Deficit: Why Should I Care?

by Marie Bussing-Burks

Overview

At the turn of this century, the American national debt stood at just under $6 trillion and the deficit at a "mere" $86 billion. Today, the national debt has topped $14 trillion, and the yearly deficit for 2011 is projected at a whopping $1.4 trillion.

According to the U.S. Treasury Department's Annual Report on the Public Debt, the debt is estimated to hit $19.6 trillion by 2015. The federal government has borrowed roughly 40 percent of its total budget for the last several years, a disturbing trend that could leave the U.S. in an economic crisis. Astronomical interest payments, a debt burden to your children and grandchildren, and an increased reliance on foreign creditors are just a few of the problems. Although the U.S. has experienced soaring unemployment, stagnant production, and a crippled housing market, foremost on economists' minds are rising deficits and ballooning debt. Others feel fears of the national debt are overblown or pale in comparison to today's economic problems.

This clear, concise book will give you the need-to-know on the debt. You will learn:

How to calculate deficits and the national debt

The history of U.S debt and its recent unparalleled growth over the years

How and why the government borrows money

Methods and tactics for balancing the budget

The economic arguments for, and against, accruing a debt

The impact of the debt on interest rates and inflation

The impact of the debt on the value of the dollar and U.S. economic power

This book also answers key questions:

Can the government go bankrupt?

Why have there seemingly been no repurcussions of the large debt to date and is that likely to change?

When the interest on the debt becomes higher than the revenue of the government, what happens?

And many more practical insights into the government debt controversy.

Business professionals, parents, retirees, and students are all talking about the debt. This quick read will provide an understanding of the ramifications of the rising debt and what the consequences may be.

Product Details

ISBN-13:	9781430236597
Publisher:	Apress
Publication date:	07/19/2011
Edition description:	1st ed.
Pages:	144
Product dimensions:	5.98(w) x 9.02(h) x 0.01(d)

About the Author

Marie Bussing-Burks is an assistant professor of economics at the College of Business of the University of Southern Indiana, where she teaches economics, focusing on microeconomics, macroeconomics, history of economic thought, and money and banking. She holds a master's degree in business administration and a doctorate of arts in economics. Bussing-Burks is the author of The Young Zillionaire's Guide to Taxation and Government Spending (2000), Profit from the Evening News: Using Leading Economic Indicators to Make Smart Money Decisions (2001), Influential Economists (2003), Money for Minors: A Student s Guide to Economics (2008), and Starbucks: Corporations that Changed the World (2009). She has more than 30 newspaper, magazine and journal articles to her credit. Bussing-Burks serves on the boards of the USI Foundation, Evansville Commerce Bank, and St. Mary's Health System.

Table of Contents

In addition to the new material (about 6,000 words), all statistics will be updated and more charts and graphs will be added to provide insight.

Chapter 1. Crash Course on the National Debt

This chapter delves into the role of the government in the U.S. economy. The government must provide certain essential goods and services for its taxpayers. In turn, the government collects taxes to pay for these goods and services. But when the government spends more than it takes in, a deficit occurs, and the government must borrow to pay for its overspending. This chapter takes a look at the budget process and the different types of budgets: balanced, deficit, and surplus.

Chapter 2. A Huge Credit Card

This chapter introduces the history of the debt and the issuing agency, the Bureau of the Public Debt. It examines details of the agency’s financing instruments, Treasury securities, and savings bonds. Other main topics include the ownership of the debt, United States versus foreign, and interest payments, which hamper the government’s ability to balance the budget.

**NEW **

Chapter 3. Primer on the Current Global Economy                 

Our Interconnected World    

—Policies and Events in One Country Affect Other Countries           

—The Impact of Weakening Economies on the U.S.   

—Trade Downturns            

—Declining Income and Jobs      

Potential Global Recession     

China: Long-term Slowing?

European Debt Crisis

—Spreading Financial Disease Across the Globe for Years to Come?

World’s Financial Markets     

—Unresolved Banking Crises   

—Periodic Sk Market Selloffs

Economic Growth Key to Revenue Growth     

—Revenue Key to Managing Deficit    

—Earnings Stagnant

Impact on the U.S. Budget and Deficit

Chapter 4. Deficit and Debt Projections

This chapter describes how the government’s spending and tax policies influence output. The government has historically used fiscal policies to alter the macro economy, with some successes and some failures. We will look at an overview of recent fiscal policies, including the economic stimulus package designed to combat the December 2007 downturn, and impacts on the deficit and debt. This chapter introduces the rising debt compared with gross domestic product (GDP), considers the productive capacity debate, and provides projections on the debt trend.

Chapter 5. Do Deficits and the Debt Matter?

This chapter sets the stage for the debt debate. It was back in 2002, at a meeting of President Bush’s economic advisors, that Vice President Dick Cheney said, “Deficits don’t matter,” a viewpoint many politicians and economists have held for years. The deficit at that time was just $158 billion. Now some in Congress and many interest groups say deficits matter a great deal, and we must eliminate deficits and pay down the debt. others say no, we must spend in the face of economic hard times.

NEW ADDITIONS FOR THE SECOND EDITION:

Changing Demographics       

—Historical Overview of Social Security     

—Historical Overview of Medicare     

—Historical Overview of Medicaid

Chapter 6. Deficits Do Not Matter

This chapter focuses on the viewpoint that deficit spending is not a concern to the health of the U.S. economy. In fact, sometimes running a deficit contributes beneficial effects for the economy. Government spending supports the economy through building strong economic growth and more jobs. The federal government’s deficit financing provides many essential services to society, such as national defense, education, public welfare, Social Security, Medicare, and Medicaid. In addition, the government sells Treasury securities and savings bonds to finance the debt. Not only are these important savings instruments for investors, but the Federal Reserve formulates monetary policy using government securities. A common view says that Treasuries can be issued continually to finance the government’s needs, and it is not imperative to pay down the debt. The United States is not unique in its deficit situation.

NEW ADDITIONS FOR THE SECOND EDITION    

How Deficits Help Other Major Economies                     

Sidebar: Interview with a Leading Economist Who Favors Deficit Spending

Chapter 7. Deficits Do Matter

This chapter explores the concerns with deficit financing. It provides a deeper explanation as to why some feel the debt matters more now than it has in the past. You will be introduced to both the long-time arguments against deficit financing—burden to future generations, hefty interest payments, crowding out of the lending, and economic instability—along with some new twists. The United States has an increased reliance on foreign creditors. China is now our number one creditor.

Chapter 8. Get a Handle on the National Debt

This chapter teaches the reader about government spending and ways to curb deficit spending. Pork projects impact government money spent in a particular locale and bring advantages to their political representatives. Fundamental reform of Social Security, Medicare, and Medicaid programs will be highlighted as options to aid the debt drain. The chapter also provides an overview of the debt ceiling, and the pros and cons of raising it.

NEW ADDITIONS FOR THE SECOND EDITION

UPDATE ON REFORM ENTITLEMENT PROGRAMS                  

—Allow States to Make Decisions                  

—Budget with a Long-Term View

Appendix A, Voice Your Opinion on the Debt

This appendix provides readers with simple but important take-charge options. The public can make contributions to help pay down the debt, become educated taxpayers, submit ideas to their congressman, and exercise their right to vote. If you want to make an impact and be heard, this appendix is a must-read.

Appendix B, Web Sites for Debt and Deficit Information

This appendix lists resources to check out for current, up-to-date information about the debt and deficit. A host of government agency web sites, economic think tanks, and academic sites are available. This is a complex problem, so be sure to have access to the sources that can provide current information as the various issues emerge.

*NEW**Appendix C, Political Views of the Debt

Political Parties' Plans to Reduce the Debt and Deficit                

Philosophical Underpinnings                                

Track Record