National Debt v. Budget Deficit

Government Spending

• Vocab terms related to National Debt & Budget Deficit

• Revenue = money collected by the government – taxed and nontaxed

• Expenditure = money spent by the government

Budget Deficit• (Federal) Budget = a written document outlining the

spending plan for the fiscal year.• Budget Deficit = occurs in any year when expenditures

exceed revenue• Meaning the government spent more than it took in• The gov’t borrows money to payoff the yearly deficit• We then have to pay back that money along with interest• Causing the debt to grow larger• Goal is to have a “balanced” budget or budget surplus• Balanced Budget = when you break even, or spend only

what you take in• Budget Surplus = When there is money left over! This

does happen…

National Debt• National Debt =All of the money

the gov’t owes to its bondholders• The bondholders are the ones who

lent the gov’t money to pay off the deficit

• Whenever the country has a budget deficit, they BORROW money to cover the cost

• This borrowed money rolls over from year to year adding to the growing National Debt

• National Debt is currently approaching $17 TRILLION

National Debt

National Debt

2008 Deficit

2010 Deficit

2011Deficit

2009 Deficit

What causes the debt?• Good Debt v. Bad Debt• Mandatory Spending = spending that is required by law or

policies. (which includes payments on debt)• Entitlement Programs = social welfare programs• Health• Medicare• Medicaid• Social Security• Some Education• Some Defense

• http://www.concordcoalition.org/learn/budget/federal-budget-pie-charts

What causes debt?

• Discretionary Spending = allows the government to make choices on where the money is spent

• Law enforcement• Education• Defense• Disaster Aid• Transportation• Land and parks• State assistance

Mandatory v. Discretionary

Real time

• http://www.usdebtclock.org/