MACROECONOMICS:  WEB UPDATES AND APPLICATIONS

THE FEDERAL BUDGET AND NATIONAL DEBT

Your Name

Historical Information

Answers to the following questions can be found by at the Congressional Budget Office website.  The first table begins on page 2.  You may find it necessary to magnify the page to 125 percent.  Show your work on any items involving computations.
 
 Table E-1

  1. In what year was the on-budget deficit (ignores the surplus in Social Security) the largest?  (Review the figures in the fourth column)  
  2. In what year was the total deficit (considers the surplus in Social Security) the largest?   (Review the figures in the next to the last column)  
  3. In what two years were there on-budget surpluses? 
  4. In what five years were there surpluses if the SS surplus is taken into account?  (Look in the "Total" column)
  5. By what percent did the debt held by the public increase from 1962 to 2006?  (Subtract the debt held by the public in 1962 from the debt held by the public in 2006 and then divide the difference by the debt held by the public in 1962.  Multiply your result by 100 to change it to a percent)    

  6. Compute the percent by which revenues and outlays increased from 1962 to 2006.

 

  1. Do the growth rates you computed in #6 help you see why the debt held by the public has grown over the 1962 to 2006 period?  Explain.

Table E-2

  1. In what year was the on-budget deficit the largest percent of GDP? 
  2. Does your answer coincide with the year in which the largest deficit in dollars was incurred?  (See your answer to Question 1 in the Table E-1 Section) 
  3. What has been the trend in the deficit as a percentage of GDP from 2003 to 2006? 

Table E-3

  1. What has consistently been the largest source of revenue for the Federal government over the 1962-2006 period? 
  2. What has been the second major revenue source during most of the 1962 to 2006 period? 

Table E-5

Discretionary outlays are outlays that Congress has control over.  Mandatory outlays are already built into the spending system from passage of previous legislation.  Social Security is an example of a mandatory outlay.

  1. What was the first year in which mandatory (programmatic) spending exceeded discretionary spending? (Ignore offsetting receipts) 
  2. In what year did total outlays first exceed $2 trillion? 

Table E-7

  1. What has been the largest discretionary outlay nearly every year? 

Table E-9

  1. What has been the largest outlay for mandatory spending? 

      Projections

Answers to the following questions can be found at the Congressional Budget Office website.

1.      Is a budget surplus or deficit projected for 2007? 

2.      In what future year is the CBO projecting that the budget will move from deficit to surplus?

Synthesis

Use the information that you gathered earlier and your textbook to help you answer the following questions.

1.      Why is it so hard for Congress to balance the budget?  (Consider the two major classes of outlays included in the budget; see questions relating to Tables 5, 7, and 9 above)

2.      There are two ways to get the budget in balance:  increase revenues and decrease expenditures.  Which of these two would you favor?  Explain. 

3.      What is the relationship between the yearly deficit (or surplus in a few cases) of the Federal government and the national debt?