Federal Budget, Deficits, and Debt

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Federal Budget, Deficits, and Debt
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Federal Budget, Deficits, and Debt

• Government Budget Rule
• Expenditures transfers interest tax revenue
  borrowing

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Federal Budget, Deficits, and Debt

• Deficit -- Government expenditures exceed
  government revenue.
• Debt -- Accumulated deficits minus accumulated
  surpluses.

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Federal Budget, Deficits, and Debt
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Federal Budget, Deficits, and Debt
The Debt Clock Presented by Ed Hall
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Federal Budget, Deficits, and Debt
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Federal Budget, Deficits, and Debt
How Much is 1 trillion?

• 1 trillion 1 bills laid end to end

93 million miles
Earth to the Sun 93 million miles
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Federal Budget, Deficits, and Debt
How Much is 1 trillion?
Stack 100 bills
1 million 40 inches
1 trillion 631 miles
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Federal Budget, Deficits, and Debt
Heres looking at you from 631miles high
Hello up there
.
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Federal Budget, Deficits, and Debt
How Much is 1 trillion?
Spend 10,000 per day for ? years
3,650,000 per year
273,972 years
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Federal Budget, Deficits, and Debt
CBO Federal Outlays by category - projected
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Federal Budget, Deficits, and Debt

• Is the Debt something to worry about?
• To judge the seriousness of the national debt we
  must view it in relation to the countrys assets.

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Federal Budget, Deficits, and Debt

• Government Debt vs. Household Debt
• Government is ongoing
• (no settlement date)
• Government can pay debts by creating money
• Government debt is partially internal

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Federal Budget, Deficits, and Debt

• Deficit and Debt relative to GDP
• Ability to pay off a deficit depends on a
  nations productive capacity (GDP).
• Debt Service
• the interest rate on debt times the total debt

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Federal Budget, Deficits, and Debt
Federal Debt as a GDP
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Federal Budget, Deficits, and Debt
Comparative Deficit Levels
Government Deficit or Surplus GDP
Source U.S. Government Printing Office
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Federal Budget, Deficits, and Debt

• Inflation and Deficits
• The expectation of inflation adds to interest
  rates that government must pay lenders in order
  to sell Treasury securities

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Federal Budget, Deficits, and Debt

• Inflation and Deficits
• Adds to the cost of financing government
  activities
• Contributes to deficit levels

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Federal Budget, Deficits, and Debt
What is the Status of OASDI?
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Federal Budget, Deficits, and Debt
End of Presentation
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Federal Budget, Deficits, and Debt

• Government Accounting
• To understand the meaning of a deficit we must
  understand the methods used to calculate the
  budget

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Federal Budget, Deficits, and Debt

• Government Accounting
• Cash flow accounting system
• Revenues and expenses entered when cash is
  received or paid out

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Federal Budget, Deficits, and Debt

• New Government Building Constructed
• The cost of the building is considered an
  expenditure in the year it is paid
• Contributes more to a deficit during for the year

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Federal Budget, Deficits, and Debt

• New Government Building Constructed
• Depreciation on the building is added during the
  following quarter and for the remaining life
  expectancy of the building

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Federal Budget, Deficits, and Debt

• ? Government promise to pay 1,000 next year
• Count the entire 1,000 as a current expense
  rather than expensing the present value of 1000
• Contributes more to the current deficit

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Federal Budget, Deficits, and Debt

• Government Accounting System
• Some obligations not counted in budget
• Federal loan guarantees
• student loans, pensions, deposits in bank

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Federal Budget, Deficits, and Debt

• Government Accounting System
• Some off-budget activities
• Social Security
• U.S. Postal Service

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Federal Budget, Deficits, and Debt

• Government Accounting System
• Unified Federal Budget
• Revenues from all sources and outlays to all
  activities are consolidated

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Federal Budget, Deficits, and Debt

• Unified Federal Budget

Unified Budget Surplus
Source U.S. Government Printing Office
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Federal Budget, Deficits, and Debt
Financial Report to the Citizens
U.S. Treasury