Transcript Government Budget

U.S. Government Budget
Why can’t we balance it?
What is a Budget?
Income
Expenses
The Government Budget
Government Revenue
Taxes
Government Spending
All Gov’t Expenses
Deficit vs. Debt
• Deficit: how much more Government spends than it
receives in tax revenue over 1- year
– $649 Billion
• Debt: total amount Government owes
– $19.1 Trillion
(has borrowed)
Budget Handout
End Day #1
Balancing the Budget?
• Total Spending: $3.6 Trillion
• Total Revenue
$3.0 Trillion
--------------------------------------------• Total Deficit:
$649 Billion
• Total Debt:
$19.1 Trillion
$18.1 Trillion = GDP = C + I + G + (X-M)
Government Spending (2014)
•
•
•
•
•
•
•
•
•
Social Security
Medicare
Medicaid
Interest on Debt
Defense Spending
Homeland Security
Education
Other
Total
23.5%
14.0%
8.5%
6.3%
16.7%
1.0%
2.0%
27.0
100.0%
46% of Budget
23% of Budget
Growth of Entitlement Spending
1964
.
27%
30%
33%
.
1984
2004*
20%
33%
46%
21%
7%
13%
14%
21%
9%
Defense
Social Security
Net interest
All other spending
*Current services estimate.
Source: Budget of the United States Government, FY 2005, Office of Management and Budget.
7%
19%
Medicare & Medicaid
What are Entitlements?
Social Security, Medicare & Medicaid
Social Security
Medicare
Medicaid
Wake-Up Call Video
http://www.cbsnews.com/stories/2007/03/01/60minutes/main2528226.shtml
End Day #2
What are Entitlements?
Social Security, Medicare & Medicaid
Social Security
Medicare
Medicaid
Angry Americans
• http://www.bloomberg.com/politics/articles/
2016-03-01/the-angry-americans-trumpsanders-and-the-aftershocks-of-2008
Kicking the Can Down the Road
Cyclical vs. Structural Problems
• Cyclical economic issues are related to the business cycle & “fix
themselves” as the economy recovers
•
Example:
Unemployment during a recession goes away at the peak
• Structural economic issues need policy changes to correct
– Example: low performing public schools in cities (think Oakland, New York, etc…)
Structural economic issues are significantly more problematic than
Cyclical economic issues
2-Types of Gov’t Deficits
Cyclical deficit: Portion of deficit attributable to a slowdown in the
business cycle (during recession)
• Cyclical deficits “self regulate” or fix themselves as economy recovers
Structural deficit: occurs with the economy at full potential
output (peak of business cycle, high GDP)
• Structural deficits remain even at the peak of a business cycle
THANK
YOU!
US Demographics
• America’s population is aging
– smaller young (echoboomer) generation
– Babyboomers beginning to retire
– By 2040 1 in 4 Americans will be over 65
• Average life span has risen
– 77 years men, 81 years women
– why: advances in medical technology, nutrition, etc…
• This FACT ensures that entitlement spending will increase a
rapidly growing rate
Entitlement Spending
• Includes- Social Security, Medicare & Medicaid
– Citizens are “entitled” to benefits at 65 years of age
• Largest part of Government budget
– Consumes approximately 46% of budget in 2014!
• Projected to 60%-75% by 2040!
Interest on Gov’t debt
• The government sells bonds to pay for deficit spending
• Interest payments on bonds are 6% of budget today
– could rise to 15% by 2020
• Entitlements & interest on debt alone could reach 7590% of budget by 2040!
Entitlements Worksheet
Social Security
Medicare
Medicaid
Changing Entitlements
Social Security, Medicare & Medicaid
Social Security
Medicare
60 minutes video 2009
End Day #3
Flawed Incentives in Medicare
Entitlement Reform?
.
Growing Entitlement Spending
Social Security
Problems increase as the
Babyboomers Retire!
spending
Medicare
spending
Medicare problem
5 times bigger!
USA spends 16% of GDP
11% of GDP for other countries
Balancing the Budget?
“The only real question” is whether adjustments to taxes and spending
will come from a “careful and deliberative process” or from a “rapid
and painful response to a looming or actual fiscal crisis,”
Ben Bernanke
2010
Social Security Disablility
•
https://www.youtube.com/watch?v=uwMxOsD2Dhg