Budget Deficits and the National Debt

The Budget Balanced Budget: Budget Surplus: Budget Deficit: When revenue equals spending Budget Surplus: When the government takes in more than it spends Budget Deficit: When the government spends more than it takes in

Why can’t the government just print more money? Creating more money creates more . . . Demand As Demand starts to reach its maximum, creating more money just creates . . . Inflation If you continue this will cause . . . Hyperinflation

An Example You’ve Heard Before Pretend the total amount of money in the economy is $100 and we are already at 100% demand. Pretend the price of a loaf of bread is $1. Remember: How do prices get set? Now we print another $100 and give it to the people. Demand hasn’t changed. Supply hasn’t changed. To accommodate the new money all prices will double. In other words, the price of a loaf of bread will now be $2 (INFLATION!)

So if we can’t print it, how does the government get more money? Borrowing Money Through Treasury Bonds, Treasury Notes and Treasury Bills (Securities) Of course borrowing too much puts us in debt

National Deficit vs National Debt The difference between revenue and expenditures in one year. Nation Debt: The total of all unpaid debts for all years

Problems with the National Debt The greater the debt, the larger the Mandatory portion of the budget becomes And therefore the smaller the discretionary portion becomes Thus the more money tied up in debt, the less money there is to use in the economy How much do they spend every year on interest payments on debt? At the beginning of the 21st Century, the Federal Government paid out $250 billion dollars a year servicing debt

Keynesian View of Debt Using fiscal policy to affect the economy is more important than worrying about debt. So, if we have to go into debt, so be it. However, going into debt should be a short-term situation.

Do We Always Run at a Deficit? When was the last year we had a surplus? 2000, we had a surplus of $236 Billion. Note: Just because we had a budget surplus in 2000, does NOT mean we were out of debt. It just means we operated at a surplus for that year.

So What is the National Debt Today? As of 05 Mar 2009 at 05:31:48 PM GMT, the National Debt is: $10,950,566,432,412.55 The estimated population of the United States is 305,760,363. So each citizen's share of this debt is $35,814.21. The National Debt has continued to increase an average of $3.71 billion per day since September 28, 2007 As of 28 Sep 2007 the National Debt is: $8,996,569,252,678.20 The estimated population of the United States is 303,108,129 So each citizen's share of this debt is $29,681.06. The National Debt has continued to increase an average of $1.35 billion per day since September 29, 2006! Facts from: http://www.brillig.com/debt_clock/

Maxing Out the National Debt Clock October 09, 2008 10:14 AM ET