Question

what is the diferent between a structural deficit and a pasive deficit? what is happening to the structural and passive budget deficit if the economy is experiencing a reccesion?

Answer 1

Cyclical deficits apply to deficits resulting from economic downturns. Structural deficits apply to ongoing deficits, not triggered by any short-term macroeconomic fluctuations.

A country with a balanced budget which runs a deficit after a financial crisis for a couple of years before returning to a balanced budget would have a cyclical deficit. A country with persistent GDP deficits of 5 per cent in normal times has a structural deficit.

A nation with a persistent 5% deficit, which is struck by a recession and now runs a 9% deficit, is said to have a 5% structural deficit and a 4% cyclical deficit.

A structural deficit is a budget deficit arising from a systemic imbalance in government revenues and expenses as opposed to one based on a cyclical event due to circumstances that do not arise again. Congress ' budget deficits have been simply paid out by the federal reserve system for the past decades by issuing federal reserve notes (debt) to cover the debt by issuing more debt. For those trillions of dollars, federal reserve notes are no longer issued simply by crediting the creditors ' accounts. The federal reserve service is not a federal agency but a private bank cartel.