Deficits and Debt. The Budget Process Taxes, especially personal income taxes, provide most of the federal government’s revenue.  The federal budget.

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Presentation transcript:

Deficits and Debt

The Budget Process Taxes, especially personal income taxes, provide most of the federal government’s revenue.  The federal budget each year is an estimate of anticipated income and expenses for a certain period of time.  Our federal budget is based on a fiscal year that begins on Oct. 1 and is created by the Office of Management and Budget, which is part of the Executive Branch.  If more money was spent than collected a deficit exists.  If less money was spent than collected surplus exists.

Deficit Spending  Causes of deficit spending:  War  Recessions  Policy Decisions

National Debt  This is the total amount the government owes.  The govern borrows each year to cover the amount of the deficit. To help with the deficit the government sells securities to individuals, corporations and financial institutions.  A person that buys a savings bond is loaning money to the government for a certain period of time. There are also regular bonds, and Treasury bills.  Each year the government has a budget deficit, it borrows an additional amount, adding to what it owes. (National Debt)

What’s the Impact  The interest on the National Debt eats up a significant portion, about 10-20% of the federal budget each year.  Interest paid on the National Debt is now 10 times what the government spends on education in year.