Deficits and Surpluses, Essay Example

All governments are run using a variety of methods. One such method is fiscal policy. As a result, all governments have either a surplus balance or a deficit balance. Surpluses occur when the country’s income is higher than its expenditures. In contrast, deficits occur when the country’s expenditures are higher than its income. It is noted that when surpluses occur, the “government is being run efficiently” (Investopedia). Having a surplus is a goal of all governments. Barring this, a balanced budget is often considered acceptable and refers to those times where “spending equals income” (Investopedia). This number is commonly shown as a percentage of GDP. Therefore, the following table provides the deficit or surplus for the US, Japan, Germany, and Greece for a 5-year time period of 2008 to 2012. This time period was chosen because it was the most recent data available from The World Bank. An analysis of the deficit or surplus of each country follows the table, as well as a comprehensive analysis of the countries combined.

It is noted that with the exception of 2012, all countries had a deficit. The surplus occurred during 2012 in Germany. In fact, when considering the graph, Germany had the best balance results of all four countries. Greece, however, had the worst. Unsurprisingly, all countries suffered a greater deficit between 2008 and 2009. It is assumed that this decrease was related to the financial recession.  The country that recovered the fastest from the recession was Greece, with a 4.8% reduction in debt. Japan and the US remained fairly parallel to each other from 2008 to 2010. In 2010, the deficit continued to increase in Japan, yet decreased in the US. Significantly, the deficit in Japan remained consistent between 2011 and 2012. However, the deficit for the US decreased steadily from 2010 to 2012. It is interesting to note the steady reduction in the deficit for Greece from 2010 to 2012. The following table shows the yearly decreased deficit or increased deficit for all the countries.

In the second graph, it is noted that Greece had the highest increase in the deficit between 2008 and 2009 and the highest decrease in the deficit between 2009 and 2010. However, following 2010, the country’s deficit continued growing. Significantly, the US, Japan, and Greece were the most similar when their deficits increased between 2008 and 2009. As a result, it can be concluded that all four countries are slowly becoming stabilized since the recession.

Works Cited

Investopedia. “Budget Surplus.” Investopedia. N.p., 2015. Web.

The World Bank. “Cash Surplus/deficit (% of GDP).” The World Bank. N.p., 2015. Web.