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