Download Borrowing Money and Public debt

BORROWING MONEY AND
PUBLIC DEBT
HOW DOES THE GOVERNMENT
BORROW MONEY?

Article 1, Section 8, Clause 2 gives congress the power to “borrow
money on the credit of the United States”

Once congress approves a budget that we do not have the
revenue to pay for, they must authorize the Department of
Treasury to do the borrowing

The Department of Treasury then borrows the money a variety of
ways through investors, either domestic or foreign

The most common means of borrowing the money on Treasury
notes or Federal bonds, both of which yield interest to the
investors after a fixed amount of time
WHY DO WE BORROW MONEY?
• The United States often borrows money to pay for yearly
budget expenses it does not have the revenue to cover
• The largest reasons the United States has to borrow money
stems from Federal Entitlements such as Social Security,
Medicare, Medicaid, Federal pensions, and other social
welfare problems
• In fiscal year 2014, the federal government spent about
66% of the budget on Federal entitlements
DEFICITS AND SURPLUSES
• Every fiscal year that the federal government must spends
more than the amount of revenue they are able to collect,
they have run up a deficit
• If by some stroke of luck, the government does the responsible
thing and spends less money than they are able to bring in,
they have run a surplus
• In the last 46 years the government has run a surplus a
total of 4 surpluses (between FY 1998 and FY 2001)
• The sum of all our budget deficits combined is known
as Public Debt (or national debt)