1. A Journey Down the Rabbit Hole
Government Spending
A Journey Down the Rabbit Hole

2. Budgeting At Home Timmy makes $42,000 working as a pig farmer.
Timmy spends $193,000 a year, because he only wears the highest quality fashions that he can purchase at his local TJ Maxx.
Timmy’s gross cashflow is -$151,000.
Is this a good financial strategy for Timmy?

3. Timmy’s Budget It’s terrible
As individuals or families, we shouldn’t spend more than we earn
This puts us in debt
Then we get this…

4. But… Government is different
The federal government spends much more money than it makes
No one gets too mad at us…

5. So What is the National Debt?
A lot
Like, seriously, a lot
The aggregated shortfall of our federal budgets
If the United States spends more than it earns in revenues, this is called a deficit
Each additional year of deficit adds to the debt

6. Debt Growth Debt has risen exponentially since 1940
$9 trillion in 2007; more than $17 trillion today
No sign of decreasing

7. Debt is Increasing

8. Debt Memes

9. Revenue v. Expenditures

10. Why So Much Debt? Mandatory Spending Great Investment
Economy runs on debt
Lack of political will to cut programs or raise taxes
“Kicking the can down the road”

11. But is Debt Bad? For an individual or family, yes
“The economy runs on debt”
GDP = Gross Domestic Product
GDP = C + G + I + NX
C = Consumption
G = Government Spending
I = Investment
NX = Net Exports
Hopefully, GDP increases every year

12. State-by-State GDP

13. Economic Theory
As the government attempts to keep GDP growing, they continue to pump money into the economy, increasing the Government Spending portion of GDP
This increases debt, but also prevents recession/depression
We will explore these ideas in greater detail next class.