Fiscal Deficit
Categories: Banking, Econ, Financial Theory
A fiscal deficit is when government spending is greater than government revenues. Even though the deficit is similar to debt, it’s a bit different. Debt is the overall accumulation of money owed, whereas a fiscal budget deficit is more like an annual status update saying “yep, we’re spending more than we’re making this year, guys.” A government’s debt is basically adding up all the yearly deficits.
You might think that a fiscal deficit is bad, in the same way that having a lot of personal debt is considered bad. Yet this isn’t necessarily the case, because it means you’re bringing in value to the people. Keynes (maybe you’ve heard of the man) actually believed a fiscal deficit was a good thing, particularly when a nation needs a little TLC from a recession. Others think that keeping a balanced budget is the better way to go.
How does a government run a deficit? With bonds it sells, printing currency (though this will cause inflation, so…), raising taxes, and cutting government spending.
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Finance: What is Deficit Financing?4 Views
Finance a la shmoop what is deficit financing? well its debt, debt used to you
know buy stuff but the phrase deficit financing gets applied in lots of
creative ways so here's one courtesy of your friends in Hollywood in [Hollywood sign in the hills appears]
the glory days of sitcom financings like when cheers and the Brady Bunch and
Friends were still alive and kicking think you know 1970s 80s and pre 500
channel 90s sitcoms were funded via deficit financing well a given TV series
err 22 23 24 25 ish episodes with a flashback or a blooper show thrown in
for good measure well that might cost a million bucks an
episode to produce and were kind of rounding the numbers a lot here so
that's 25 million bucks for a season of yucks the network ABC NBC CBS and Fox [TV network logos appear]
that's all the network was allowed to air the show twice and for complex legal
reasons was not allowed to own the show or really participate in its profits if
there were any yes poor you network that's it so NBC might have paid in
fifteen million dollars to shmoop Warner mount you know producers of
friends for the right to broadcast 2 airings of the show over a one-year
period that's 15 million for a product that costs 25 million so the show's
producers lost 10 million dollars each year that they were in primary
production gulp yeah that's a lot of dough but wait Jennifer Aniston has a [Private jet appears on runway]
really nice jet and gallons of Botox and the hair thing going on there yeah it
cost big bucks even if most of it really isn't hers well she had to have gotten
paid a big fat profit participation right well not right away you know like
she got a salary to be on the show in the first part but you know you get
money for reruns well in fact friends might have lost say
four years worth of 10 million bucks a year before the auction floodgates then [Man standing on floodgates]
opened into the land of reruns where the producers were then paid handsomely for
their hit show and if you think about the math of a rerun all you have to do is
hit play on the VCR again and you get paid for that right? so
really high margin business somebody had to have taken the very big risk of
deficit financing that 40 million bucks up front though waiting praying hoping
for that billion dollar win at the end so a given deficit financier might
contribute 20 million dollars to buy two-thirds of the "back end"
of the show and we like big back ends we cannot lie meaning the future profits [Profits from ad sales and friends appear]
that would come from hitting the rerun button on that VCR and selling ads
against it so how or why could a 20 million dollar investment turn into half
a billion dollars in a decade or less well because oh so many shows fail and
if a show goes only two seasons on a network well it has pretty much zero
after life like nobody watches it in reruns it just dies on the vine
worthless and all the money that the deficit financier invested well pretty
much goes up in smoke so yeah deficit financiers are kind
of like the friends on friends kind of like the venture capitalists of
Hollywood or at least how Hollywood used to be as long as there's a pile of cash [A big pile of cash on a hill]
at the end of the rainbow they'll look you know you know it goes
sing it with me....I'll be there for you yeah I was the original song
there and then they fired me for some other yutzy band