3. What is the difference between debt and deficit?
4. National Debt $9.1 trillion is enough to: - Give every 18-year-old a 4-year college education for the next 57 years. - Buy up every Super Bowl ticket for the next 100,000 years. - Drive 1 mil. cars around the world 1,368 times each . - A stack of $1,000 bills 4 inches high is a million. $ 1 trillion would be a stack of $1,000 bills 252.5 mil . high. $7.4 trillion would be 1,868.5 miles high. - A $1 bill is 6 inches long. If $7.8 trillion bills were laid end to end, they would form a chain 700 million miles long, enough to stretch from the surface of the earth to the surface of the sun and back –5 times.
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6. For Example, my wife and I own a home. Well, we really don’t own our home, the bank owns the home until we pay off the loan (mortgage) We are happy in debt, our house gives us a nice place to live and we know our loan will be paid off sometime in the future.
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8. However, the good news is that our car allows us to easily get to work, which helps us to earn a living. And since one of our cars is paid for, it allows us to put more money into savings.
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11. Deficits , Surpluses , and the P ublic D ebt [Iraq will cost 1 trillion dollars]
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18. 0 20 40 60 80 100 120 140 Japan Italy Belgium Canada France Spain Sweden Germany United States Netherlands United Kingdom Finland Denmark Australia GLOBAL PERSPECTIVE Public Sector Debt as a percent of GDP, 2002 Source: Organization for Economic Cooperation and Development
19. The “ Debt ” and The “Deficit ” Deficit ($412 bil.) Debt ($8 trillion) Reasons for Debt 1. Lack of political will 2. Tax cuts 3. Recessions (transfers) 4. Wartime financing Attention Deficit Hyperactivity Disorder [ADHD] Congressmen have trouble focusing attention on the deficit. $ 7.4
24. The “no” answer entails three points . 1. Refinancing – as portions of the debt fall due each month, the G does not cut G or raise T to retire the maturing bonds. It refinances the debt by selling new bonds and uses the proceeds to pay off holders of the maturing bonds. 2. Taxation – if bankruptcy were imminent the G could always raise taxes. 3. Creating Money – bankruptcy could be avoided by printing the money ( inflationary ). I’m not paying no $30,000 and I hope you will not either. Economic Implications of the Debt: False Issues [The “G” doesn’t have to pay the entire debt off because it never “dies.” ] [The “G” will live forever so it will keep “rolling it over in perpetuity” ] Going Bankrupt? Shifting Burdens Does every new born get slapped on the backside, then told he owes $26,400 ? Not quite. About 82% of the debt is owed to ourselves . Thus the public debt is a a public credit . It is a liability to the taxpayer but an asset to the people ( bondholders ). Therefore, retiring the debt would amount to a large transfer payment from U.S. citizens to U.S. citizens . The repayment would entail no decrease in the economy’s wealth or standard of living. So the babies who inherit $26,400 worth of debt will inherit almost that same amount . Whew! $30,000 each.
29. National Debt Clock 8 $24,000 National Debt Clock $7.9 $26,500 National Debt 9.1 $33,000 per second is added to the National Debt 3 4, and $4 mil per minute . or $1.3 Billion per day $124,000 $26,500
31. Sources of Government Revenue -Today Three major sources of federal taxes (90%) a. Individual income taxes b. Social Insurance c. Corporate income taxes
33. Think of your income as a L a y e r C a k e . The 1 st layer will not be taxed at all. ( $7,150 for singles) In the 2 nd layer , taxable income starts at 10% up to $14,350 . The 3 rd layer starts at 15% up to $29,050 . The 4rth layer starts at 25% up to $70,350 . The 5 th layer starts at 28% up to $146,750 . The 6 th layer starts at 33% up to $319,100 . The 7 th layer starts at 35% for those over $319,100 . With a tax cut, high earners not only get a tax cut on the top layer but all layers. Our Progressive Tax System Is Like A L a y e r e d C a k e 35% over $319,100 No tax on 1 st $7,150 10% up to $14,350 15% up to $29,050 25% up to $70,350 28% up to $146,750 33% up to 319,100
39. Changes in Marginal Tax Rates 35% 2000 1990 1980 1970 1960 1950 1940 1930 1920 Top tax rate, in percent 100% 80 60 40 20 0
40. Marginal Tax Rate 1913-2005 Top Marginal Tax Rates Year Tax Rate 1900 No Tax 1914 1% [over $3,000] [Only 1 in 270 paid this tax at all] 1930 30% [1 in every 32 was now paying taxes] 1940 81% [1 in every 3 was paying taxes] 1943 * Paycheck withholding (by the boss) was launched to stop cheating. 1950 91% 1970 70% [E veryone was paying with taxable Y] 1980 70% 2002 38.6% 2005 35% Medicare tax – 1.45% for an individual [ 2.9% for self employed ] for every dollar earned . Harrison Ford – received $25 million for 20 days work on a movie . 1.45% of $ 25 million = $362,500 x 2 = $725,000 medicare tax. [Over his 35 years on the Big Screen, his films grossed over $10 bil . Jim Carrey – gets $20 million per movie, so his tax is $580,000 . [1.45% of $20 million = $290,000 x 2 = $580,000 .]
41. Nation’s Wealthiest 5 % Pay 55 % of Income Taxes Ave. Tax Rate Top 1 % ($293,000) paid over 1/3 of all taxes – average 28% Top 5 % (+ $121,000; 6.3 mil.) paid 55% - average 24% Top 10 % (+80,000) paid 62% of all taxes – average 21.4% Top 25 % (+$50,000) paid 81% of all taxes – average 18% Top 50 % (+$25,000) paid 96% of all taxes – average 16% Bottom 50 % (63 mil. earned -$23,000) paid o nly 4 % of all taxes. There are 7.5 million millionaires & 341 billionaires . [691 in world] 40 millionaires are in the U.S. Senate
42. Billionaires of the World in 2003 [The U.S. has 50%] 691 in 2004 Worth 2.2 T [341 in U.S.]
43. 0 20 40 60 80 100 120 140 Japan Italy Belgium Canada France Spain Sweden Germany United States Netherlands United Kingdom Finland Denmark Australia GLOBAL PERSPECTIVE Public Sector Debt as a percent of GDP, 2002 Source: Organization for Economic Cooperation and Development
44. Federal Expenditures Pensions and Income Security National Defense Health Interest on Public Debt Pensions & Income Security 38% National Defense 17% Health 21% All Other 15% Interest 13% 2002 Data Total Expenditures $2,011 Billion
