1. Government Debt

2. The total amount owed by the federal government National Debt

3. Government spends less than it takes in Budget Surplus

4. Government spends more than it takes in Budget Deficit

5. You serve as an Economic Advisor to the President. The new President of the United States has been elected on the promise of fiscal responsibility. He has promised the voters he will not raise taxes, and he will not reduce Social Security or Medicare. He has promised interest groups that he will not reduce Commerce Department spending. By law he cannot reduce the net interest paid on the debt. The President's budget is projected to leave the country with a $230 billion surplus, and he promises not to allow a deficit, unless the U.S. faces a recession or war. National Debt Activity – Background Information

6. Suddenly, the United States is subject to military attack -- a turn of events not anticipated in the current budget. At the same time, a lingering recession reduces the government's tax revenues and forces the government to increase its spending on unemployment benefits, welfare, housing assistance, food stamps, and other need-based programs. Because of the increased spending and reduced revenues, the nation falls into a projected deficit of nearly $429 billion. National Debt Activity – Update

7. Then Congress passes legislation to increase military spending by 20 percent, to pay for increased security within the U.S. and to pay for a prolonged military response against the attacking country and other potential threats. The President signs this bill into law, increasing the projected deficit to nearly $530 billion. National Debt Activity – Update

8. The President is committed to keeping his campaign promises, in order to maintain support for his reelection. He must protect the programs he promised to protect, and he cannot raise taxes, so he must cut spending on other programs to stay within his new guideline to keep the deficit below $450 billion. The President turns to you, his trusted economic advisor, for help. National Debt Activity – Update

9. Open the Document on my website to complete this activity National Debt Activity - Instructions