Consider: What is the biggest fiscal challenge facing our country?

The Last Word: #6 for tomorrow, 7-8 for Thurs; MC Test Friday

Economic Policy

AP Government and PoliticsChapter 17

FIGURE 17.1: How Does the Federal Government Raise and Spend Money?

17.2

Economic Slowdown of 2008$168 billion stimulus package$700 billion financial crisis bailout package (Emergency Economic Stabilization Act)

Troubled Assets Relief Program (TARP)American Recovery and Reinvestment Act (ARRA)

17.2

National Debt Effect of Bush tax cut, wars in Iraq and Afghanistan, bailout bills

Current number: about $18.5 trillion

Debt Ceiling Similar to a credit card limit Congress must vote to spend above it

Budget Control Act of 2011 Authorized a series of automatic debt ceiling increases, but:

Triggered automatic spending cuts in 2013 – “sequestration”

17.2

The United States' GDP was estimated to be $17.701 trillion as of Q4 2014.

If our current public debt is about $18.5 trillion, we are over 100%.

Took place from October 1st to 16th, 2013 Cause:

Inability of Congress and the president to agree on a “continuing resolution” to keep funding the government

Main sticking point: (de)funding Obamacare, spending cuts

Approx. 800,000 federal employees were furloughed Major/important functions of government (air traffic

control) remained in operation On October 16th, a continuing resolution was agreed

on to fund the gov. until Jan 15th, 2014 Next bill funded the government through Sept. 30th, 2014

The U.S. Treasury is estimated to hit the debt ceiling in August of 2015. It needs to be raised in order to prevent the

U.S. from defaulting on its existing debts. The new fiscal year begins October 1st.

Congress must have approved the annual 12 spending bills or have in place a stopgap funding bill to keep the government open, OR…

Unpopular, across-the-board cuts to defense and domestic programs kick in.

This is the “cliff”…

Allow time to run out. Trigger automatic spending cuts and hope for the best.

Increase the debt ceiling. Some or all of the spending cuts and tax increases would be canceled. This would add to the deficit and America’s debt would grow.

 A “middle of the road” approach could be used, in which budget issues are addressed, but there is a smaller impact on growth.