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Class Notes 30808 Government Deficits

Class Notes 30808 Government Deficits - Government Deficits...

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Government Deficits  – 3/10/08 Concerned about deficits b/c impact on AD and  fairness across generations. Deficit today => debt issued;   o Interest/principal will be paid by future generations 4 Parts: 1) Deficit concepts 2) Deficit trends 3) Deficit projections 4) Is zero the right number? Deficit Concepts Debt = Debt  t-1  + Deficit  t Debt is accumulated deficits Fig 1-1 shows deficit/GDP Fig 1-2 shows debt/GDP
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2007 Total On- Budget Off- Budget Revenues 18.8 14.1 4.6 Outlays 20 16.7 3.3 Deficit/Surplus -1.2 -2.5 1.3 Define: Off-budget =basically social security On-budget =everything else Now, Social Security is in surplus, collecting more than it is paying out b/c baby boom still  working. Social Security is lending  money to the rest of the government, because lock box  (Trust  Fund) is holding government bonds At some point, Social Security will redeem  these bonds, implies higher taxes in future.
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