Transcript The Debt Crisis

The Debt Crisis
Key things to know

What is the national debt?


What is the difference between the debt and
deficit?


the sum of all federal bills, notes and bonds that
have been issued by the Treasury and not yet
redeemed-what we owe
Debt is the cumulative total owed, deficit is the
difference between revenues collected (taxes) and
expenditures
What is intra-governmental debt?

Debt that the government owes to itself-mainly
the Social Security trust fund
Key things to know continued

What is the total amount owed?


Who do we owe it to?



$14.6 trillion or $14,600,000,000,000
Social Security trust fund $4.7 trillion
Other countries, individuals, retirement funds,
businesses
When do we have to pay it back?

We pay it off over time and pay interest often
borrowing and paying at the same time
So what’s the problem?


The debt is currently about equal to our
annual GDP of $15 trillion, but it is
rising faster than economic growth. As
the debt rises, more of our revenue
goes to pay interest on the debt.
Current rate of spending, especially
because of entitlement programs is not
sustainable.

Cyclical debt: due to the downturn in the
business cycle



Lower tax revenues
Increased spending to stimulate the economy
Structural debt


Rising costs of Medicare and Medicaid due to
increased health care costs and aging
population
Rising cost of Social Security as baby boomers
retire
Chart below does not include
intra-governmental debt
How do we compare to other
countries?
What do we spend money on?

http://www.whitehouse.gov/omb/budge
t
Ratio of Current Budget
How did we get here?

Bigger government




Afghanistan and Iraq Wars fought on
credit
Tax Cuts during Bush years extended by
Obama
Demographic time-bomb


New programs, new priorities, Homeland
Security
Medicare and Social Security
Great Recession
What are the options?




Reduce spending
Increase revenues (taxes)
Grow the economy
Some combination of the above