000 1,005 1,080 -44 54.0% -7.5% -1.7%
Italy 1,600 768 820 -72 51.3% -6.8% -3.5%
China 1,600 318 349 -31 21.8% -9.7% +5.1%
Spain 1,000 384 386 -64 38.6% -0.5% -4.6%
Canada 900 150 144 -49 16.0% +4.0% -3.1%
South Korea 600 150 155 +29 25.8% -3.3% +2.9%

Early deficits

US annual federal deficits over receipts 1901 to 2006
United States deficit or surplus percentage 1901 to 2006.

Before the invention of bonds, the deficit could only be financed with loans from private investors or other countries. A prominent example of this was the Rothschild dynasty in the late 18th and 19th century, though there were many earlier examples (Peruzzi family).

These loans became popular when private financiers had amassed enough capital to provide them, and when governments were no longer able to simply print money, with consequent inflation, to finance their spending.

However, large, long-term loans had a high element of risk for the lender and consequently gave high interest rates. Governments later began to issue bonds that were payable to the bearer, rather than the original purchaser. This meant that someone who lent the state money could sell on the debt to someone else, reducing the risks involved and reducing the overall interest rates. Examples of this are British Consols and American Treasury bill bonds.

Deficit spending

According to most economists, during recessions, the government can stimulate the economy by intentionally running a deficit. As Professor William Vickrey, awarded with the 1996 Nobel Memorial Prize in Economic Sciences put it :

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.

This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.[12]

Ricardian equivalence

The Ricardian equivalence hypothesis, named after the English political economist and Member of Parliament David Ricardo, states that because households anticipate that current public deficit will be paid through future taxes, those households will accumulate savings now to offset those future taxes. If households acted in this way, a government would not be able to use tax cuts to stimulate the economy. The Ricardian equivalence result requires several assumptions. These include households acting as if they were infinite-lived dynasties as well as assumptions of no uncertainty and no liquidity constraints.

Also, for Ricardian equivalence to apply, the deficit spending would have to be permanent. In contrast, a one-time stimulus through deficit spending would suggest a lesser tax burden annually than the one-time deficit expenditure. Thus temporary deficit spending is still expansionary. Empirical evidence on Ricardian equivalence effects has been mixed.

Crowding-out hypothesis

The crowding-out hypothesis is the conjecture that when a government experiences a deficit, the choice to borrow to offset that deficit draws on the pool of resources available for investment, and private investment gets crowded out. This crowding-out effect is induced by changes in the interest rate. When the government wishes to borrow, its demand for credit increases and the interest rate, or price of credit, increases. This increase in the interest rate makes private investment more expensive as well and less of it is used.[13]

Potential policy solutions for unintended deficits

Increase taxes or reduce government spending

Government surplus or deficit since 2001 (piiggs and US)
The government surplus/deficit of struggling European countries according to European sovereign debt crisis: Italy, Cyprus, Portugal, Spain, Greece, United Kingdom and Ireland against the Eurozone and the United States (2000–2013).

If a reduction in a structural deficit is desired, either revenue must increase, spending must decrease, or both. Taxes may be increased for everyone/every entity across the board or lawmakers may decide to assign that tax burden to specific groups of people (higher-income individuals, businesses, etc.) Lawmakers may also decide to cut government spending.

Like with taxes, they could decide to cut the budgets of every government agency/entity by the same percentage or they may decide to give a greater budget cut to specific agencies. Many, if not all, of these decisions made by lawmakers are based on political ideology, popularity with their electorate, or popularity with their donors.

Changes in tax code

Similar to increasing taxes, changes can be made to the tax code that increases tax revenue. Closing tax loopholes and allowing fewer deductions are different from the act of increasing taxes but essentially have the same effect.

Reduce debt service liability

Every year, the government must pay debt service payments on their overall public debt. These payments include principal and interest payments. Occasionally, the government has the opportunity to refinance some of their public debt to afford them lower debt service payments. Doing this would allow the government to cut expenditures without cutting government spending.[14]

A balanced budget is a practice that sees a government enforcing that payments, procurement of resources will only be done inline with realised revenues, such that a flat or a zero balance is maintained. Surplus purchases are funded through increases in tax.

Balanced budget

According to Alesina, Favor & Giavazzi (2018), “we recognized that shifts in fiscal policy typically come in the form of multiyear plans adopted by governments with the aim of reducing the debt-to-GDP ratio over a period of time-typically three to four years. After reconstructing such plans, we divided them into two categories: expenditure-based plans, consisting mostly of spending cuts, and tax-based plans, consisting mostly of tax hikes.” They suggest that paying down the national debt in twenty years is possible through a simplified income tax policy while requiring government officials to enact and follow a balanced budget with additional education on government spending and budgets at all levels of public education. (Alesina, Favor & Giavazzi, 2018). [15]

See also



  1. ^ "IMF database". 2006-09-14. Retrieved 2013-02-01.
  2. ^ a b Financial Times-Martin Wolf-The Balance Sheet Recession in the U.S. – July 2012
  3. ^ NYT-Paul Krugman-The Problem-December 2011
  4. ^ Goldman's Top Economist Explains The World's Most Important Chart, And His Big Call For The US Economy
  5. ^ "Deficit Spending 101 – Part 1 : Vertical Transactions" Bill Mitchell, 21 February 2009
  6. ^ "OECD Glossary of Statistical Terms: Primary Balance". Retrieved August 14, 2011.
  7. ^ a b Michael Burda and Charles Wyplosz (1995), European Macroeconomics, 2nd ed., Ch. 3.5.1, p. 56. Oxford University Press, ISBN 0-19-877468-0.
  8. ^ Dillow, Chris (15 February 2010). "The myth of the structural deficit". Investors Chronicle. The Financial Times Limited. Retrieved 19 May 2013.
  9. ^ AARP article on the fiscal gap
  10. ^ Data on the United States' federal debt can be found at U.S. Treasury website. Data on U.S. state government finances can be found at the National Association of State Budget Officers website. Data for most advanced countries can be obtained from the Organization for Economic Cooperation and Development (OECD) website. Data for most other countries can be found at the International Monetary Fund (IMF) website.
  11. ^ a b In this column, a negative number represents a deficit, and a positive number represents a surplus.
  12. ^ 15 Fatal Fallacies of Financial Fundamentalism-William Vickrey 1996
  13. ^ Harvey S. Rosen (2005), Public Finance, 7th Ed., Ch. 18 p. 464. McGraw-Hill Irwin, ISBN 0-07-287648-4
  14. ^ Steven A. Finkler (2005), Financial Management For Public, Health And Not-For-Profit Organizations, 2nd Ed., Ch. 11, pp. 442–43. Pearson Education, Inc, ISBN 0-13-147198-8.
  15. ^ Alesina, A., Favero, C., & Giavazzi, F. (2018). Climbing out of Debt. Finance & Development, 55(1), 6-11.
2012 Puerto Rico government transition process

The 2012 Puerto Rico government transition process is the ongoing process in Puerto Rico regarding the government transition between the outgoing governorship of incumbent Governor Luis Fortuño and the incoming governorship of Alejandro García Padilla, governor-elect. The process is mandated and regulated by Law No. 197 of 2002 and started on November 13, 2012, three working days after the Puerto Rican general election of 2012 as the law requires, once García Padilla was preliminarily certified as Governor-elect by the State Elections Commission.

As expected, the process has unveiled discrepancies between what the incumbent administration portrayed in the media and what the current status of the government of Puerto Rico truly is; in particular its Consolidated Fund, budget balance, labor statistics, and performance and metrics.

2018 Argentine monetary crisis

The 2018 Argentine monetary crisis was a big devaluation of the Argentine Peso, caused by the high inflation, an increase in the price of the United States dollar at the local markets, and other domestic and international reasons. As a result of it, the presidency of Mauricio Macri requested a loan from the International Monetary Fund.

Anglo-German naval arms race

The arms race between the United Kingdom and the German Empire that occurred from the last decade of the nineteenth century until the advent of World War I in 1914 was one of the intertwined causes of that conflict. While based in a bilateral relationship that had worsened over many decades, the arms race began with a plan by German Admiral Alfred von Tirpitz in 1897 to create a fleet in being to force Britain to make diplomatic concessions; Tirpitz did not expect the Imperial German Navy to defeat the Royal Navy.

With the support of Kaiser Wilhelm II, Tirpitz began passing a series of laws to construct an increasing number of a large surface warships. The construction of HMS Dreadnought in 1906 prompted Tirpitz to further increase the rate of naval construction. While some British observers were uneasy at German naval expansion, alarm was not general until Germany's naval bill of 1908. The British public and political opposition demanded that the Liberal government meet the German challenge, resulting in the funding of additional dreadnoughts in 1910 and escalating the arms race.

Maintaining Europe's largest army and second-largest navy took an enormous toll on Germany's finances. Theobald von Bethmann-Hollweg, German Chancellor from 1909, undertook a policy of détente with Britain to alleviate the fiscal strain and focus on the rivalry with France. Under Bethmann-Hollweg, and particularly from 1912 onwards, Germany abandoned the dreadnought arms race and focused on a commerce raiding naval strategy to be conducted with submarines.


Austerity is a political-economic term referring to policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. Austerity measures are used by governments that find it difficult to pay their debts. The measures are meant to reduce the budget deficit by bringing government revenues closer to expenditures, which is assumed to make the payment of debt easier. Austerity measures also demonstrate a government's fiscal discipline to creditors and credit rating agencies.

In most macroeconomic models, austerity policies generally increase unemployment as government spending falls. Cutbacks in government spending reduce employment in the public and may also do so in the private sector. Additionally, tax increases can reduce consumption by cutting household disposable income. Some claim that reducing spending may result in a higher debt-to-GDP ratio because government expenditure itself is a component of GDP. In the aftermath of the Great Recession, for instance, austerity measures in many European countries were followed by rising unemployment and debt-to-GDP ratios despite reductions in budget deficits. When an economy is operating at or near capacity, higher short-term deficit spending (stimulus) can cause interest rates to rise, resulting in a reduction in private investment, which in turn reduces economic growth. Where there is excess capacity, the stimulus can result in an increase in employment and output.

Debt brake (Germany)

Due to a debt-to-GDP ratio above the 60% threshold fixed in the Maastricht Treaty, caused primarily by the heavy payments to reconstruct former communist Eastern Germany after reunification, the German government decided to introduce a balanced budget amendment called "debt brake" (Schuldenbremse); in 2009 it was approved with a two-thirds majority both by the Bundestag and the Bundesrat. This decision will lead to public budgets without structural deficits (Länder) or a very limited deficit (0.35% of the GDP for the federal state). For the introduction of the Schuldenbremse or debt brake a constitutional change was necessary: The debt brake is now fixed in Article 109 paragraph 3 of the Basic Law, Germany's constitutional law. Meanwhile, several Länder also have adopted the debt brake in their state constitutions. With the debt brake, the structural federal deficit, and not the cyclical deficit, must not exceed 0.35% of the GDP starting 2016. For the Länder, structural deficits will be completely forbidden starting 2020. The only exceptions are natural disasters or strong recessions.

Germany has achieved budget surpluses for the complete country starting from 2012 and was able to reduce its debt-to-GDP ratio from 82.5% to 74.8%. In 2014, Germany achieved a budget surplus of 18.0 billion euros or 0.6% of GDP. This means that Germany's debt is not growing any more, but actually shrinking.

Deficit spending

Deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit; the opposite of budget surplus. The term may be applied to the budget of a government, private company, or individual. Government deficit spending is a central point of controversy in economics, as discussed below.

Economy of Kenya

Kenya's economy is market-based with a few state-owned infrastructure enterprises and maintains a liberalised external trade system. The country is generally perceived as Eastern Africa's hub for Financial, Communication and Transportation services. Major industries include: agriculture, forestry and fishing, mining and minerals, industrial manufacturing, energy, tourism and financial services. As of 2019 estimates, Kenya had a GDP of $98.264 billion making it the 65th largest economy in the world. Per capita GDP was estimated at $1,991.

The government of Kenya is generally investment friendly and has enacted several regulatory reforms to simplify both foreign and local investment, including the creation of an export processing zone. An increasingly significant portion of Kenya's foreign inflows are remittances by non-resident Kenyans who work in the US, Middle East, Europe and Asia. Compared to its neighbours, Kenya has well-developed social and physical infrastructure.

As of September 2018, economic prospects were positive with above 6% GDP growth expected, largely because of expansions in telecommunications, transport, construction and a recovery in agriculture. These improvements are supported by a large pool of English-speaking professional workers. There is a high level of computer literacy, especially among the youth.

In 2018 Kenya ranked 61st in the World Bank ease of doing business rating, up from 80th in 2017 (of 190 countries).

Greek government-debt crisis

The Greek government-debt crisis (also known as the Greek Depression) is the sovereign debt crisis faced by Greece in the aftermath of the financial crisis of 2007–08. Widely known in the country as The Crisis (Greek: Η Κρίση), it reached the populace as a series of sudden reforms and austerity measures that led to impoverishment and loss of income and property, as well as a small-scale humanitarian crisis. In all, the Greek economy suffered the longest recession of any advanced capitalist economy to date, overtaking the US Great Depression. As a result, the Greek political system has been upended, social exclusion increased with hundreds of thousands of well-educated Greeks leaving the country.The Greek crisis started in late 2009, triggered by the turmoil of the Great Recession, structural weaknesses in the Greek economy, monetary policy inflexibility (being a member of the Eurozone), and revelations that previous data on government debt levels and deficits had been underreported by the Greek government (the official forecast for the 2009 budget deficit was less than half the final value as calculated in 2010, while after revisions according to Eurostat methodology, the 2009 government debt was finally raised from €269.3 bn to €299.7 bn, i.e., about 11% higher than previously reported).

This led to a crisis of confidence, indicated by a widening of bond yield spreads and rising cost of risk insurance on credit default swaps compared to the other Eurozone countries, particularly Germany. The government enacted 12 rounds of tax increases, spending cuts, and reforms from 2010 to 2016, which at times triggered local riots and nationwide protests. Despite these efforts, the country required bailout loans in 2010, 2012, and 2015 from the International Monetary Fund, Eurogroup, and European Central Bank, and negotiated a 50% "haircut" on debt owed to private banks in 2011, which amounted to a €100bn debt relief (a value effectively reduced due to bank recapitalisation and other resulting needs). After a popular referendum which rejected further austerity measures required for the third bailout, and after closure of banks across the country (which lasted for several weeks), on June 30, 2015, Greece became the first developed country to fail to make an IMF loan repayment on time (payment was made with a 20-day delay). At that time, debt levels had reached €323bn or some €30,000 per capita (a per capita value still below the OECD average, but high as a percentage of the respective GDP).

Between 2009 and 2017 the Greek government debt rose from €300 bn to €318 bn, i.e. by only about 6% (thanks, in part, to the aforementioned debt restructuring); however, during the same period, the critical debt-to-GDP ratio shot up from 127% to 179% due to the severe GDP drop during the handling of the crisis.

Greek government-debt crisis timeline

The Greek government-debt crisis began in 2009 and, as of November 2017, was still ongoing. During this period, many changes had occurred in Greece. The income of many Greeks has declined, levels of unemployment have increased, elections and resignations of politicians have altered the country's political landscape radically, the Greek parliament has passed many austerity bills, and protests have become common sights throughout the country.

Maryland state budget

Maryland has an annual budget of 43.6 $ billion, it is administered to manage government operations and for county operationsThe income for Maryland budget is received form Corporate tax, Sales taxes, residents income taxes and resident property tax in the United States and tariffs.

Mauricio Macri

Mauricio Macri (Spanish pronunciation: [mauˈɾisjo ˈmakɾi]; born February 8, 1959) is the current President of Argentina and has been in office since 2015. A former civil engineer, Macri won the first presidential runoff ballotage in Argentina's history (the runoff system had been introduced in 1994) and is the first democratically-elected non-Radical or Peronist president since 1916. He was chief of government of Buenos Aires from 2007 to 2015, and represented the city in the lower house of the Congress of Argentina from 2005 to 2007. The reintegration of Argentina into the international community is central to Macri's agenda.

Born in Tandil, Buenos Aires Province, Macri is the son of Franco Macri, a prominent Italian businessman in the industrial and construction sectors, and was raised in an upper class home. He received a bachelor's degree in civil engineering from the Pontifical Catholic University of Argentina and studied at Columbia Business School in New York City. Macri became president of Boca Juniors, one of Argentina's two most popular football clubs, in 1995. In 2005, he created the centre-right Republican Proposal party (Propuesta Republicana, also known as PRO).Although Macri was a potential presidential candidate in the 2011 general elections, he ran instead for reelection as mayor. He received about 47 percent of the vote in the mayoral election, which led to a runoff election on 31 July 2011 against Daniel Filmus in which Macri was reelected for a second consecutive term. On 22 November 2015, after a tie in the first round of the presidential elections on 25 October, he received 51.34 percent of the vote to defeat Front for Victory candidate Daniel Scioli and was inaugurated on 10 December 2015 in the Argentine Congress. In 2016, Macri was named one of the world's 100 most influential people and the most powerful president in Latin America by the U.S. news magazine Time.

National debt of the United States

The national debt of the United States was $21.97 trillion (as of 2018). This is the total debt, or unpaid borrowed funds, carried by the federal government of the United States, which is measured as the face value of the currently outstanding Treasury securities that have been issued by the Treasury and other federal government agencies. The terms national deficit and national surplus usually refer to the federal government budget balance from year to year, not the cumulative amount of debt. A deficit year increases the debt, while a surplus year decreases the debt as more money is received than spent.

The US national debt can be divided between intragovernmental debt and publicly held debt.

There are two components of gross national debt:

Debt held by the public, such as Treasury securities held by investors outside the federal government, including those held by individuals, corporations, the Federal Reserve System, and foreign, state and local governments.

Debt held by government accounts or intragovernmental debt, are non-marketable Treasury securities held in accounts of programs administered by the federal government, such as the Social Security Trust Fund. Debt held by government accounts represents the cumulative surpluses, including interest earnings, of various government programs that have been invested in Treasury securities.In general, government debt increases as a result of government spending, and decreases from tax or other receipts, both of which fluctuate during the course of a fiscal year. In practice, Treasury securities are not issued or redeemed on a day-by-day basis, and may also be issued or redeemed as part of the federal government's macroeconomic management operations.

Historically, the US public debt as a share of gross domestic product (GDP) has increased during wars and recessions, and subsequently declined. The ratio of debt to GDP may decrease as a result of a government surplus or due to growth of GDP and inflation. For example, debt held by the public as a share of GDP peaked just after World War II (113% of GDP in 1945), but then fell over the following 35 years. In recent decades, aging demographics and rising healthcare costs have led to concern about the long-term sustainability of the federal government's fiscal policies. The aggregate, gross amount that Treasury can borrow is limited by the United States debt ceiling.As of December 31, 2018, debt held by the public was $16.1 trillion and intragovernmental holdings were $5.87 trillion, for a total or "National Debt" of $21.97 trillion. Debt held by the public was approximately 76.4% of GDP in Q3 2018. In 2017, the US debt-to-GDP ratio was ranked 43rd highest out of 207 countries. The Congressional Budget Office forecast in April 2018 that the ratio will rise to nearly 100% by 2028, perhaps higher if current policies are extended beyond their scheduled expiration date. The United States has the largest external debt in the world and the 14th largest government debt as a % of GDP in the world.

Political debates about the United States federal budget

Political debates about the United States federal budget discusses some of the more significant U.S. budgetary debates of the 21st century. These include the causes of debt increases, the impact of tax cuts, specific events such as the United States fiscal cliff, the effectiveness of stimulus, and the impact of the Great Recession, among others. The article explains how to analyze the U.S. budget as well as the competing economic schools of thought that support the budgetary positions of the major parties.

Public debt of Puerto Rico

The public debt of Puerto Rico is the money borrowed by the government of Puerto Rico through the issue of securities by the Government Development Bank and other government agencies.

Puerto Rico government budget balance

The Puerto Rico government budget balance is the overall result of the budget of the government of Puerto Rico over the course of a fiscal year beginning on July 1 and ending on June 30 of the following year. As of November 2012, the government's balance is experiencing a deficit of about $1.1 billion US$. The government has about $15.1 billion in total assets and $48.8 billion in total liabilities.

Stability and Growth Pact

The Stability and Growth Pact (SGP) is an agreement, among the 28 member states of the European Union, to facilitate and maintain the stability of the Economic and Monetary Union (EMU). Based primarily on Articles 121 and 126 of the Treaty on the Functioning of the European Union, it consists of fiscal monitoring of members by the European Commission and the Council of Ministers, and the issuing of a yearly recommendation for policy actions to ensure a full compliance with the SGP also in the medium-term. If a Member State breaches the SGP's outlined maximum limit for government deficit and debt, the surveillance and request for corrective action will intensify through the declaration of an Excessive Deficit Procedure (EDP); and if these corrective actions continue to remain absent after multiple warnings, the Member State can ultimately be issued economic sanctions. The pact was outlined by a resolution and two council regulations in July 1997. The first regulation "on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies", known as the "preventive arm", entered into force 1 July 1998. The second regulation "on speeding up and clarifying the implementation of the excessive deficit procedure", known as the "dissuasive arm", entered into force 1 January 1999.The purpose of the pact was to ensure that fiscal discipline would be maintained and enforced in the EMU. All EU member states are automatically members of both the EMU and the SGP, as this is defined by paragraphs in the EU Treaty itself. The fiscal discipline is ensured by the SGP by requiring each Member State, to implement a fiscal policy aiming for the country to stay within the limits on government deficit (3% of GDP) and debt (60% of GDP); and in case of having a debt level above 60% it should each year decline with a satisfactory pace towards a level below. As outlined by the "preventive arm" regulation, all EU member states are each year obliged to submit a SGP compliance report for the scrutiny and evaluation of the European Commission and the Council of Ministers, that will present the country's expected fiscal development for the current and subsequent three years. These reports are called "stability programmes" for eurozone Member States and "convergence programmes" for non-eurozone Member States, but despite having different titles they are identical in regards of the content. After the reform of the SGP in 2005, these programmes have also included the Medium-Term budgetary Objectives (MTO's), being individually calculated for each Member State as the medium-term sustainable average-limit for the country's structural deficit, and the Member State is also obliged to outline the measures it intends to implement to attain its MTO. If the EU Member State does not comply with both the deficit limit and the debt limit, a so-called "Excessive Deficit Procedure" (EDP) is initiated along with a deadline to comply, which basically includes and outlines an "adjustment path towards reaching the MTO". This procedure is outlined by the "dissuasive arm" regulation.The SGP was initially proposed by German finance minister Theo Waigel in the mid-1990s. Germany had long maintained a low-inflation policy, which had been an important part of the German economy's strong performance since the 1950s. The German government hoped to ensure the continuation of that policy through the SGP, which would ensure the prevalence of fiscal responsibility, and limit the ability of governments to exert inflationary pressures on the European economy. As such, it was also described to be a key tool for the Member States adopting the euro, to ensure that they did not only meet the Maastricht convergence criteria at the time of adopting the euro, but kept on to comply with the fiscal criteria for the following years.


A tax (from the Latin taxo) is a mandatory financial charge or some other type of levy imposed upon a taxpayer (an individual or other legal entity) by a governmental organization in order to fund various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent.

Most countries have a tax system in place to pay for public, common or agreed national needs and government functions. Some levy a flat percentage rate of taxation on personal annual income, but most scale taxes based on annual income amounts. Most countries charge a tax both on corporate income and dividends. Countries or subunits often also impose wealth taxes, property taxes, sales taxes, value-added taxes, payroll taxes or tarrifs.

Twin deficits hypothesis

In macroeconomics, the twin deficits hypothesis or the twin deficits phenomenon, is the proposition that there is a strong causal link between a nation's government budget balance and its current account balance.

United States federal budget

The United States federal budget comprises the spending and revenues of the U.S. federal government. The budget is the financial representation of the priorities of the government, reflecting historical debates and competing economic philosophies. The government primarily spends on healthcare, retirement, and defense programs. The non-partisan Congressional Budget Office provides extensive analysis of the budget and its economic effects. It has reported that the U.S. is facing a series of long-term financial challenges, as the population of the country ages and healthcare costs continue growing faster than the economy, leading to the debt held by the public (a partial measure of national debt) exceeding GDP by 2030. The United States has the largest external debt in the world and the 14th largest government debt as % of GDP in the world.

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