1. Deficits, Surpluses, and the National Debt

2. From Deficits to Debt
Because of deficit spending, the national debt has increased dramatically.
Typically, deficit spending is a result of the government forced to spend more than it collects because of unexpected developments causing a drop in revenues or a rise in expenditures.

4. From Deficits to Debt
When the federal government runs a deficit, it must finance the revenue shortage by selling U.S. Treasury notes and other securities to the public.
The national debt is equal to all outstanding federal notes, bonds, and other debt obligations.
A balanced budget does not change the national debt.

5. Two alternative views of the total national debt
From Deficits to Debt
A portion of the national debt is money the government owes itself as in trust funds.
Two alternative views of the total national debt
Debt as a percentage of GDP
National debt computed on a per capita basis

7. Differences between public and private debt
From Deficits to Debt
Differences between public and private debt
Country can never go bankrupt—most of debt is owed to itself.
Repayment—new bonds are issued to pay off old bonds.
Little purchasing power is given up.

8. Impact of the National Debt
The national debt affects the distribution of income and transfers purchasing power from the private to the public sector.
The national debt, although mostly owed to ourselves, still affects the economy by
Transferring purchasing power from private sector to public sector
Reducing economic incentives
Causing a crowding-out effect
Redistributing income

9. Reducing the Deficits and Debt
Congress has tried a number of measures to reduce deficits and the national debt.
Concern over deficit spending led to attempts to control it.
Congress mandated a balanced budget.
“Pay-as-you-go” provision
Line-item veto and spending caps
Raising revenues
Reduced spending—difficult because of entitlements

10. Reducing the Deficits and Debt
Action to reduce budget deficits and the national debt will depend on the willpower of Congress to make unpopular and difficult choices.