1. U.S. Government Budget
Why can’t we balance it?

2. The Government Budget Government Revenue Government Spending
All Gov’t Expenses
Taxes

3. 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)

4. 2016 Budget Summary Spending: $3.5 Trillion dollars
Revenue $2.99 Trillion (from taxes)
Deficit: $501 Billion
Debt: $19.9 Trillion

5. 2017 Budget Summary Spending: $3.65 Trillion dollars
Revenue $3.21 Trillion (from taxes)
Deficit: $440 Billion
Debt: $19.9 Trillion

6. 2018 Budget Summary Spending: $4.094 Trillion dollars
Revenue $3.65 Trillion (from taxes)
Deficit: $779 Billion
Debt: $22.02 Trillion

7. 2019 Budget Summary Spending: $4.407 Trillion dollars
Revenue $3.42 Trillion (from taxes)
Deficit: $985 Billion
Debt: $????? Trillion

8. Government Spending Social Security 36% Medicare/Medicaid 27%
Interest on Debt 7%
Defense Spending 16%
Other %
70% of Budget

9. Government Spending

10. US Demographics By 2040 1 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!

11. Entitlement Spending Includes- Social Security, Medicare & Medicaid
Citizens are “entitled” to benefits at 65 years of age
Largest part of Government budget
Consumes approximately 49% of budget in 2016!
Projected to 60%-70% by 2040!

12. 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

13. Interest on debt
The government sells bonds to pay for deficit spending
Interest payments on bonds are 8% of budget today
Will rise to 15% by 2020
Entitlements & interest on debt could reach 75-90% of budget by 2040!

14. 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

15. Growing National Debt
Should we be worried?

16. Federal Deficit
Leads to a larger
Federal Debt
$15.4 Trillion

17. Deficit & Debt relative to GDP Do both have an equal debt burden?
“It’s not only what you owe”
Joe & Bob
Joe
Bob
Owns $800,000
home
Housing
Rents apartment
Investments
$200,000
in stocks
none
Do both have an equal debt burden?
Rental
properties
One
none
$300,000
Debt
$300,000

18. Deficit & Debt relative to GDP
Current Deficit = $ 501 Billion 2016
Current Debt = $19.9 Trillion
Current GDP = $16.7 Trillion
Debt as % of GDP =104.7% of GDP

19. History of DEBT as % of GDP
1) National debt peaked: % of GDP (WWII)
2) Fell to pre-war levels: %
3) Rose to %
4) %
5) %
6) %

20. History of DEBT as % of GDP

21. U.S. Debt in Comparison European Union (EU) debt limit of 60%
France % of GDP
China 22.4% of GDP
Italy % of GDP
India % of GDP
Greece % of GDP
Germany 88% of GDP
Japan: % of GDP
(1970: 10% of GDP)

22. Analyzing Deficits Summary
Entitlements make up an ever-increasing percentage of the Federal Budget
Debt & Deficit should be viewed as % of GDP
This allows you to compare past deficits and to compare with other countries’ deficits
The current Federal Deficit is a structural deficit
Just cutting Discretionary Spending will not be enough to fix the problem
Entitlement spending must be addressed to correct it