Debt & Deficit: What if taxes don’t raise enough money?
What if taxes aren’t enough? Governments are constantly borrowing money to finance what they do, and often, the amount they spend exceeds the revenues they have. That’s a government deficit. If a government goes into deficit, it starts accumulating debt. To what extent this debt is really a problem is a subject of huge controversy among economists and the wider public.
The amount of money a government owes (debt), and the amount it’s got to borrow in excess of its revenues (deficit), rises in times of crisis and declines during good economic times. The same way you might go into debt to be able to finance your house or your education, and a business might go into debt to buy a new office space or equipment, governments go into debt to pay for large public projects or stabilise the economy during times of crisis.
The crucial difference is the options governments have in contrast to individuals for paying for debt—where you can’t print off money to pay your mortgage, the government can, and where your mortgage is for a house that only you live in, the government’s debt isn’t for one individual, but for the whole society. It’s impossible to compare the two.
The key thing to pay attention to as a citizen in relation to your government’s debt is what it’s being used for, and the terms on which it was taken out. Only then can you really assess what you think of the debt your government is in, and how you’d want them to handle it.