Deficit vs. Debt Deficit: how much more Government spends than it receives in tax revenue over 1- year Debt: total amount Government owes (has borrowed.

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Presentation transcript:

Deficit vs. Debt Deficit: how much more Government spends than it receives in tax revenue over 1- year Debt: total amount Government owes (has borrowed OVER TIME)

Entitlement Spending Definition of Entitlement: a guarantee of access to benefits because of rights, or by agreement through lawlaw Includes- Social Security, Medicare & Medicaid

Three Largest Entitlement Programs Medicare: --Health care for those over age 65 Medicaid: --Health care for the poor Social Security: --pension money for those who retire --unemployment insurance; disability

Government Spending Social Security 19.0% Medicare 12.8% Medicaid 7.7% Interest on Debt 6.5% Defense Spending14.3% Homeland Security 1.1% Education 1.3% Other 37.3% Total 100.0% 41% of Budget

US Demographics By in 4 Americans will be over 65 This FACT guarantees that entitlement spending will increase It is projected to increase to over 60% of the federal budget by 2040!

Federal Budget Summary Projected Deficit for ‘14: $628 Billion dollars Total Debt: $17.5 Trillion dollars /

How does the US borrow $ to pay for deficit spending? U.S. Treasury Department sells “Treasuries” —Treasury bills,Treasury notes, Treasury bonds Treasuries = a very safe investment Example: I buy a $1000 five-year Treasury note with a 4% annual interest rate --every 6 months I receive an interest payment: ($1000 X 4%) / 2 = $20 --at the end of five years the U.S. Treasury pays me back my $1000

Growth of Entitlement Spending *Current services estimate. Source: Budget of the United States Government, FY 2005, Office of Management and Budget. Defense Social Security Net interest Medicare & Medicaid All other spending * 9% 19%..

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