fiscal policy & our national debt...u.s. budget deficits/ surpluses, 1929-2010 years, 1961-2008...
TRANSCRIPT
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Fiscal Policy & Our National Debt
What is “fiscal policy”?
What is our current national debt?
What can be done to solve this problem?
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• Avoid occasions of expense. . . and avoid likewise the accumula7on of debt…not throwing upon posterity the burden which we ourselves ought to bear.”
• George Washington
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How does the US government influence economic ac6vity?
• The US government is a full player in the US economy just like any other economic par6cipant
• Fiscal Policy = Use of government revenue (taxes) & spending – Distribu6on of income – Savings / Investment – Government programs /
services – Debt
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4
$55,644 Burden
That’s the current burden of every American citizen
(including newborn babies) if we had to pay of our national
debt TODAY!!!
Consider this…
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What types of debts does the US owe?
• The annual imbalances between revenues and spending in our government is known as a “deficit”
• Debt: The accumulation of deficits over time • Public debt: U.S. government money held by individual
Americans and foreigners • Debt held by other financial entities: debt to finance a
loan to a private entity in which government acquires a financial asset
• Inter-governmental debt: Held by government trust funds (e.g., Social Security) and other accounts
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What is the history of our na6onal debt?
• The US has developed a na6onal debt since before we were a country – Pre-‐1776
• Reasons: – War costs – Internal improvements – Social programs
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U.S. Budget Deficits/ Surpluses, 1929-2010
Years, 1961-2008
Deficits rose from 0 in 1969 to $340 billion in 1992. U.S. budget had $86 billion surplus in 2000 Deficits rose to $568 billion in 2004 and $1.8 trillion in 2009.
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National Debt, 1940-2009
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What are “unfunded liabilities”? • Unfunded liabilities are
benefits promised to be paid in the future without a viably source of income • Social Security • Medicare
• Total U.S. unfunded promises: $56 trillion • Equal to the total net
worth of the US
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What are our projections for the future?
• Projections of future deficits and debt are based on assumptions, such as:
– Economic growth or recessions – Changes in spending and tax
policies – Population trends – Workforce participation rates
• History shows that assumptions and projections are often wrong
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How does long term debt effect our everyday life?
• The burden of long-term debt will fall on America’s younger generations – Drastically higher taxes – Cut / loss of benefits – Lower living standards – Fewer choices for public
spending – ALL OF THE ABOVE
• Conclusion:
– Working longer – Paying more taxes – Fewer options
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Like the idea of working old?
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The 2008-2009 Economic Crisis and Soaring Federal Deficits
Deficits up from $455 billion in 2008 to $1.8 trillion in 2009 due to Federal spending associated with the “Great Recession”
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Where the Money Goes: Traditional Federal Spending Policies
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What foreign countries own interest in our debt?
• 25% of our na6onal debt is foreign owned – China (31%) – Japan (27%) – Belgium (15%) – Other par6es (27%)
• As of 2014, the US Treasury es6mates that the US owes $1.253 trillion to China ALONE !!!
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Percent of Debt Held by the Public (Owned by Foreigners)
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The US Debt “Ceiling”
Overview of the Federal Budget Challenge 19
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Has the US overextended itself?
Overview of the Federal Budget Challenge 20
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Overview of the Federal Budget Challenge 21
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What are we going to need to do to get out of our current situation?
– Which Federal programs and policies should be changed and how?
• Entitlement programs • Unfunded spending • Tax policy
– How can budget processes and controls be reformed?
– What should be the major goals of government,
business and individuals in U.S. economy? • Investing in the future (education,
infrastructure, science, environment, etc.) • Providing income security and good living
standards • Providing health care for all Americans