Congress passed the $831 billion economic stimulus package in March 2009 to end the 2008 financial crisis.  It paid for extended unemployment benefits and public works projects.In 2015, the Federal Government collected $3.25 trillion in taxes, almost 60% from income taxes, while spending $3.69 trillion. As a result, the budget deficit of $439 billion – the lowest deficit since 2008.Allowing the Bush tax cuts to expire at all income levels would have a significant deficit reduction effect. In August 2010, CBO estimated that extending the tax cuts for the 2011–2020 time period would add $3.3 trillion to the national debt: $2.7 trillion in foregone tax revenue plus another $0.7 trillion for interest and debt service costs.The American Taxpayer Relief Act of 2012 resulted in the expiration of the lower Bush income tax rates for individual taxpayers earning over $400,000 and couples earning over $450,000. This was expected to bring in an additional $600 billion over ten years. In effect, this extended the Bush tax cuts for roughly 80% of their dollar value. By 2015, the budget deficit was 2.4%, below the 1980-2007 historical average of 2.5% GDP.
Explanation:
Deficit spending is when purchases exceed income. It happens to individuals and businesses, but it usually refers to governments. Governments have strong incentives to spend more than they take in and few reasons to balance the budget.
When government spending exceeds government revenue, it creates a budget deficit. Each year's deficit is added to the sovereign debt. There is a small but important difference between the deficit and the debt. In addition to the deficit, the government lends money to itself from the Social Security Trust Fund. That adds to the debt without increasing the deficit.
Deficit spending is not an accident. The president and Congress intentionally create it in each fiscal year's budget. They do it to increase economic growth. For example, the government buys defense equipment, medical supplies, and buildings. The businesses it contracts with hire people. The government hires people directly. Both federal and local government spending is a crucial component of gross domestic product.
Deficit spending is also part of expansionary fiscal policy. Job creation gives more people money to spend, which further boosts growth. Tax cuts are the other tool that expand the economy.
