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National Deficit & Debt

National Deficit & Debt. Basic Definitions. A budget deficit occurs when an entity (often a government) plans to spend more money than it takes in. The opposite of a budget deficit is a budget surplus . The debt is the accumulation of all yearly deficits.

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National Deficit & Debt

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  1. National Deficit & Debt

  2. Basic Definitions • A budget deficit occurs when an entity (often a government) plans to spend more money than it takes in. • The opposite of a budget deficit is a budget surplus. • The debt is the accumulation of all yearly deficits.

  3. "Budget Deficit" vs. "National Debt" • Suppose you want to spend more money this month than your income. This situation is called a "budget deficit". • So you borrow. The amount you borrowed (and now owe) is called your debt. • You have to pay interest on your debt. • If next month you don't have enough money to cover your spending (another deficit), you must borrow some more, and you'll still have to pay the interest on the loan. • If you have a deficit every month, you keep borrowing and your debt grows. • Soon the interest payment on your loan is bigger than any other item in your budget. • Eventually, all you can do is pay the interest payment, and you don't have any money left over for anything else. • When you get this far “over your head”, this situation is known as bankruptcy.

  4. Brief History of U.S. Debt • Each year since 1969, Congress has spent more money than its income (except 3 yrs under Clinton & 1 under G.W. Bush) • However, never once was a surplus planned (it was a fortunate mistake!) • The Treasury Department has to borrow money to meet Congress's appropriations (allotted spending). • The total borrowed is more than $16 trillion and growing. • Even when government officials claim to have a surplus, they still spend more than they get in. • We pay interest on that huge debt.

  5. The Debt Clock The National Debt is $14.6 Trillion! Updated Nov 29, 2012 That’s a 10% increase from this time last year – some $1.7 Trillion! Expected debt in 10 years: $24 T

  6. How do we “fix” the problem? Your Choices: Think about the possible consequences of each… • Borrow more money & stay on the same path • Raise Taxes to bring in more revenue • Cut Spending to reduce expenditures • Raise Taxes AND Cut Spending simultaneously • Other ideas????

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