Chapter 17: Federal Deficits, Surpluses, and the National Debt

Chapter 23: Federal Deficits, Surpluses, and the National Debt

LEARNING OBJECTIVES

The steps to achieve the learning objectives include reading sections from your textbook and the “causation chain game,” which is available directly on the Tucker web site. The steps also include references to “Ask the Instructor Video Clips,” the “Graphing Workshop” available through CourseMate on the Tucker website.

#1 - Know the major steps in federal budgetary process.

Step 1 Read the subsection in your textbook titled “Federal Budgetary Process.”

Step 2 Play the “Causation Chains Game” titled “Major Steps in the Federal Budgetary Process.”

The Result Following these steps, you have learned the federal budgetary process.

#2 - Understand financing the national debt and arguments concerning who bears the burden of the national debt.

Step 1 Read the sections in your textbook titled “Financing the National Debt” and subsections titled “Can Uncle Sam Go Bankrupt? and “Are We Passing the Debt Burden to Our Children?”

Step 2 Listen to the “Ask the Instructor Video Clip” titled “How Big Is the National Debt?” You will learn how the national debt is financed.

Step 3 Listen to the “Ask the Instructor Video Clip” titled “Should We Amend the Constitution to Require a Balanced Budget?” You will learn different views concerning the issue balancing the federal budget.

The Result Following these steps, you have learned that the U.S. Treasury issues government securities to finance deficits that increase the national debt. The burden of the debt involves two controversial issues: (1) Can Uncle Sam go bankrupt? and (2) Are we passing the debt burden to our children?

#3 - Explain the meaning of crowding out.

Step 1 Read the subsection titled “Does Government Borrowing Crowd Out Private-Sector Spending?”

Step 2 Listen to the “Ask the Instructor Video Clip” titled “What Is Fiscal Policy All About?” You will learn the problems of using fiscal policy to stabilize an economy, including crowding out.

Step 3 Listen to the “Ask the Instructor Video Clip” titled “What Is ‘Crowding-Out’ and Is It Important?” You will learn how spending and borrowing by the government can cancel spending in the private sector.

The Result Following these steps, you have learned that crowding out is a reduction in private sector consumer spending and investment because federal government borrowing to finance its deficits increase interest rates.