Click the link below to see the up to the second national debt. http://www.usdebtclock.org/

How large is $1 trillion? Source: http://www.globalresearch.ca/what-does-one-trillion-dollars-look-like/12754 A packet of one hundred $100 bills is less than ½ inches thick and contains $10,000.

How large is $1 trillion? Source: http://www.globalresearch.ca/what-does-one-trillion-dollars-look-like/12754 This pile is $1 million (100 packets of $10,000).

How large is $1 trillion? Source: http://www.globalresearch.ca/what-does-one-trillion-dollars-look-like/12754 $100 million dollars fits on a standard pallet.

How large is $1 trillion? $1 Billion Dollars Source: http://www.globalresearch.ca/what-does-one-trillion-dollars-look-like/12754 $1 Billion Dollars

$1 TRILLION Dollars! (notice that the pallets are double stacked) How large is $1 trillion? Source: http://www.globalresearch.ca/what-does-one-trillion-dollars-look-like/12754 $1 TRILLION Dollars! (notice that the pallets are double stacked)

Deficit vs. Debt Essential Questions: What is fiscal policy? How is the national deficit related to, yet different from, the national debt?

Fiscal Policy – government taxation and spending policies

Fiscal Policy – government taxation and spending policies Budget – estimate of the amount of money that will probably be received and spent for various purposes in a given time (usually a fiscal year) by a government, business, family, etc. Fiscal Year – 12-month financial planning period that may or may not coincide with a calendar year (the federal government’s fiscal year runs from October 1 to September 30)

Establishing the Federal Budget Executive Formulation Fiscal Policy – government taxation and spending policies Budget – estimate of the amount of money that will probably be received and spent for various purposes in a given time (usually a fiscal year) by a government, business, family, etc. Fiscal Year – 12-month financial planning period that may or may not coincide with a calendar year (the federal government’s fiscal year runs from October 1 to September 30) Establishing the Federal Budget Executive Formulation The president works with the OMB to create the budget for the upcoming fiscal year Congressional Action The House and Senate must both approve the same budget bill by a majority vote Final Approval The president may veto the budget if it has been changed too much. If the president signs the budget, it goes into effect October 1 and ends September 30

Establishing the Federal Budget Executive Formulation Fiscal Policy – government taxation and spending policies Budget – estimate of the amount of money that will probably be received and spent for various purposes in a given time (usually a fiscal year) by a government, business, family, etc. Fiscal Year – 12-month financial planning period that may or may not coincide with a calendar year (the federal government’s fiscal year runs from October 1 to September 30) Establishing the Federal Budget Executive Formulation The president works with the OMB to create the budget for the upcoming fiscal year Congressional Action The House and Senate must both approve the same budget bill by a majority vote Final Approval The president may veto the budget if it has been changed too much. If the president signs the budget, it goes into effect October 1 and ends September 30 Balanced Budget – annual budget in which expenditures and revenue are equal Budget Deficit – annual budget in which expenditures exceed revenue Budget Surplus – annual budget in which revenue exceeds expenditures

What is the difference between the federal deficit and the federal debt?

What is the difference between the federal deficit and the federal debt? The federal deficit is the amount of money that is spent in excess of the revenue collected in one fiscal year. Federal Debt

What is the difference between the federal deficit and the federal debt? The federal deficit is the amount of money that is spent in excess of the revenue collected in one fiscal year. Federal Debt The federal debt is the total amount borrowed from investors to finance the government’s deficit spending. Debt is the result of deficit spending.

The Federal Deficit

The Federal Debt

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Negative Impact of the Debt Interest payments make up a growing expense of the federal government. This could force the government to raise taxes, reduce spending on necessary programs, or both. Making large interest payments results in less money for other things (opportunity cost) The “crowding-out effect” - The federal government competes with the private sector for scarce resources. This drives up interest rates as banks and corporations must offer higher rates to borrow money. A large debt might limit our ability to use tax cuts or increases in spending to stimulate the economy during a future recession.

Circle the recommendations by the U. S Circle the recommendations by the U.S. Deficit Commission would have decreased spending. Box-in the recommendations that would have increased revenue.

Summarizer: Word Splash Use each of the words below in sentence and paragraph form. Underline each word as you use it. Fiscal Policy Borrow Deficit Debt Crowding Out Effect National Budget

America’s fiscal policy consists of our taxation and spending policies America’s fiscal policy consists of our taxation and spending policies. When we have a national budget in which expenditures exceed tax revenue we will have a deficit for that fiscal year. In order to finance the deficit, the federal government must borrow money by issuing and selling bonds. Each new deficit adds to our national debt. One negative consequence of this is the crowding out effect. When the government attempts to borrow, they must compete with private businesses who also sell bonds. The competition for scarce resources could lead to an increase in interest rates, which could have a negative impact on the economy.