Government Spending Deficits, Surpluses, and The National Debt

Government SpendingGovernment Spending

Deficits, Surpluses, and The Deficits, Surpluses, and The National DebtNational Debt

Tomorrow’s TestTomorrow’s Test

GDP (included/not included)GDP (included/not included)Real GDP & Economic GrowthReal GDP & Economic GrowthAggregate Supply & Aggregate Demand Aggregate Supply & Aggregate Demand (shifters)(shifters)Inflation (CPI, GDP deflator, calculating)Inflation (CPI, GDP deflator, calculating)Unemployment (Calculate,Types)Unemployment (Calculate,Types)Fed Structure/RolesFed Structure/RolesMonetary PolicyMonetary Policy

StudyStudy

The GDP Notes HandoutThe GDP Notes Handout

The Unemployment Types Notes HandoutThe Unemployment Types Notes Handout

Written NotesWritten Notes

Fed/Monetary Policy Notes HandoutFed/Monetary Policy Notes Handout

Government Spending in Perspective

Total gov’t spending was $6.5 trillion in 2009—about $21,000 per person.

Government Spending in Perspective

Total Federal and Combined State and Local Spending per Household, 1965–2007

Federal Government Spending Federal Government Spending Categories Categories

44thth-Income Security-Income Security

55thth-Health-Health

66thth-Net Interest-Net Interest

The biggest categories of federal spending:The biggest categories of federal spending:

11stst-National Defense-National Defense

22ndnd-Social Security-Social Security

33rdrd-Medicare-Medicare

What the What the Federal Federal

Government Government Spends it’s Spends it’s Money OnMoney On

I. From the Deficit to the DebtI. From the Deficit to the Debt

DeficitDeficit- expenditures > revenues - expenditures > revenues in 1 yrin 1 yr..

SurplusSurplus- revenues > expenditures - revenues > expenditures in 1 yrin 1 yr..

Federal debtFederal debt- - total owedtotal owed

National DebtNational Debt

Dice GameDice Game

1 roll is for government expenditures.1 roll is for government expenditures.

1 roll is for government revenue (taxes).1 roll is for government revenue (taxes).

5 rounds (10 rolls)5 rounds (10 rolls)

Keep a tally:Keep a tally:– Each year’s deficit/surplusEach year’s deficit/surplus– Total debt accumulatedTotal debt accumulated

Deficits/SurplusesDeficits/Surpluses

Debt ClockDebt Clock

U.S. Treasury Web SiteU.S. Treasury Web Site

I. From the Deficit to the Debt - I. From the Deficit to the Debt - ContinuedContinued

When there’s a deficit, gov’t can sell bonds When there’s a deficit, gov’t can sell bonds (borrow)(borrow)

II. Impact of the National DebtII. Impact of the National Debt

2 ways it hurts economy:2 ways it hurts economy:– More debt = more interest. More debt = more interest. – When When gov’t borrows, interest rates risegov’t borrows, interest rates rise..

II. Impact of the National Debt -II. Impact of the National Debt -ContinuedContinued

1/2 of debt is owed to the Fed.1/2 of debt is owed to the Fed.

II. Impact of the National Debt -II. Impact of the National Debt -ContinuedContinued

China, Japan, UK = hold most debt.China, Japan, UK = hold most debt.

II. Impact of the National DebtII. Impact of the National Debt

Social Security & Medicare spending is growing.

II. Impact of the National Debt -II. Impact of the National Debt -

1. What is the term for when 1. What is the term for when revenues exceed expenditures over revenues exceed expenditures over

the course of 1 year? the course of 1 year?

A) DeficitA) Deficit

B) SurplusB) Surplus

C) DebtC) Debt

2. The U.S. government owes over 2. The U.S. government owes over $11 trillion total. What is the term $11 trillion total. What is the term

for this?for this?

A) the deficitA) the deficit

B) the surplusB) the surplus

C) the debtC) the debt

HealthcareHealthcare

The IssuesThe Issues

I. The IssuesI. The Issues

Health care spending is rising faster than Health care spending is rising faster than inflation and economic growth.inflation and economic growth.

The leading cause of personal The leading cause of personal bankruptcy in U.S. is medical debt.bankruptcy in U.S. is medical debt.

Health care in U.S. costs more per Health care in U.S. costs more per person than any other nation on earth.person than any other nation on earth.

U.S. is the only wealthy, industrialized U.S. is the only wealthy, industrialized nation that doesn’t have universal nation that doesn’t have universal coverage.coverage.

I. The IssuesI. The Issues

In ‘07 15% of U.S. population (45.7 In ‘07 15% of U.S. population (45.7 million people) did not have health care.million people) did not have health care.

We spend more for our health care but We spend more for our health care but get less.get less.

http://www.cnn.com/interactive/2009/08/hehttp://www.cnn.com/interactive/2009/08/health/map.health.global/index.htmlalth/map.health.global/index.html

II. The CausesII. The Causes

Diet Diet – ObesityObesity– Late-Onset DiabetesLate-Onset Diabetes– Estimated 70% of increases in costs are lifestyle Estimated 70% of increases in costs are lifestyle

related.related.

Prescription drugs cost more in U.S. than in Prescription drugs cost more in U.S. than in other countries.other countries.– Gov’t Health Care = MonopsonyGov’t Health Care = Monopsony– Intellectual Property Right EnforcementIntellectual Property Right Enforcement– Gov’ts Sometimes Use Price ControlsGov’ts Sometimes Use Price Controls

II. The CausesII. The Causes

Inadequate competition among insurers.Inadequate competition among insurers.

Inadequate info for Inadequate info for – users of health care.users of health care.– providers of health care.providers of health care.

Doctors paid for services provided rather Doctors paid for services provided rather than by salary.than by salary.

Medical malpractice Lawsuits.Medical malpractice Lawsuits.

III. Possible RemediesIII. Possible Remedies

2 schools of thought: costs vs. coverage2 schools of thought: costs vs. coverage

Create a national market.Create a national market.Tax credits or subsidies.Tax credits or subsidies.Coverage mandates.Coverage mandates.Create a Public Sector Competitor.Create a Public Sector Competitor.

Take A Stand!Take A Stand!

Consider the ideas to “fix” healthcare.Consider the ideas to “fix” healthcare.

To what extent should the government get To what extent should the government get involved?involved?

Look at the signs around the classroom.Look at the signs around the classroom.

In a moment, go to the sign that In a moment, go to the sign that best best represents your opinion.represents your opinion.

Talk with the other people in your group, Talk with the other people in your group, and be ready to share why you believe as and be ready to share why you believe as you do.you do.

Patient Protection and Patient Protection and Affordable Care ActAffordable Care Act

Insurance Mandate-You must get insurance.Insurance Mandate-You must get insurance.

Tax credit for poorTax credit for poor

Prohibits Pre-Existing Condition ExclusionsProhibits Pre-Existing Condition Exclusions

No cancellation of coverage except for fraud.No cancellation of coverage except for fraud.

Limits out-of-pocket expenses to $5k individual/yrLimits out-of-pocket expenses to $5k individual/yr

Public optionPublic option

National market for health insurance National market for health insurance

Taxes Taxes – employers who don’t offer coverageemployers who don’t offer coverage– individuals w/ incomes > $350kindividuals w/ incomes > $350k

IV. Who’s For It?IV. Who’s For It?

AARP, AMA, ANA, AFL-CIO, AFTAARP, AMA, ANA, AFL-CIO, AFT

The President and many democrats. The President and many democrats.

V. Who’s Against It?V. Who’s Against It?

People worried about costs/ deficit People worried about costs/ deficit spending.spending.

People worried about becoming less People worried about becoming less Capitalist/ more Socialist.Capitalist/ more Socialist.

The health insurance industry.The health insurance industry.

Most Republicans.Most Republicans.

Quote of the DayQuote of the Day

““My medical plan was to not get shot.”My medical plan was to not get shot.”

Boots RileyBoots Riley

ListenListen

When Social Security was created in the When Social Security was created in the 1930s, the life expectancy was 60.1930s, the life expectancy was 60.

It was 75 in the 80s, and is 78 today.It was 75 in the 80s, and is 78 today.

II. Impact of The National Debt II. Impact of The National Debt - Continued- Continued

I. Government Spending in Perspective - Continued

Total gov’t spending was $6.5 trillion in 2009—about $21,000 per person.

I. Government Spending in Perspective

Total Federal and Combined State and Local Spending per Household, 1965–2007

III. III. Impact of Government Spending

I. From the Deficit to the DebtI. From the Deficit to the Debt

Guarantee access for pre-existingGuarantee access for pre-existing

LawsuitsLawsuits

Can’t cancel unless fraudCan’t cancel unless fraud

Small businesses form health care groupsSmall businesses form health care groups

National marketNational market