Debt and the Deficit Is a deficit a problem?

debt clock

Deficit and Debt, Defined Video clip about the debt and deficit (bottom of page) Deficit Debt Compound Interest

Remember. . . In a balanced economy . . . Withdrawls = injections or S+T+M = I+G+X

Types of Deficits Trade deficit M > X spending deficit G > T

T, where does it come from? https://www.nationalpriorities.org/analysis/2014/presidents-2015-budget-in-pictures/ Data from Office of Management and Budget (OMB)

Where does the money go? Entitlements: Discretionary spending:

Another look from CNN, 2016

G, Where does the money go? Discretionary Spending https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/ Data from Office of Management and Budget (OMB)

Where does the money come from when G>T?

Types of Government issued Debt T-Bills: mature < 1 year Treasury Notes: mature 2-10 years Bonds: Mature > 30 years US Savings Bonds

To whom is the money owed? https://www.nationalpriorities.org/budget-basics/federal-budget-101/borrowing-and-federal-debt/ Data from Office of Management and Budget (OMB)

Foreign Holders of the National Debt https://econographics.files.wordpress.com/2012/11/foreign-holders-of-u-s.jpg Data from U.S. Treasury

Growth of the National Debt and debt ceiling. http://www.cato.org/blog/default-dysfunction (interesting with the political party correlation and debt ceiling, though not in percent of GDP)

Growth of the National Debt asa percentage of GDP (St Louis Fed) http://www.theatlantic.com/business/archive/2012/11/the-long-story-of-us-debt-from-1790-to-2011-in-1-little-chart/265185/ (it’s neat how it shows historical events, such as wars and recessions, since there is a correlation between those and the deficit)

National Debt as a percentage of GDP Worldwide, 2015 http://www.economist.com/content/global_debt_clock

Short-run impact, 5 years With excess capacity, little impact

Medium run, 5 - 15 years G>T and growing Falling savings rate Baby boomers retirement means increased demand on medicare and social security Less tax revenue, as boomers no longer working Falling savings rate Boomers are drawing down on their savings in 401k and other investment plans Falling Investment rate Deficits = increased borrowing = increased interest rates. This is called Crowding Out because

Long run, More than 15 years As debt grows, more interest is owed relative to debt principle. National savings rate will fall as more money goes to pay off interest, and less towards principle.

So . . . Is running a deficit a problem? debt clock

Other insights . . . IOUSA Byte-sized IOUSA- Solutions Discussion question: Is the national debt a real problem? What solutions do you see as viable?

Foreign Holders of the National Debt http://www.davemanuel.com/2013/06/15/foreign-holdings-of-us-debt-up-30-4-billion-in-april/ (More recent but shows less countries)

National Debt as a Percentage of GDP http://visual.ly/united-states-debt-percentage-gdp-1940-2012 (I thought this was a cool graphic, more political sided, and compares presidents.)

http://dailybail.com/home/us-national-debt-infographic-which-countries-own-us.html (Ownership of American debt, domestically vs. Internationally)

Historic National Debt adjusted for inflation http://www.heritage.org/research/reports/2014/12/federal-spending-by-the-numbers-2014 (Another choice for historical national debt adjusted for inflation)