Understanding Government Spending
In a conversation with Mirian, Thiago and Stella yesterday, we raised some questions about how the Canadian government spends money and how it gets in debt. This morning I have been trying to understand some of the secrets of government debt, how they invest in social programs and how they get the money for it. Well, I find out that this subject is not very simple to understand. Let's be patient. First things first, it is important to understand the difference between debt and deficit. Deficit is the difference, each fiscal year, between what was earned and what was spent. Debt, however, is whatever money any level of government owes internally or externally. To make it easier to understand, think of a household: a family with a yearly income of $80,000 dollars might spend, yearly, much less than that in food, health, taxes, clothing, etc. When this happens, they have a surplus (as opposed to a deficit). However, this family might have a mortgage of $240,000 dollars which they are...