Your SlideShare is downloading. ×
The National Debt
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

The National Debt

1,314
views

Published on

Published in: Business, Economy & Finance

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,314
On Slideshare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
37
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Deficits , Surpluses and the Public Debt
  • 2. Is Debt a four letter word?
  • 3. What is the difference between debt and deficit?
  • 4. National Debt $8.8 trillion is enough to: - Give every 18-year-old a 4-year college education for the next 57 years. - Buy up every Super Bowl ticket for the next 100,000 years. - A $1 bill is 6 inches long. If $7.8 trillion bills were laid end to end, they would form a chain 700 million miles long, enough to stretch from the surface of the earth to the surface of the sun and back –5 times.
  • 5.
    • Debt is the accumulation of yearly deficits plus surpluses.
    • The obvious question is, Is Debt good or bad?
    IT DEPENDS
  • 6. For Example, my wife and I own a home. Well, we really don’t own our home, the bank owns the home until we pay off the loan (mortgage) We are happy in debt, our house gives us a nice place to live and we know our loan will be paid off sometime in the future.
  • 7.
    • When the government spends more than it takes in taxes, in a given year.
    • GS > T
    • Gov’t spending greater than taxes
    • In a Year
    A deficit is
  • 8. Deficits , Surpluses , and the P ublic D ebt
  • 9.
    • In 1999 the US National Debt stood at:
    • - $5,600,000,000,000
    • Folks, that’s 5.6 Trillion dollars
    • Also in 1999, the government had a surplus of:
    • $123,000,000,000
    • Which could have reduced the National debt to:
    • $5,477,000,000,000
    • However our SUPERSIZED Deficit
    • in 2006 was…….
  • 10.
    • The deficit in 2006 was…
    -$248,000,000,000
  • 11.
    • The budget deficit in 2009 was
    - $ 1,400,000,000,000
  • 12.
    • Now our national debt in 2010 is…
    Folks, that’s 12.8 Trillion dollars                                                                                                                         
  • 13. DEFICITS AND SURPLUSES 1992 - 2012 Source: Congressional Budget Office $800 700 600 500 400 300 200 100 0 -100 -200 -300 Budget Deficits or Surpluses, Billions 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Actual Projected (as of May 2003)
  • 14.  
  • 15.
    • So again, debt is the accumulation of all our deficits and surpluses.
    • Yearly deficits are added to the debt
    • A surplus may help pay down the debt , but it may not .
  • 16. The “ Debt ” and The “Deficit ” Deficit ($1.4 T .) Debt ($12.3 trillion) Reasons for Debt 1. Lack of political will 2. Tax cuts 3. Recessions (transfers) 4. Wartime financing Attention Deficit Hyperactivity Disorder [ADHD] Congressmen have trouble focusing attention on the deficit. $ 12.3
  • 17.  
  • 18.  
  • 19. Porkmobile
  • 20. Pork in Alaska
    • The Bridge to Nowhere ($200 million!) rising to 200 feet above ocean level, going from Ketchikan, Alaska (pop. 14,500) to Gravina Island (pop. 50 on a good day)
    • $950,000 for a recreation center and $150,000 for a botanical garden in Anchorage.
    • $300,000 for a senior center in Fairbanks.
    • $900,000 for an aquarium in Ketchikan.
    • $500,000 for a quarry in Nome, Alaska.
    • Ted Stevens who is chairman of the Appropriations Committee was responsible for most of this pork to Alaska.
    … in the 2005 Federal Budget
  • 21.
    • Other Pork Barrel Legislation for 2005
    • A selected list of hometown and special-interest projects in the $388 billion government spending package: · Alabama: $4 million for the International Fertilizer Development Center in Muscle Shoals. · Alaska: $443,000 to develop salmon-fortified baby food. · Arizona: $2.5 million for Lone Pine Dam Road. · California: $150,000 for the Girl Scouts Golden Valley Council bridge project. · Florida: $1 million for the Palm Coast Trail System in Flagler County. · Kentucky: $2.3 million for an animal waste management research laboratory in Bowling Green. · Hawaii: $4 million for mitigation of congestion in Kapolei City. · Illinois: $1.4 million for an Interstate-55 sound barrier in Darien. · Massachusetts: $1.2 million for Cape Cod Seashore Eastham/Dennis Bike Trail Repair . · Mississippi: $750,000 for the Mississippi Museum of Natural Science. Missouri: $50,000 to control wild hogs in Missouri
    • · Montana: $1.5 million for a ''fuels-in-schools'' biomass project. · North Carolina: $1 million for Garden Parkway in Gaston and Mecklenburg counties.
    • North Dakota : $335,000 to protect North Dakota’s sunflowers from blackbirds . · Ohio: $750,000 for the city of Circleville's sewer construction project; $350,000 for music education programs at the Rock and Roll Hall of Fame in Cleveland. · Oregon: $6.28 million to Oregon State University for wood utilization research and $688,000 for a barley gene-mapping project. · Pennsylvania: $250,000 to promote tourism in the Allegheny National Forest area. · Tennessee: $2 million for the Fiery Gizzard Trail. · Vermont: $500,000 for a wood products program. · Virginia: $500,000 for the Amherst County River Walk Trail; $200,000 for a Vermont Civil War Monument in Virginia. · Washington: $1 million for the Enumclaw welcome center; $1 million for the Norwegian American Foundation. · Wisconsin: $3.2 million for the Chequamego-Nicolet National Forest ''Wisconsin Wild Waterways.'' There is also $1 million for a “Wild American Shrimp Initiative” so we might call this
    • our, “No shrimp left behind program.”
  • 22. Congressional pork includes some real stinkers
    • Federal government earmarks $29 billion for pet projects, watchdog says
    • The World Toilet Summit in Belfast, Northern Ireland, is one beneficiary of U.S. spending on so-called “pork” projects. Congress allocated $13.5 million for the International Fund for Ireland, which helps fund the summit.
    • … msnbc.com Arpri 5 th 2006
    Congressional pork includes some real stinkers Federal government earmarks $29 billion for pet projects, watchdog says                                                                                                                                                       The World Toilet Summit in Belfast, Northern Ireland, is one beneficiary of U.S. spending on so-called “pork” projects. Congress allocated $13.5 million for the International Fund for Ireland, which helps fund the summit.
  • 23. O ne G ood T hing Has Come From the Public Debt This is the way we used to get the first cry out of a baby Now we tell them, “You owe $39,000.” (as their share of the public debt) We get the same result – their first cry ; no more of that “ Take that .” We no longer have to hit our newborn to get their first cry. The Debt prevents me from having to do this.
  • 24. The “no” answer entails three points . 1. Refinancing –It refinances the debt by selling new bonds and uses the proceeds to pay off holders of the bonds. 2. Taxation – if bankruptcy were imminent the G could always raise taxes. 3. Creating Money – bankruptcy could be avoided by printing the money ( inflationary ). I’m not paying no $39,000 and I hope you will not either. Economic Implications of the Debt: False Issues [The “G” doesn’t have to pay the entire debt off because it never “dies.” ] [The “G” will live forever so it will keep “rolling it over in perpetuity” ] Going Bankrupt? Whew! $39,000 each. Where our debt comes from?
  • 25. Negative Impact of the Debt
    • A problem is interest must be paid to the debt holders as the debt continues to grow.
    • This is the third largest federal budget expenditure.
        • Interest on the national debt projected to be 800 Billion $$ by 2019.
        • This takes away from other government programs, or increases the debt and/or taxes
  • 26.
    • Crowding Out Effect:
    • Future generations will likely have to pay higher rates to borrow money (the interest rate).
    • Thus, there will be less investment in our economy, less capital stock, and leading to a lower standard of living in the future
  • 27. Chapter 18 Figure 18.2 The Crowding Out Effect
  • 28.
    • Income Distribution [the debt is transferred from all
    • taxpayers to the bond holders [ the rich], so more income disparity]
    • Incentives – larger taxes dampen incentives to bear risk,
    • to innovate, to invest, or just to work.
    • * Children will not inherit as large of a “national factory”
    • Foreign-Owned Public Debt
      • External Public Debt
    Economic Issues F rom T he Debt Abe Lincoln, with the Debt at $1 billion in 1864, said, “Men can readily perceive that they cannot be much oppressed by a debt which they owe themselves.”
  • 29.  
  • 30. Term Limits “ If you had a well-paying position that comes with all kinds of perks and opportunities , would you vote to fire yourself ? Is there another position in which you vote to set your own salary ?
  • 31. National Debt Clock 8 $24,000 National Debt Clock $7.9 $26,500 National Debt 8.8 $33,000 per second is added to the National Debt 3 4, and $4 mil per minute . or $1.3 Billion per day $124,000 $26,500
  • 32. Deficits Since 1970
  • 33.  
  • 34. Sources of Government Revenue -Today Three major sources of federal taxes (90%) a. Individual income taxes b. Social Insurance c. Corporate income taxes
  • 35. Proportional & Regressive Taxes
  • 36. Think of your income as a L a y e r C a k e . The 1 st layer will not be taxed at all. ( $7,150 for singles) In the 2 nd layer , taxable income starts at 10% up to $14,350 . The 3 rd layer starts at 15% up to $29,050 . The 4rth layer starts at 25% up to $70,350 . The 5 th layer starts at 28% up to $146,750 . The 6 th layer starts at 33% up to $319,100 . The 7 th layer starts at 35% for those over $319,100 . With a tax cut, high earners not only get a tax cut on the top layer but all layers. Our Progressive Tax System Is Like A L a y e r e d C a k e 35% over $319,100 No tax on 1 st $7,150 10% up to $14,350 15% up to $29,050 25% up to $70,350 28% up to $146,750 33% up to 319,100
  • 37. The Seven States With No Income Tax
  • 38. State Sales Tax
  • 39. Tax Debate (continued)
    • T ax B ased O n A Proportional (“Flat Rate”) T ax [“20%”]
    • $ 200 (tax of $ 40 so $ 160 to live on) [ now less likely to get in crime]
    • $ 350 (tax of $ 70 so +$ 280 to live on) [ also lessens crime potential]
    • $ 500 (tax of $ 100 so +$ 400 to live on)
    • $ 1,000 (tax of $ 200 so +$ 800 to live on
    • $ 5,000 (tax of $ 1,000 so +$ 4,000 to live on)
    Progressive Tax System No tax up to $7,150, then 10%(The poor group made $10,400 a year) 0%....................Up to $7,150 10%...........$7,151 - $14,300 15%.........$14,301 - $29,050 25%.........$29,051 - $73,550 28%.......$73,551 - $146,750 33%.....$146,751 - $319,100 35%.....$319,101 +
  • 40.  
  • 41. Causes:
    • Wars
    • Recessions
    • Tax Cuts
    THE PUBLIC DEBT Facts & Figures: Quantitative Aspects
    • Debt and GDP
    • International Comparisons
    • Interest Charges
    • Ownership
  • 42. Changes in Marginal Tax Rates 35% 2000 1990 1980 1970 1960 1950 1940 1930 1920 Top tax rate, in percent 100% 80 60 40 20 0
  • 43. Marginal Tax Rate 1913-2005 Top Marginal Tax Rates Year Tax Rate 1900 No Tax 1914 1% [over $3,000] [Only 1 in 270 paid this tax at all] 1930 30% [1 in every 32 was now paying taxes] 1940 81% [1 in every 3 was paying taxes] 1943 * Paycheck withholding (by the boss) was launched to stop cheating. 1950 91% 1970 70% [E veryone was paying with taxable Y] 1980 70% 2002 38.6% 2005 35% Medicare tax – 1.45% for an individual [ 2.9% for self employed ] for every dollar earned . Harrison Ford – received $25 million for 20 days work on a movie . 1.45% of $ 25 million = $362,500 x 2 = $725,000 medicare tax. [Over his 35 years on the Big Screen, his films grossed over $10 bil . Jim Carrey – gets $20 million per movie, so his tax is $580,000 . [1.45% of $20 million = $290,000 x 2 = $580,000 .]
  • 44. Nation’s Wealthiest 5 % Pay 55 % of Income Taxes Ave. Tax Rate Top 1 % ($293,000) paid over 1/3 of all taxes – average 28% Top 5 % (+ $121,000; 6.3 mil.) paid 55% - average 24% Top 10 % (+80,000) paid 62% of all taxes – average 21.4% Top 25 % (+$50,000) paid 81% of all taxes – average 18% Top 50 % (+$25,000) paid 96% of all taxes – average 16% Bottom 50 % (63 mil. earned -$23,000) paid o nly 4 % of all taxes. There are 7.5 million millionaires & 341 billionaires . [691 in world] 40 millionaires are in the U.S. Senate
  • 45. Billionaires of the World in 2003 [The U.S. has 50%] 691 in 2004 Worth 2.2 T [341 in U.S.]
  • 46. Of The 100 Million With Full Time Employment:
    • 1. Only 5.7% make above $100,000
    • 2. 10% make between $65,000 & $100,000
    • 3. 84% earn under $65,000
    • 4. More than half earn less than $35,000
    • 5. One in four workers(28 M workers) earns
    • $18,800 a year or less, with few if any benefits
  • 47. Federal Expenditures Pensions and Income Security National Defense Health Interest on Public Debt Pensions & Income Security 38% National Defense 17% Health 21% All Other 15% Interest 13% 2002 Data Total Expenditures $2,011 Billion
  • 48. $412
  • 49. 0 20 40 60 80 100 120 140 Japan Italy Belgium Canada France Spain Sweden Germany United States Netherlands United Kingdom Finland Denmark Australia GLOBAL PERSPECTIVE Public Sector Debt as a percent of GDP, 2002 Source: Organization for Economic Cooperation and Development
  • 50.
    • THE END

×