AND THEY CREATE DEBT 40 cents of every dollar spent is created by debt The federal government has to raise the “debt ceiling” in order to borrow money to for items already approved by Congress The “debt ceiling” is the amount of money the federal government can have as debt – currently that is $16.7 trillion
WHAT WILL HAPPEN IF CONGRESS DOES NOT RAISE THE DEBT CEILING?
DEBT CEILING VIDEOS Investopedia Investopedia The Debt Ceiling Explained The Debt Ceiling Explained
IF THE DEBT CEILING IS NOT RAISED: The government cannot pay its bills Social Security checks, Medicare, Medicaid, etc. Bond holders do not get paid This is us! And China Banks could become insolvent Dollar could lose value Interest rates could rise Stock market could fall
WHAT IS THE NATIONAL DEBT? Amount owed by the federal government to all sources as a result of borrowing Amount owed by the federal government to all sources as a result of borrowing Approximately $16.9 trillion 4 inch stack of $1,000 bills = millionaire 1 trillion = stack would be 67 miles high! Everybody has a share $53,000 per person $148,000 per taxpayer
SO HOW MUCH DO THEY SPEND? 2010 The government will spend 3.5 trillion The government will take in 2.3 trillion What is the difference? The difference between how much Congress spends and how much they take in (in one year) is called the deficit. The government will add 1.2 trillion in deficit spending to the national debt
NO REALLY, HOW DO THEY SPEND ALL THAT MONEY? Mandatory (uncontrollable) spending is required by LAW: Examples: Interest payments on the national debt Entitlements (Social Security and Medicare) About 60% of the overall budget Discretionary (controllable) spending is decided upon yearly by Congress and the President Examples: Defense (20%) Everything else: Education, NASA, Foreign Aid, Science, Research, etc. (19- 20%)
IS THE BUDGET MISMANAGED? 60 Minutes Disability Spending 60 Minutes Disability Spending On the back of your paper, answer this question: What more could be done to ensure there is less fraud in government spending?
HERE’S ANOTHER WAY TO LOOK AT IT: This graphic is just discretionary spending
THE BOTTOM LINE: The president proposes a budget for discretionary spending only (39-40% of the total budget) every year. Congress must pass the proposal and the President must sign it for the budget to go into effect 60% of the budget is authorized by permanent laws, and not affected by the President or Congress!
WHAT IS THE “SEQUESTER”? $85 billion in mandated spending cuts Only for discretionary spending (40% of the budget) 2.4% of total spending 6% of total discretionary spending
YOUR BUDGET ESTIMATE http://congress.indiana.edu/learn_about/launcher.htm
THE ACTUAL BUDGET http://congress.indiana.edu/learn_about/launcher.htm http://congress.indiana.edu/learn_about/launcher.htm
SO WHAT DOES THIS MEAN? As my cabinet, you must make the best use of your budget A portion of the red slice (19%) is yours Unless you are the Department of Defense You are responsible to the American people for your agency's fiscal management You must prepare a proposal outlining your most pressing needs