Presentation on theme: "Does the U.S really have a debt crisis? wgbh/pages/frontlin e/tentrillion/view/"— Presentation transcript:
Does the U.S really have a debt crisis? http://www.pbs.org/ wgbh/pages/frontlin e/tentrillion/view/
Introduction Federal budget one of most contentious political issues Passed by congress Budget battle was for years a “silent war” BUT skyrocketing national debt makes it more public and partisan Current national debt: 16 Trillion Dollars
What is National Debt? Total sum of money borrowed by the gov’t from U.S. population, lending institutions, foreign banks & government's own funding- like social security 11.5 trillion owned by public or treasury securities held by individuals, corporations, federal reserve & local, state, fed government. Rest is from bonds held by social security, medicare & other government funds.
What is a Budget Deficit? Occur when the government spends more than it takes in. Last few years have seen annual deficits topping $1 trillion. Due to tax cuts, military spending in Iraq & Afghanistan and Obama administration's economic stimulus
What is a Budget Surplus? Occur when the government takes in more than it spends. There have only been 5 years of surplus 1969 1998 1999 2000 2001
Timeline of Debt U.S has a long history of debt Spiked due to vast military spending of WWII Remained relatively constant throughout the 70s Reagan administrate saw rising debt due to large tax cuts and increases in Cold War defense spending
Timeline of Debt Debt up to near 50% of GDP by early 90s Clinton administration saw reduction in debt and biggest government surplus in history. Why? Reductions in defense spending Tax increases Congress led budget control measures A booming economy
Timeline of Debt Bush administration saw large increases in debt throughout the 2000s due to: Sweeping tax cuts Entitlement program extensions War in Iraq War in Afghanistan Global financial crisis and economic recession which followed
Timeline of Debt Obama entered office in midst of recession. Passed stimulus plan of spending increases and tax cuts to kick start economy which added $790 billion to debt Despite drawdown of wars, debt as percentage of GDP increased from 36% in 2007 to 67% in 2011
Timeline of Debt 2011 elections saw Republicans take control of House of Representatives behind a platform of aggressive debt reduction without tax increases Battles between fiscally conservative Repubs & President, who believes next decade will see debt at sustainable levels, have led to several high profile economic showdowns in recent years Yearly deficit for 2013 projects to be smallest since 2008
Best Path Forward: Competing Perspectives Republicans in congress generally favor major spending cuts without increasing revenues. Democrats typically believe new revenues (usually through taxes) are necessary along with any spending cuts. Areas of focus for spending cuts also differ. For example- to cut military spending or Medicare?
Best Path Forward: Economist Perspectives Some economists argue other issues are more pressing than the debt Since most of debt is money Americans owe to selves- more spending would be best way to improve weak economy Others favor more supply side approach Concerned that if the debt continues growing it could hurt the governments ability to pay for essential needs. Money owed to foreign countries could also harm our relations with these nations.
The U.S National Debt is Not a Crisis PRO Nat’ l debt-mostly money Americans owe to selves Americans need more gov’t spending to aid sluggish employment Debt’s nothing new- since founding Slashing gov’t spending at time when gov’t is recovering from economic crisis can throw U.S. back into recession CON Nat’l debt limits gov’t ability to pay for what it wants/needs Without action, interest payments could be $900 billion by 2022 Foreign gov’t/investors hold half of debt- risking leverage European crisis demonstrates speed that fiscal crises can develop
Reducing Debt Must Involve Tax Increases PRO Spending cuts in a weak economy could lead to higher unemployment & back to a recession Tax increase needed as Americas do not want cuts to entitlement programs like Medicare or social security Aging baby boomers place demand for increase revenue to fund entitlement programs Only fair to ask all- especially wealthy- to contribute their fair share CON Government has spending problem, not revenue problem Tax revenue expected to be at record high (not adjusted for inflation) but debt still an issue Lowering taxes will increase economic growth, leading to more gov. revenue Too much spending created the mess, so spending cuts should be focus