Content Tagged: debt

Back to Greece

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February 1, 2015

Greece continues to face economic issues and a debt crisis, although there are hopes that a new leader could help pull them off the edge.  The new government under Alexis Tsipras was elected under the promise of having half of the Greek debt written off, even though debt holders have said that will not happen.  The BBC points out that unemployment in Greece is 25% right now, and the economy has shrunk by almost half since the Eurozone crisis began.

The Huffington Post questions whether Tsipras can actually renegotiate debt terms, while a blog on the Washington Post wonders if Greece will leave the Euro behind.  The Guardian suggests that Tsipras should call the bluff of German Chancellor Merkel, who is refusing to provide any debt relief to the smaller country.

All of this is a great way to identify cycles to students.  Returning to UFR Lesson 4.4 on Europe’s Debt Crisis, students can ponder that question of Greece:  when does it become everyone’s problem?  Have students work through UFR Lesson 4.4, then read through some of the current news on Greece, including the hopeful work of Tsipras.  Students could see what Princeton Economist Paul Krugman has to say about it.  How could this affect a world economy – and how could it affect us in the United States?



President Obama’s Proposed Budget for 2013

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March 22, 2012

The Congressional Budget Office (CBO) recently received President Obama’s proposed budget for 2013. The President’s budget would add less to the national deficit than other plans, though it would still leave debt levels at the end of this decade near an alarming high. According to an article by Jeanne Sahadi for CNN Money, the CBO reported that Obama’s budget would add $6.4 trillion in deficits from 2013-2022 and bring public debt to 76% of GDP. Sahadi states that, “Debt held by the public includes U.S. bonds bought by investors, but excludes money owed to government trust funds, such as Social Security and Medicare.”

The CBO’s report shows that Obama’s proposal would stabilize the debt. This means the economy would grow faster than the deficit, possibly allowing for the deficit to have a less steep upward trajectory. If no debt-reduction plans are passed, however, the deficit will continue to rise. Based on historical trends, Sahadi believes that Obama’s budget proposal will have a hard time getting adopted in its entirety, especially during an election year. After the election, Congress must address some challenging issues, primarily the Bush-era tax cuts and whether or not to replace the $1 trillion in automatic cuts expected at the beginning of 2013.

Teachers can use this article to discuss the potential challenges facing budget negotiations. A key topic to present would be Gross Domestic Product (GDP) and the relationship it has with the national debt. Students can also work together to identify some of the national deficit issues Congress will face after the November election.


President Obama’s 2013 Budget Proposal

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February 13, 2012

President Obama sent his budget proposal for 2013 to Congress today. According to Chris Moody’s Yahoo News article, in the outlined plan, Obama expresses the need to raise tax rates on the wealthy, increase funds for job training and infrastructure, and cut unnecessary spending on government programs. If approved, the federal deficit could decrease by $4 trillion over the next ten years, yet leave the federal government with a $901 billion shortfall at the conclusion of 2013.

The passing of the Budget Control Act last August, which eliminated discretionary spending by $900 billion over the next ten years, caused President Obama and the White House to make cuts to programs like Medicare and Medicaid. Moody states that the plan reduces the amount of funding for the aforementioned programs by $360 billion. Republicans have expressed their disapproval of the proposed budget because they believe it does not do enough to lower the federal deficit and does not justify the need to raise taxes. The Republicans, according to Moody, “also knocked Obama for submitting a budget that does not cut the federal deficit in half by the end of the president’s first term, a promise Obama made in February 2009.”

Republican presidential candidates Mitt Romney and Ron Paul both criticized Obama’s proposal. From the article:

“The President has failed to offer a single serious idea to save Social Security and is the only president in modern history to cut Medicare benefits for seniors,” Romney said in a statement in which his campaign also referred to the budget as “an insult to the American taxpayer.”


“I believe we can save Social Security and Medicare with a few commonsense reforms, and,” Romney added, “unlike President Obama — I’m not afraid to put them on the table.”

“When President Obama talks about spending ‘cuts’ it’s always some plan that will supposedly unfold over a decade and that the next president or Congress can change at whim,” Paul’s campaign said in a statement on its website. “In other words, cuts never happen. But budget deficits, as evidenced above, happen every year. And they will continue to happen every year. President Paul would offer $1 trillion cuts in the first year.”


Teachers could use this article as a class warm-up or “Do Now” to talk about the federal budget. Teachers could then use the provided link to read President Obama’s remarks on the budget and how he presented them to the American public. The White House blog has the digital edition of the budget at the bottom of the webpage (257 pg. document). Students could evaluate some of President Obama’s proposals and address these questions: What might be some issues of debate between Republicans and Democrats? What proposals will need modification for support from both sides? How does the proposal further address the federal deficit? How might the budget influence domestic policies like Social Security, Medicare, and national security? Upon discussing these questions, students should have a stronger understanding of how the federal budget impacts the federal deficit and the types of discussions that occur between the two major political parties involving the appropriation of governmental funding and taxation.


The 99% and Representative Mike Honda’s People’s Budget Plan

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December 16, 2011

The Huffington Post recently posted an article by Rep. Mike Honda (California’s 15th Dist.) discussing his fight for the 99 percent. In this article, Honda talks about his engagement to keep government programs funded because the majority of the 99 percent are beneficiaries. He believes that Republicans are willing to cut these programs to ensure tax cuts remain for the wealthy.

Honda states the number of Americans that live in poverty has increased drastically. He references the November 2011 U.S. Census Bureau that reports, “the number of people living in poverty in America rose by nearly 4 million to 43.6 million in 2009 — the largest figure in the 51 years for which poverty estimates have been available.” In addition to these figures, the number of children living in poverty rose by 1 million. Minorities also face extreme poverty at a much higher rate than the national average.

Honda discusses how his People’s Budget plan will address the issues of unemployment, national debt, Medicare – common demands of the 99 percent. His plan focuses on raising taxes for the wealthy (individuals, companies) and investing heavily in government services like transportation and public education. In addition to this, the People’s Budget aims to help the middle class in and counter the Republican budget proposal. From the article:

Where the Republican budget forsakes our solemn oath to protect seniors, the People’s Budget guarantees their safety and security. Where the Republican budget forgets the steel in the spine of the American economy was laid by the middle class, the People’s Budget guarantees full access to the American dream for all. Where the Republican budget explodes our national debt, the People’s Budget creates a budget surplus.

Teachers could use this article and Honda’s website to discuss the many budgetary policies proposed by Democrats and Republicans. Some questions to consider: How does Honda’s People’s Budget relate to Obama’s budget plan? How does it differ from GOP presidential candidates’ plans? Does it address the national debt? If so, what might some challenges be to its implementation? Do you support his budget plan? Why or why not? What information would you need to make this decision? Where could you go to find it?

Students can also use this article to analyze political rhetoric. How does he present the Democrats? The Republicans? The People’s Budget? These discussions should help students comprehend how politicians view the current financial state of America, their solution(s) to solving challenges, and their opinion about the opposing party’s plan. One might also address the issue of disharmony found within party lines and Congress so that students can understand the challenges recent budgetary proposals are facing.


Personally Fighting the National Debt

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December 8, 2011

Richard Simon, writer for the L.A. Times, recently wrote an article about everyday Americans working to reduce the $15 trillion dollar federal deficit. Simon’s article begins by focusing on Atanacio Garcia, a resident San Antonio, California, and his efforts to shrink the deficit. Mr. Garcia collects aluminum cans around his neighborhood and donates $50 of his pension to the Bureau of Public Debt, established during President Kennedy’s administration. According to the article, Mr. Garcia plans to keep donating “until the debt is paid off or until I die.”

Others like Mr. Garcia have given various amounts of money to the bureau for a variety of reasons. Simon states that one veteran sent $17,500 after having surgery at a VA hospital. President Reagan even contributed $1 million after his second inaugural. In the 1990s, the Eskimo Pie Corporation decided to donate one nickel for every box of ice cream bars it sold in one month. It raised enough nickels for a total of $17,894 and planned on giving it to the Treasury Department. The article states that the department “facing the prospect of counting all those nickels, told the company to send a check.”

Politicians have also proposed programs to help lower the debt. Rep. Steve Stivers (R-Ohio) created the Debt Contribution Act and donates five percent of his monthly salary.  Rep. Don Young (R-Alaska) submitted a bill to generate a website that will allow donors to be recognized for the contributions. Simon states that Young believes this bill will “needle” millionaires that support higher taxes for the wealthy.

Teachers could use this article and past blogs to discuss the reasons as to why individuals and large corporations try to lower the national deficit through donations. Do the contributions by individuals really make a difference in the overall debt? If so, should others be asked to give? If not, should they get their money back? Do large corporations donate more than what their tax breaks are? Where should one look to find this information? Students can research these questions and others to determine if these contributions are truly making an impact in the federal debt and if more serious policies should be implemented by the national government.


Super Committee Fails to Make Deal

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November 25, 2011

On Monday, November 21st, the Joint Selection Committee on Deficit Reduction announced that the bipartisan super committee could not reach a deal to eliminate $1.2 trillion. Unable to come to a compromise, both parties expressed their unhappiness and blamed each other publicly. In an article by authors Ted Barrett, Kate Bolduan and Deirdre Walsh for CNN, President Obama accused the Republicans of refusing “to listen to the voices of reason and compromise that are coming from outside of Washington.” Republicans condemned the Democrats for the failure of the super committee because the Democrats “would not accept any proposal that did not expand the size and scope of government or punish job creators.” Because no agreement was met, the federal government will automatically reduce spending by $1.2 trillion in January 2013. According to the article, domestic and defensive programs will see a reduction of funding, but Social Security, food stamps, veteran’s benefits, and other “politically sensitive” programs will not.

Obama addressed reporters on the issue of altering or stopping the $1.2 trillion cuts by stating:

“The only way these spending cuts will not take place is if Congress gets back to work and agrees on a balanced plan to reduce the deficit by at least $1.2 trillion. That’s exactly what they need to do. That’s the job they promised to do. And they’ve still got a year to figure it out.”

The CNN article also discusses future problems the federal government might have involving unemployment benefits and payroll tax cuts. Republicans assert that keeping taxes low for the wealthy will help the economy from falling back into a recession. Democrats claim that the national debt will continue to rise unless the large businesses and millionaires pay more taxes.

Teachers could use this article to examine the implications the automatic cuts will have on the federal government and the American people. Questions to consider: Although the federal deficit will be reduced, how does this impact the American public that uses government-funded programs? Is $1.2 trillion too much/too little? Will an increase or decrease in the automatic cuts positively or negatively influence America’s economy?

As the election year nears, students can hypothesize how President Obama and the Republican nominees will discuss the super committee and the federal deficit. By looking at the economic plans of President Obama and the Republican nominees, students should have a stronger understanding of how each individual addresses the current deficit and how their economic plan will affect the size, influence, and goals of the federal government.


Why Should Students Care about the U.S. Debt Panel?

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November 2, 2011

“It’s the economy, stupid,” the phrase popularized in the 1992 Clinton presidential campaign, may need slight revision.  Yes, it certainly is the economy, but right now, it’s the debt.  And while high school students are anything but stupid, they may need some reminding as to why they should care about the looming deadline for the Joint Selection Committee on Deficit Reduction

Heidi Przybyla’s recent article for Bloomberg explores the consequences of the automatic cuts if the Committee is unable to create an alternative.  James Jones, an Oklahoma Democrat, is quoted as saying: “I don’t think Congress on either end understands the consequence of their inaction… You’re creating a generational war.”

War? Who is fighting?

On one side, we have Social Security and Medicare; on the other, child health and education programs.  Though one may think that all of these programs will take a hit with the $1.2 trillion cut, some may be hit harder than others, Przybyla explains.  The programs that will be hit hardest, she posits, will be those serving the young. 


Przybyla points first to the strong lobbying of the AARP who, in the first six months of this year, spent $9.7 million on said lobbying.  Second, she notes the fact that Social Security and Medicare are “mandatory entitlement spending that automatically grows as the retiree populations increases,” while spending for many children’s programs is determined annually.  Furthermore, the Children’s Defense Fund, in stark contrast to the AARP, spent $48,245 during all of last year. 

Already, trends in federal spending indicate which generation has been “winning” this war: “In 2008, per capita federal spending on those 19 and younger was $3,660, compared with $23,900 for those 65 and older, according to a report by Urban Institute and Brookings in Washington,” reports Przybyla. 

How children may lose

 A recent study by the Federal Funds Information for States stated that the U.S. Department of Education may have its budget cut by $3.5 billion.  The Head Start program may lose up to $799 million.  The study also mentioned potential budget cuts for child welfare services and child-care. 

In the Classroom

This article introduces a number of important aspects of the political process.  Teachers may use this article to introduce the concept of “lobbying,” who lobbyists are, and how interest groups play a role in lobbying.

With regards to interesting the students in this current budget crisis, teachers may use this article to explore what it might mean for their particular school if the Department of Education lost that much funding.  Students may be asked to research how much money, on average, a school in their district receives, what percentage of the federal budget their district is, and then how much money their school could lose based on the cut.  The project could culminate in examining the costs of the school: how much the desks cost, the printers cost, etc., and what the school might not have without federal funding.

Have the students consider the following questions: how does the action (or inaction) of the federal government affect me?  How does it affect the nation as a whole?  If you were a member of the Congressional committee, what trade-offs (between Social Security and Medicare on one side, and child health and education services on the other) would you make? Would you try to cut equally from the benefits for seniors and children, or would you cut more from one than the other?  What information would you need to be able to make an informed decision?


Putting the Size of the National Debt in Perspective

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August 29, 2011

In a recent story for NPR News, Linton Weeks points out Americans’ increasing comfort with the word trillion.   In the past, this number was only used for things that seemed unimaginably vast, like cells in the human body or stars in the visible universe.  However, in modern fiscal discussions, “If you’re not talking trillions, you’re talking chump change,” Weeks contends.  From the article:

The national debt is more than $14 trillion. In a recent report, the credit rating agency Moody’s says the 1,600-plus U.S.-based companies it rates harbored some $1.2 trillion in cash at the end of 2010. The newly minted congressional supercommittee is charged with finding ways to pare the federal deficit by at least $1.2 trillion in the next decade.

Weeks says that our comfort with this number is the result of positional arithmetic, our everyday notational system.  He cites 19th century mathematician Pierre-Simon Laplace who wrote that the “method of expressing all numbers by means of 10 symbols” is “so simple to us now that we ignore its true merit.”  Using this notation system, changing 1 million to 1 billion only requires the addition of three zeros.  Completing the same task using Roman numerals, Weeks writes, would require “1 million Ms – roughly 1,000 pieces of paper filled with Ms!”

The ease with which we transition from millions to billions to trillions means that “pretty soon we’re talking surreal money.”  Weeks concludes with several examples that help put these numbers in perspective:

To spend $1 trillion in the average American life span of 77 years, you will have to shell out about $35,580,857 every day… One trillion seconds add up to 31,688 years, The Associated Press points out… In a 1981 address, President Reagan explained to Congress that a stack of a trillion $1 bills would be 67 miles high.

Even with these examples, the size of these numbers can be mind-boggling.  Teachers should help students put these numbers in perspective as they discuss the federal budget deficit and national debt.  Students should be encouraged to discuss whether or not the examples given above are beneficial in discussions of fiscal policy.  While $1 trillion is a nearly unimaginable amount of money for an individual, is it unimaginable for an entire country?  What additional information would you need to answer that question?  Where would you go to find it?

Teachers could use this article to introduce concepts like gross domestic product and debt-to-GDP ratio.  Students in US history classes could examine the United States’ history of deficit spending and compare our current debt-to-GDP ratio with that of other decades.  World history or global studies students could compare the United States debt-to-GDP ratio with that of other countries (in the past or the present).  These lessons would help students understand the size of our debt in relation to comparable elements of similar magnitude.  While it is important that students understand the true size of the national debt, it is also important that they understand how that number relates to other economic indicators.


Individual Donations to Reduce the National Debt

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April 29, 2011

In a recent article for Slate, Brian Palmer discusses the various avenues for individuals to make contributions to the federal government.  Palmer writes that there are “several ways for charitable patriots to augment their support for the federal government,” but notes that simply increasing your tax payment will not work.  Instead, the government recommends that citizens interested in making a donation send their money to the Treasury’s Bureau of the Public Debt.  From the article:

Your money will go into a special account to redeem outstanding government notes, bills, and bonds. Since 1996, Americans have donated about $26 million to reducing federal indebtedness, which represents 0.00018 percent of the current national debt. By the way, there’s no need to wait for tax time; the Treasury accepts contributions year-round.

Palmer reports that members of the House of Representatives have the ability to allocate a portion of their salaries to reducing the debt.  Last year, “three house members donated $15,233.56, which represents 0.02 percent of the total salary of the House and 0.00000011 percent of the national debt.”  The Treasury also accepts donations to the Gifts to the United States fund, which are deposited into the Treasury’s general fund.

Outside of the Treasury, citizens can donate money to several different federal agencies.  Palmer explains that there is “no exhaustive list of agencies authorized to accept charity,” but the Government Accountability Office can answer any questions about which agencies can accept donations.

Previous Understanding Fiscal Responsibility blogs have discussed the concept of charitable donations to pay down the national debt.  The first, in a discussion about Great Britain’s fiscal issues, suggested, “individual payments of cash are only one (very ineffective) way of addressing the national debt.”  The second questioned the motives of citizens who make these donations, particularly those who donated just one penny.  Are they simply “jokers,” or are they making a political statement?

Teachers could use this article to continue this discussion.  The national debt is so large that individual payments are largely ineffectual.  According to the article, the combined $26 million donated since 1996 (a significant sum of money) only represents 0.00018 percent of the current national debt.  Teachers should encourage students to consider why some individuals might make donations to the debt.  Are they making a political statement? A moral statement? Do they believe their payment will significantly lower the nation’s debt load?  What other, more effective ways exist for paying down the debt?  As students discuss these questions, they should develop a better understanding of the immense size of the debt and the importance of fiscal policy decisions in reducing the federal budget deficit and the national debt.


S&P Downgrades Outlook on US Treasury Securities

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April 22, 2011

A recent article in the Wall Street Journal discusses Standard and Poor’s decision to downgrade its outlook on United States Treasury securities from “stable” to “negative.”  Though S&P did not lower the United States’ AAA-bond rating, the change to a negative outlook indicates the possibility it could do so in the near future.  From the article:

Since S&P began assigning outlooks to government debt in 1989, five AAA-rated countries have been assigned negative outlooks, including Britain in 2009. Three were subsequently downgraded, and Britain and one other were returned to a stable outlook. S&P acted after it determined that new British austerity measures to cut spending and raise revenue would reduce the government deficit to 3% of GDP by 2014 from 11.2% in 2009.

The article notes that a downgrade would increase interest rates on Treasurys, a benchmark for consumer and business borrowing rates, ultimately “raising the cost of credit throughout the economy.”  Many believe that this threat could force Democrats and Republicans to compromise on a deficit reduction plan.  The gridlock in Washington, however, was a “key determinant” in the outlook change, according to S&P chairman John Chambers.  Chambers went on to say that if the United States could reach a British-style resolution, S&P would restore the outlook to stable.

Teachers could use this article to discuss the importance of the United States’ bond rating.  Students should be encouraged to follow the fiscal debate in Washington, noting how politicians from both parties react and respond to this report.  Does the report spur compromise, as many believe it will, or will it be used in an attempt to gain leverage for one side or the other?  How will this report influence the debate about the federal debt ceiling?  These questions will help students begin to appreciate the complexity and far-reaching implications of fiscal policy decisions.