Deficits & debt

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Deficits & debt

  1. 1. 18 - 1Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShowDeficits,Surpluses,and thePublic Debt18C H A P T E R
  2. 2. 18 - 2Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShowDEFICITS, SURPLUSES, AND DEBTDefinitions:•Budget Deficit•Budget Surplus•National or Public Debt•U.S. SecuritiesBudget Philosophies•Annually Balanced Budget•Cyclically Balanced Budget•Functional Finance
  3. 3. 18 - 3Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShowCauses:• Wars• Recessions• Tax CutsTHE PUBLIC DEBTFacts and Figures:Quantitative Aspects• Debt and GDP• International Comparisons• Interest Charges• Ownership
  4. 4. 18 - 4Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShow0 20 40 60 80 100 120 140ItalyJapanBelgiumCanadaSpainFranceGermanyUnited StatesNetherlandsFinlandSwedenDenmarkUnited KingdomAustraliaGLOBAL PERSPECTIVEPublic Sector Debt as a percent of GDP,2000Source: Organization for Economic Cooperation and Development
  5. 5. 18 - 5Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShowSocial Security Considerations• Social Security Trust FundTHE PUBLIC DEBTFalse Concerns• Bankruptcy• Refinancing• Taxation• Burdening FutureGenerations
  6. 6. 18 - 6Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShowOWNERSHIP OF THE PUBLIC DEBT9%28%11%22%13%17%Debt heldBy FederalReserve &GovernmentAgenciesDebt heldOutside theFederalReserve &GovernmentAgenciesFederal ReserveU.S.GovernmentAgenciesOther, IncludingState & Local GovernmentsU.S. Banks & FinancialInstitutionsForeignOwnershipU.S. Individuals
  7. 7. 18 - 7Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShow•Income Distribution•Incentives•Foreign-OwnedPublic Debt•External Public DebtSUBSTANTIVE ISSUES
  8. 8. 18 - 8Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShow•Crowding Out andthe Stock of Capital•Public Investment•Public-PrivateComplementaritiesSUBSTANTIVE ISSUES
  9. 9. 18 - 9Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShowID1Investment (billions of dollars)Realinterestrate(percent)THE CROWDING OUT EFFECTWith a Deficit,An Increase inInvestmentDemand Causes…16141210864205 10 15 20 25 30 35 40ID2CrowdingOutEffect
  10. 10. 18 - 10Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShowDEFICITS AND SURPLUSES1990 - 2010Source: Economic Report of the President, 2001$8007006005004003002001000-100-200-300BudgetDeficitsorSurpluses,Billions1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010ActualProjected (as of 2001)
  11. 11. 18 - 11Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShow•Pay Down the PublicDebt•Reduce Taxes•Increase GovernmentExpenditures•Bolster the SocialSecurity Trust Fund•Combinations of PoliciesOPTIONS FOR THE SURPLUSES
  12. 12. 18 - 12Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShow•Pay Down the PublicDebt•Reduce Taxes•Increase GovernmentExpenditures•Bolster the SocialSecurity Trust Fund•Combinations of PoliciesOPTIONS FOR THE SURPLUSESCHAPTERCONCLUSIONS
  13. 13. public debtU.S. Securitiesannually balanced budgetcyclically balanced budgetfunctional financesocial security trust fundexternal public debtpublic investmentsENDBACKCopyright McGraw-Hill/Irwin 2002
  14. 14. 18 - 14Copyright McGraw-Hill/Irwin, 2002Deficits, Surpluses,and DebtThe Public DebtOwnership of thePublic DebtSubstantive IssuesThe Crowding OutEffectDeficits andSurpluses 1990-2010Options for theSurplusesKey TermsPreviousSlideNextSlideEndShowNext Disputes OverMacro TheoryAnd PolicyChapter 19

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