1. Deficits and The Debt: An example. Year Taxes Spending Deficit/Surplus Debt 1 25M 25M 0 0 2 27M 30M -3M 3M 3 30M 35M -5M 8M 4 33M 32M 1M 7M

2. Some Numbers for the US FY2010 October 1, 2009 through September 30, 2010. Receipts = $2,165 billion Outlays = $3,721 billion Deficit = $1,556 billion Source: Office of Management and Budget http://www.whitehouse.gov/omb/

3. As a percent of GDP FY2010 Receipts = 14.8% Outlays =25.4% Deficit = 10.6% Note: GDP = $14, 624 billion

4. US Debt http://www.treasurydirect.gov/NP/BPDLogin? application=np http://www.treasurydirect.gov/NP/BPDLogin? application=np $9,059 billion, which is about 62% of GDP.

5. The U.S. government debt 5 5 The debt of the U.S. federal government, expressed here as a percentage of GDP, has varied throughout history. Wartime spending is typically associated with substantial increases in government debt.

6. Large increase in government debt – Cannot be explained by war – Around 1980 – President Ronald Reagan, 1981 Committed to smaller government and lower taxes Cutting government spending - more difficult politically than cutting taxes – Period of large budget deficits – Government debt: 26% of GDP in 1980 to 50% of GDP in 1993 The history of U.S. government debt 6

7. President Bill Clinton, 1993 – Major goal - deficit reduction – And Republicans took control of Congress, 1995 Deficit reduction – Substantially reduced the size of the government budget deficit – Eventually: surplus – By the late 1990s - debt-GDP ratio - declining The history of U.S. government debt 7

8. President George W. Bush – Debt-GDP ratio - started rising again – Budget deficit Several major tax cuts 2001 recession - decreased tax revenue and increased government spending War on terrorism - increases in government spending The history of U.S. government debt 8