The national debt is 19.7 trillion http://www.usdebtclock.org/ http://www.visualeconomics.com/gdp-vs-national-debt-by-country/ http://www.youtube.com/watch?v=qSHI9PDh6GM (video what 16 trillion looks like)

Federal Government Fiscal Year 2010

How the Government Spends Money

What is a government budget? A financial plan that summarizes expected income and expenses for the federal government for an upcoming fiscal year When expected revenue equals expected expenses = balanced budget. When revenue exceeds expenses = budget surplus. When expenses exceed revenues = budget deficit

The National Debt For the past 30 years a government deficit has been the norm During the 1990’s (the Clinton years) – economic expansion produced a consecutive years of government surplus. The national debt is the cumulative sum of all federal government borrowing used to finance annual deficits.

Is the national debt as large as it seems? 16.7 Trillion dollars is a huge sum of money. But, our GDP is 15.8 trillion. So it is important to look at the National Debt as a percentage of GDP. We produce more than we owe. http://www.youtube.com/watch?v=R0LOXUEsBlI (What if the Federal Gov debt was your debt)

There are 2 types of National Debt Debt Held by the Public The Debt Held by the Public is all federal debt held by individuals, corporations, state or local governments, foreign governments, and other entities outside the United States Government. Types of securities held by the public include, but are not limited to, Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series securities. Intragovernmental Holdings – Gross Debts Intragovernmental Holdings are Government Account Series securities held by governmental agencies – IOUS, Government trust funds, revolving funds, and special funds; - Gross Debt is not as much of a problem – it is like one part of the government owing another part – but it still shows up on the deficit

Debate about the Debt Ceiling Congress has to agree to raise the debt ceiling – and they did so in Feb of 2011. – to 14.3 trillion. Other deadlines approached – May, Aug 2, and many were opposed to raising it again. If they had not raised it again, the gov. has to come up with $738 billion to pay its bills. There was a heated debate and crisis that ended in a compromise on both sides and calls for reducing the deficit over a 10 year plan. We reach a debt ceiling limit often…last month is was raised again to 17 trillion

The Debt Ceiling http://www.nytimes.com/interactive/2011/09/25/us/obamas-plan-to-reduce-the-deficit.html?ref=nationaldebtus http://www.nytimes.com/2012/01/27/us/politics/senate-approves-1-2-trillion-debt-limit-rise.html?_r=1&scp=3&sq=debt%20limit%20&st=cse

Should the government be debt free? Debt is a bad thing, right? For individuals, yes, but the federal government is different. It controls the money supply and can use the tools of monetary policy to increase the money supply. (Keynesian Economics) It also can finance its debt by selling treasury bonds (magic checkbook) – individuals can’t do that.

p. 215 – JA Economics Book Read the conflicting viewpoints. What arguments are given to defend the national debt? What arguments are given as criticism against the national debt? What do you think?