A budget deficit occurs when the government spends more money than it brings in. Every year the government prepares an annual budget and this budget assumes that a certain amount of money comes in through taxes and other sources. The government then spends the money on a large group of programs ranging from the military to entitlement programs like Social Security and Medicare to projects like building roads and bridges. When the government spends more than it takes in, this results in a deficit. It is the same as when a person spends more than he or she makes. The person, just like the government, has to find a way to make up for this overspending. A person may run up a credit card bill, and this is basically what the government does except they do it through various loan programs and bonds.
[...] Marketable Pollution Permits The idea behind a system of marketable pollution permits is that companies receive permits to produce a certain amount of pollution. Some companies would produce less than this amount, and some companies would produce more, but the average of all of them would be the level of pollution that we are willing to accept. Companies with pollution levels lower than their permits would then be able to sell their permits to other companies. For example, let's say you have two companies, A and B. [...]
[...] Problems with GDP Gross Domestic Product (GDP) is a measure taken by economists to determine the health of a nation's economy. It tries to measure all the goods and services of a country and to determine if the country is doing well or not. While at a basic level this measure works, there are a lot of problems with it. One important issue as a measure of a nation's well-being is that the GDP doesn't take into account non-market things like quality of life. [...]
[...] Another problem with the GDP is that crime, disasters, and other sorts of bad events actually count as a positive to the GDP rather than a negative. A high crime rate, for instance, will generate more sales in security systems. This will add to the GDP, even though everyone would probably agree that high crime is not good for the nation's well-being. Disasters are similar. When Katrina hit New Orleans, this added a boost to the GDP because of the all the rebuilding that was needed. [...]
[...] For example, if the price of oil suddenly dropped, then this would have a positive boost in the economy. The cost to produce many goods would drop, resulting in lower prices. And with the lower prices, demand would increase. New jobs would be created. However, the system would then self-correct to return to the point of equilibrium. As more jobs are created, wages would increase. This would then result in a rise in prices, which would result in a drop in demand until the aggregate supply and aggregate demand intersected again. [...]
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