Deficits
in sentence
2171 examples of Deficits in a sentence
A more fundamental question is causality: the state of the economy certainly affects the fiscal position, just as taxation, spending, deficits, and debts may affect economic growth.
While large
deficits
are usually undesirable, sometimes they can be benign or even desirable, such as in recession, wartime, or when used to finance productive public investment.
In normal times,
deficits
crowd out private investment (and perhaps crowd in private saving and/or foreign capital), and hence reduce future growth.
Corroborating statistical evidence shows that high
deficits
and debt increase long-run interest rates.
The effect is greater when modest deficit and debt levels are exceeded and current-account
deficits
are large.
Finally, the notion that we can wait 10-15 years to start dealing with
deficits
and debt, as economist Paul Krugman has suggested, is beyond irresponsible.
Tracing outsize current-account and trade
deficits
to an extraordinary shortfall of US domestic saving – just 1.3% of national income in the fourth quarter of 2017 – counts for little in the arena of popular opinion.
Likewise, it doesn’t help when we emphasize that China is merely a large piece of a much bigger multilateral problem: the US had bilateral merchandise trade
deficits
with 102 countries in 2017.
Trade deficits, goes the argument, lead to job losses and wage compression.
Indeed, with budget
deficits
likely to widen, America’s saving shortfall will only deepen in the years ahead.
That points to rising balance-of-payments and multilateral trade deficits, which are impossible to resolve through targeted bilateral actions against a single country.
The current global expansion will likely continue into next year, given that the US is running large fiscal deficits, China is pursuing loose fiscal and credit policies, and Europe remains on a recovery path.
A big difference, however, was the turnaround in Germany’s external balance, with annual
deficits
in the 1990’s swinging to a substantial surplus in recent years, thanks to its trade partners in the eurozone and, more recently, the rest of the world.
Turkey, another country whose star has faded, also relied on large annual current-account deficits, reaching 10% of GDP in 2011.
But look at their average current-account
deficits
from 2000 to 2013 – which range from a low of 5.5% of GDP in Lithuania to a high of 13.4% in Kosovo – and it becomes evident that these are not countries to emulate.
In an optimal world, the surpluses of countries pursuing export-led growth would be willingly matched by the
deficits
of those pursuing debt-led growth.
When some countries want to run smaller
deficits
without a corresponding desire by others to reduce surpluses, the result is the exportation of unemployment and a bias toward deflation (as is the case now).
When some want to reduce their surpluses without a corresponding desire by others to reduce deficits, the result is a “sudden stop” in capital flows and financial crisis.
Its economy, for example, cannot recover properly because consumers, lacking confidence in the ability of their political leaders to solve the economy’s manifold economic problems (budget deficits, pensions, etc.), are saving for a rainy day they feel is just around the corner—and businessmen are reluctant to invest, because they don’t trust government to make the necessary economic reforms.
Many EU countries were vulnerable because they had accumulated excessive and unnecessary public debts by maintaining budget
deficits
during the pre-crisis boom years.
A financial crisis should be met with swift action, and budget
deficits
should be slashed instantly, mainly through spending cuts.
In addition, some governments in the region are under the double pressure of having to reduce their budget
deficits
and pay back debt; precious little will be left for expenditure that could stimulate economic activity, such as investments in infrastructure or energy efficiency.
In the years before the 2008 global financial crisis, independent central banks were seen as successful in controlling inflation; and countries with sizable fiscal
deficits
were especially enthusiastic about central-bank independence because they benefited from lower long-term interest rates.
The balance-of-payments crisis of 1966-7 reflected the tendency of British wages to grow faster than productivity, the consequent trade deficits, and foreign investors’ reluctance to finance a position they saw as unsustainable.
In the interim, foreign investors remained reluctant to finance Britain’s
deficits.
Several consequences follow from this divergence: difficulties in policy coordination, given no agreement on the diagnosis; a very probable return to large US external
deficits
while Europe remains in balance; and a weaker dollar, which will become evident if the crisis in the eurozone subsides.
By now, the global repercussions are clear, falling most acutely on developing economies with large current-account
deficits
– namely, India, Indonesia, Brazil, Turkey, and South Africa.
Finally, while many emerging-market economies tend to run current-account surpluses, a growing number of them – including Turkey, South Africa, Brazil, and India – are running
deficits.
And these
deficits
are now being financed in riskier ways: more debt than equity; more short-term debt than long-term debt; more foreign-currency debt than local-currency debt; and more financing from fickle cross-border interbank flows.
These countries share other weaknesses as well: excessive fiscal deficits, above-target inflation, and stability risk (reflected not only in the recent political turmoil in Brazil and Turkey, but also in South Africa’s labor strife and India’s political and electoral uncertainties).
Back
Next
Related words
Fiscal
Budget
Countries
Large
Trade
Growth
Their
Government
Would
Which
Public
Economic
Rates
Spending
Surpluses
Inflation
Economy
Governments
Interest
External