Presidential BudgetPresidential Budget What is the difference between the deficit and

the debt? Deficit: annual gap between what the

government collects (tax revenues), and what it spends (expenses)

Debt: accumulated amount government owes from it’s history of deficits.

What are some of the problems caused by a large national debt?

“Reagan proved that deficits don’t matter.”

VP Dick Cheney 2002

“Reagan proved that deficits don’t matter.”

VP Dick Cheney 2002

True or False: Under President Obama, the federal budget deficit has been more than cut in

half, from 2009 to 2013. True Government spending under Obama has decreased over the past 2 years. True The Affordable Care Act will save $143 billion over the next 10 Years for the

government. True

Problem with a large federal debt:

Problem with a large federal debt:

Slows economic growthLess money for other programs, education,

science, infrastructure.Eventually must raise taxes or cut programsTax money wasted on interest paymentsTax burden on future generations

"The budget should be balanced; the treasury should be refilled; public debt should be reduced; and the arrogance

of public officials should be controlled." -Cicero

"The budget should be balanced; the treasury should be refilled; public debt should be reduced; and the arrogance

of public officials should be controlled." -Cicero

Other 8% Savings bonds

Insurance companies7%

State, Local govern.& banks

8%Private pension funds,

Mutual funds, Savings bonds13%

Foreign and International Investors China, Japan, Great Britain

23%Federal Reserve and Government Accounts

41%

To whom do we owe all this money? Who owns the Debt?

Should we institute pay as you go budgeting?

1. If you cut taxes you must reduce spending.

2. If you increase spending, raise tax revenues.

National Debt TimelineNational Debt Timeline

For most of the Nation’s history, deficits were the result of either wars or recessions.

Wars necessitated major increases in military spending.

Recessions reduced Federal tax revenues from businesses and individuals.

1944 Bretton Woods NH-dollar tied to price of gold. International Monetary System

1971 Nixon scrapped Bretton Woods to avoid recession from cost of Vietnam War

1980 Reagan cuts taxes on wealthy, increased spending on defense

1988 “Read my lips, no new taxes!” GHW Bush, later would raise taxes to avoid deficits

1993 Clinton –without a single Republican vote, Gore casting vote, raised taxes on wealthy and cut defense. 3 years of surplus. America would be debt free by 2012!

2000 GW Bush-cuts taxes for wealthy, Medicare drug benefit for poor, 2 wars, borrows from China. Return of deficits.

1990-2010 Democrat led states increase pensions for government employees and increase number of state workers.

Medicare &MedicaidSocial Security

Defense

Discretionary

Mandatory

Interest

23

20

20

19

12

6

Discretionary: Homeland Security, HUD, Education, Justice, Agriculture, Transportation, Environment, etc.

Mandatory: Veterans benefits, Salaries, Troubled Asset Relief Program, etc.

Federal BudgetFederal BudgetBalanced Budget+Limits spending+Sets good example+Eliminates waste+Limits inflation

-May have to cut programs-Cause unemployment-Time of war/emergency

What to do with Social Security?

What to do with Social Security?

Estimates say we will begin paying more in benefits than we collect in taxes by 2016.

Without changes the trust fund will be exhausted by 2037.

Collect with penalty age 62Me: no penalty age 66/10

The debate goes on:The debate goes on:

Debt free nations:

1. China

2. Taiwan

3. Hong Kong

4. Singapore

5. Brunei