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National Debt

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National Debt ... 3. Higher debt may lead to higher taxes on future generations - if the debt is owed to Americans, its repayment will redistribute wealth ... – PowerPoint PPT presentation

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Title: National Debt


1
National Debt
2
Budget Deficit The amount by which expenditures
exceed revenues (GT) - 186.5 Billion(2007)Bud
get Surplus The amount by which revenues exceed
expenditures (TG)
3
National Debt The total amount owed by the
federal governmentIt is the sum total of all
budget deficits we have run minus all budget
surpluses
4
National Debt as of 3/13/20089,408,066,260,869.
55 (Thats 9.4 Trillion), or31,000 per
person in the US
5
Debt Held by the Public5.3 Trillion
Intergovernmental Holdings4.1 Trillion
6
Intergovernmental Holdings ex Social Security
Trust Fund
7
Debt Held by the Public5.2 Trillion Owned
byForeigners 2.33 TrillionLocal G
546 BillionPension Funds 364
BillionMutual Funds 307 BillionInsurance
Cos 164 BillionBanks 118 Billion
8
History of the Debt
9
Debt as a of GDPJapan 164Italy 106
Euro Area 79 US 64.8Switzerland
57UK 40Australia 9
10
The impact of the national debt1. Higher debt
levels will lead to higher interest rates a.
hurts capital accumulation b. hurts
borrowers2. Higher interest rates will lead to
higher interest payments on debt
11
3. Higher debt may lead to higher taxes on future
generations- if the debt is owed to Americans,
its repayment will redistribute wealth within the
country
12
If the debt is owed to foreigners, then wealth
will be redistributed out of the US
13
Notes on the debt1. We never have to pay off
the debt, per se2. The burden of the debt on
our economy would be lowered if our GDP grows
faster than our debt
14
Debt to GDP in US 1945 121.21981
32.52005 64.8
15
Graph of Debt to GDP
16
Current Budgets as a of GDPUK -3.2
US -2.4 Japan -2.7 Euro
Area -1.0Canada .6Australia 1.5
Norway 17.9
17
Balanced Budget Amendment A change in the US
constitution to require that GT every yearIt
would outlaw budget deficits and budget
surpluses.It would also outlaw fiscal policy
18
It passed the US House in 1995 but failed in the
US Senate
19
Most states have a balanced budget
requirementIt means that they have to cut
government spending when tax revenues fall
20
Pros1. It would reduce the US debt/GDP ratio
over time2. It would provide a fiscal restraint
for short-sighted politicians
21
3. It requires politicians to examine the full
cost of their spending policies4. It would help
the US increase its overall savings rate
22
Cons1. It would outlaw fiscal policy2. It
could increase the volatility of economic
contractions and expansions
23
3. It would not allow for emergencies such as
war4. It would make debt for capital purchases
more difficult not all debt is equally bad
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