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The National Debt The Budget Balanced Budget: revenues are equal to spending Budget surplus: the government takes in more than it spends Budget deficit: where the government spends more than it takes in. Ways the government reacts to a deficit: 1. Create more money. Just print more of it. Downside: can create hyperinflation 2. Borrow more money by selling Treasury Bills (repaid in 3 months to a year), Treasury Notes (repaid in two to ten years), Treasury Bonds (paid back in 30 years) National Debt Vs. National Deficit National Debt: Total of all money owed to bondholders The debt is ALL the money owed for all time, but the deficit : when spending exceeds revenue in one year Example: if the debt was $100 at the start of the year and the government has revenues of $20 in the year and spends $35 the deficit is 35 – 20 = $15 the new debt is $100 + $15 = $115 Two problems of the national debt: -the crowding out effect, which means that because the government has borrowed so much money, there isn’t enough money available for businesses to borrow money. -servicing the debt which means to pay the interest on the debt, which takes away money available for other programs like health care, defense or roads Who owns the US debt? Hong Kong: $121.9 billion (0.9 percent) Caribbean banking centers: $148.3 (1 percent) Taiwan: $153.4 billion (1.1 percent) Brazil: $211.4 billion (1.5 percent) Oil exporting countries: $229.8 billion (1.6 percent) Mutual funds: $300.5 billion (2 percent) Commercial banks: $301.8 billion (2.1 percent) State, local and federal retirement funds: $320.9 billion (2.2 percent) Money market mutual funds: $337.7 billion (2.4 percent) United Kingdom: $346.5 billion (2.4 percent) Private pension funds: $504.7 billion (3.5 percent) State and local governments: $506.1 billion (3.5 percent) Japan: $912.4 billion (6.4 percent) U.S. households: $959.4 billion (6.6 percent) China: $1.16 trillion (8 percent) The U.S. Treasury: $1.63 trillion (11.3 percent) Social Security trust fund: $2.67 trillion (19 percent) Budget the last 20 years In the mid 1990’s an effort was taken to make a Balanced Budget Amendment. However, it did not pass because it would not be flexible enough to deal with rapid changes in the economy. In 2000 we had the first surplus in thirty years and President Bush even sent tax rebate checks to tax payers Debt by President 2012 gdp $15.2T Current Debt Numbers U.S. NATIONAL DEBT CLOCK The Outstanding Public Debt as of 04 Dec $16,344,322,925,999 so each citizen's share of this debt is $51.906. Debt clock