Presidential Budget  What is the difference between the deficit and the debt?  Deficit: annual gap between what the government collects (tax revenues), and what it spends (expenses)  Debt: accumulated amount government owes from it’s history of deficits.  What are some of the problems caused by a large national debt?

“Reagan proved that deficits don’t matter.” VP Dick Cheney 2002  True or False:  Under President Obama, the federal budget deficit has been more than cut in half, from 2009 to  True  Government spending under Obama has decreased over the past 2 years.  True  The Affordable Care Act will save $143 billion over the next 10 Years for the government.  True

Problem with a large federal debt:  Slows economic growth  Less money for other programs, education, science, infrastructure.  Eventually must raise taxes or cut programs  Tax money wasted on interest payments  Tax burden on future generations

"The budget should be balanced; the treasury should be refilled; public debt should be reduced; and the arrogance of public officials should be controlled." - Cicero Other 8% Savings bonds Insurance companies 7% State, Local govern. & banks 8% Private pension funds, Mutual funds, Savings bonds 13% Foreign and International Investors China, Japan, Great Britain 23% Federal Reserve and Government Accounts 41%  To whom do we owe all this money? Who owns the Debt?  Should we institute pay as you go budgeting? 1. If you cut taxes you must reduce spending. 2. If you increase spending, raise tax revenues.

National Debt Timeline  For most of the Nation’s history, deficits were the result of either wars or recessions.  Wars necessitated major increases in military spending.  Recessions reduced Federal tax revenues from businesses and individuals.

1944Bretton Woods NH-dollar tied to price of gold. International Monetary System 1971Nixon scrapped Bretton Woods to avoid recession from cost of Vietnam War 1980Reagan cuts taxes on wealthy, increased spending on defense 1988“Read my lips, no new taxes!” GHW Bush, later would raise taxes to avoid deficits 1993Clinton –without a single Republican vote, Gore casting vote, raised taxes on wealthy and cut defense. 3 years of surplus. America would be debt free by 2012! 2000GW Bush-cuts taxes for wealthy, Medicare drug benefit for poor, 2 wars, borrows from China. Return of deficits Democrat led states increase pensions for government employees and increase number of state workers.

Discretionary: Homeland Security, HUD, Education, Justice, Agriculture, Transportation, Environment, etc. Mandatory: Veterans benefits, Salaries, Troubled Asset Relief Program, etc.

Federal Budget Balanced Budget +Limits spending +Sets good example +Eliminates waste +Limits inflation -May have to cut programs -Cause unemployment -Time of war/emergency

What to do with Social Security?  Estimates say we will begin paying more in benefits than we collect in taxes by  Without changes the trust fund will be exhausted by  Collect with penalty age 62  Me: no penalty age 66/10

The debate goes on:

Debt free nations: 1. China 2. Taiwan 3. Hong Kong 4. Singapore 5. Brunei