Presentation on theme: "The Debt Crisis. Key things to know What is the national debt? the sum of all federal bills, notes and bonds that have been issued by the Treasury and."— Presentation transcript:
Key things to know What is the national debt? the sum of all federal bills, notes and bonds that have been issued by the Treasury and not yet redeemed-what we owe What is the difference between the debt and deficit? Debt is the cumulative total owed, deficit is the difference between revenues collected (taxes) and expenditures What is intra-governmental debt? Debt that the government owes to itself-mainly the Social Security trust fund
Key things to know continued What is the total amount owed? $14.6 trillion or $14,600,000,000,000 Who do we owe it to? Social Security trust fund $4.7 trillion Other countries, individuals, retirement funds, businesses When do we have to pay it back? We pay it off over time and pay interest often borrowing and paying at the same time
So what’s the problem? The debt is currently about equal to our annual GDP of $15 trillion, but it is rising faster than economic growth. As the debt rises, more of our revenue goes to pay interest on the debt. Current rate of spending, especially because of entitlement programs is not sustainable.
Cyclical debt: due to the downturn in the business cycle Lower tax revenues Increased spending to stimulate the economy Structural debt Rising costs of Medicare and Medicaid due to increased health care costs and aging population Rising cost of Social Security as baby boomers retire
Chart below does not include intra-governmental debt
How did we get here? Bigger government New programs, new priorities, Homeland Security Afghanistan and Iraq Wars fought on credit Tax Cuts during Bush years extended by Obama Demographic time-bomb Medicare and Social Security Great Recession
What are the options? Reduce spending Increase revenues (taxes) Grow the economy Some combination of the above