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National Debt
What do we owe?
• April 2015 National Debt has reached $18.2 trillion
• Average of: $56,728 per person• Average of: $154,161 per tax payer
What is the National Debt?
• Definition: money owed to creditors in the US & in foreign countries
• 33% of the debt is owned by foreign investors– How do they own debt?
• By purchasing bonds
• Country that owns the most: China – currently have around $1 trillion; if released into circulation, the value of the dollar would decrease
• Value of the dollar is determined by supply & demand
How do we accumulate debt?
• The Federal Budget: all of the money spent on federal programs in one year
• Based on a Fiscal Year instead of a calendar year starting October 1 & ending September 30
• Top 3 Categories of expenditures:1. Medicare/Medicaid2. Social Security3. National Defense
How do we accumulate debt?
• Deficit Spending: government spends more than it takes in taxes in one year– *Not the same as National Debt; debt + several
deficits• To make up the difference, the gov’t must
borrow the money by selling securities (bonds)• A budget surplus occurs when the gov’t spends
less than its tax revenues• Two ways gov’t brings in monies: Tax & Borrow
How do we accumulate debt?
• Where do revenues come from?• Income Tax– 16th Amendment1. Progressive Tax: higher incomes pay a higher tax
percentage2. Regressive Tax: lower incomes pay a higher
percentage of tax of their incomes3. Flat Tax: Tax levied on everyone equally
• Only recent president to have a surplus: Bill Clinton
Why we shouldn’t pay down the debt?
1. Could lead to a recession; cuts to our federal programs in order to do so
2. Should work on building up our Gross Domestic Product so the debt is just a smaller percentage
3. What is the GDP? – Total dollar value of all goods and services
produced in a nation in 1 year
Why we should pay off the debt?
1. Increase the value of the dollar2. Lower the cost of interest we pay in the
future3. Restore confidence in the economy
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