Deficits & Debts: Crash Course Economics #9

What is debt? What is a deficit? And do these things have different outcomes for individuals and nations? Adriene and Jacob answer all these questions and more on this week’s Crash Course Econ. Deficit and debt are easy to misunderstand, but luckily, they’re also pretty easy to understand. This week we’ll explain what deficit and debt are, and talk about what the sources of deficit and debt are for the US Government. Also, we’ll take a very special trip to Cliffordonia to try and understand these concepts and get a look at what a colonial-era space program might have looked like.

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Both President Bill Clinton and congressional Republicans are claiming credit for the first U-S budget surplus since 1969.

Now, they have to figure out what to do with the extra 70 (b) billion U-S dollars.

Both sides say they want to save the pension for the elderly, known as Social Security.

The U-S is celebrating the end of three decades of red ink.

On Wednesday President Bill Clinton unveiled an electronic display ticking off the extra cash flowing into federal coffers.

The White House estimates that when all the cash is counted, the surplus for the fiscal year ending Wednesday night, will be in the tens of (b) billions of dollars.

SOUNDBITE: (English)
“Tonight at midnight, America puts an end to three decades of deficits and launches a new era of balanced budgets and surpluses. While the numbers will not be official until the end of the month, we expect the 1998 surplus to be about 70 (b) billion dollars (U-S). ”
SUPER CAPTION: Bill Clinton, President of the United States

The President said the payoff was a result of touch choices and fiscal discipline.

But the need for discipline is far from over.

Clinton said the government must resist the temptation to spend the extra cash on tax cuts.

Saving the financial safety net for the elderly, Social Security, must come first.

SOUNDBITE: (English)
“And if we squander this surplus and start spending a little here, a little there, a little yonder on the tax cuts, just because we are a few weeks before an election, before we do this, what are we going to do when times get tough and we still have to take care of it?”
SUPER CAPTION: Bill Clinton, President of the United States

The President however, wasn’t the only one claiming credit for the turn around.

Republicans had their own surplus sign, and their own way of looking at things.

Senate Budget Committee chairman Pete Domenici says the credit belongs to the American people, the Federal Reserve Board and Congress — as well as the White House.

SOUNDBITE: (English)
“I believe it’s very, very important that the American people know that we (Congress) forced some changes around here that really brought us to where we are. And, I have to say, led by the Republican Congress we entered into an agreement with this president and he should share part of that credit. Clearly, we deserve our share. Without that, nothing would have happened.”
SUPER CAPTION: Senator Pete Domenici, Republican, Chairman of Senate Budget Committee

Now, the battle is on over what to do with some of the surplus.

Some Republicans are proposing a tax cut, while President Clinton is asking for spending increases.

Republican Senator Phil Gramm, says both of those options would take money away from social security coffers.

SOUNDBITE: (English)
“I don’t see how the president with a straight face can say, ‘Don’t spend the social security surplus by giving tax cuts’, and then turn around and support spending 20 (b) billion dollars of it on government programmes. It seems to me that if you want to save social security, and use the surplus for that purpose, you’ve got to oppose both the tax cuts and the spending increases. And the president has changed his position.”
SUPER CAPTION: Senator Phil Gramm, Republican, Texas

The surplus announced on Wednesday is an estimate – it won’t be final until mid-October.

Whatever the final tally, it’ll be the government’s first black ink in almost 30 years, providing a political boost to both parties in upcoming Congressional elections.

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21 thoughts on “Deficits & Debts: Crash Course Economics #9”

  1. Phillip R Jorgensen

    The U.S government does not borrow money. The Federal Reserve Bank prints money by way of keystrokes and credits or debits accounts.

    The Fed is a government entity that operates like a private entity. An act of Congress created the Fed and Congress ultimately decides what the money will be spent on. In other words Congress create budgets and appropriate funding.

    At least that is my understanding and the debt is not a problem until there is more money than resources which will cause inflation.

  2. Dude if you don't want to teach don't fking teach what's with the speech rate have you not taken COM101 in college? literally you're faster than most of the rappers out there

  3. William Wallace

    Wow… someone has my first name for a last name. o/ Cliffordonia may be broke, but it's going to legalize and get out of debt. 😉 Also it's moving away from fiscal policies that put it there to start with.

  4. World's biggest debtors;
    Our gold NY Tresury 7000 gold tons + Ft. Knox 4500 = our total gold 11500 tons.
    11500t x 32,150oz x $1300 = $481 Billion

    2018 trade deficit = $566B, 2018 national debt $21 Trillion…. this means all our gold leaves over $20 trillion in debt… or our gold does not cover one year of trade deficit! We really are great borrowers!!!

    1989 fall of USSR why??

  5. The signs of reducing health care costs are false. If the American government continues like this, then what happened to Greece will happen to America!

  6. NathanRyanAllen

    Love you guys, but Debt to GDP is a meaningless apples to oranges measurement that ultimately equates to nothing.

  7. at 3:02 the graph shows debt adjusted inflation as a negative percentage compared to the GDP. What does this represent, considering the us doesn´t have negative debt?

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