Economics eLearning Lesson

Government Spending

Introduction

Why is spending policy important?

This is why......
I.O.U.S.A. Bonus Reel: Warren Buffett on the Trade Deficit

Instruction: Federal Budget Notes

Gov Spending

Activities

Transcript of the NBCLearn Video

What’s the National Debt and Does it Really Matter?


MARIA SHRIVER, co-host:


What is remarkable about US tax payers is that they do pay. 109 million of them will cough up the dough this year and send it to the federal treasury. But while they are paying the government is spending, hemorrhaging money, and the national debt, shown on this clock in New York City has topped 2 trillion 700 billion dollars and it’s rising by the second. It’s a figure that is mind boggling to most people.


Unidentified Man #1: I ain’t got nothing to do with that, I just pay taxes like anyone else.


Unidentified Woman #1: I think it’s terrible that we owe so much money I don’t know why.


Unidentified Man #2: Its just mind boggling I can’t imagine anyone can possibly imagine what it is. I think even the ones who keep track of these figures in Washington probably don’t even understand it themselves.


Unidentified Man #3: I hope they take it off right now, because it just shows me how far behind we are.


SHRIVER: Well Irving R. Levine is NBC’s chief economics correspondent. He’s been keeping a close eye on the effort to trim the deficit and good morning Irving.


IRVING R.LEVINE: Good morning Maria.


SHRIVER: Everybody wants to know including those people who talked about it being mind boggling, how did we get into this fine state of affairs?


LEVINE: Well we got into it in a very simple way. Simply by spending more than the government takes in. the government is borrowing very heavily to cover its debts. And this deficit, this spending more than we take in, has been going on for a very long time, but it accelerated during the Reagan era. We had a deficit of under, a national debt that is we accumulated deficits of under a trillion dollars when President Reagan took office, it then swelled to over 2 and a half trillion as a result of two things.


The first, more military spending which may have been necessarily to provide security but nevertheless added to the debt. And the big Reagan tax cut which was helpful in putting money into peoples pockets, keeping us out of a recession because people could spend and buy things and keep people working but nevertheless widening this enormous gap, between receipts and what the government spends.


MARY ALICE WILLIAMS, co-host:


Irving what’s the real danger on running deficits of this size?


LEVINE: The danger is the government has to borrow money just as an individual does if that individual is spending more than he or she earns. The government today is borrowing at the rate of 350,000 a minute.


WILLIAMS: A minute?


LEVINE: That is correct. And now the problem is that the government is borrowing for whatever available loan money that is out there at a any time in competition with individuals who wan tot by homes or by cars, in competition with corporations, which are borrowing money for expansion an for improvement. And whenever there is a huge demand for anything be it beans or money by simple economics it pushes up the price of that commodity. And the price of money is interest, and when interest rates go up too high, since people do in this economy borrow to buy homes, to buy cars, to buy appliances, if that interest rate goes up too high people cannot afford to make the monthly payments and the economy grinds to a halt.


SHRIVER: Well briefly Irving, President Reagan said one of the major disappointments of his administration was not being able to get the deficits under control. Will bush be able to do it?


LEVINE: I rather doubt it. I think that we do find that the way to get the deficit under control is to cut into some of these heavy government programs particularly social security, and everyone is afraid to do that because that is a big powerful constituency which votes.


WILLIAMS: Okay, thanks Irving, we’ll be right back.

30 Minute summery of IOUSA

I.O.U.S.A.: Byte-Sized - The 30 Minute Version

Clips

IOUSA has multiple short clips of the movie to help remind you of topics.

Assessment

eLearning Assignment

Handwrite the answers to these questions on a separate sheet of Paper.


Tie in IOUSA and the NBCLearn video into this answer.


Where is the Debt Clock?

What are most people thoughts on the debt?

What is the simple answer to why we have this large debt?

Whose presidency enlarged the debt and why did he do it?

How does the government borrowing money hurt Americans?

Who is the president during this video?


Write a letter to a Presidential candidate stating your view on the debt and national spending. Offer ideas to reducing the debt. Be cordial. Bonus if you send a digital copy in email form to the candidate. Bcc me on the email.

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