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Seven Things You Should Know About the National Debt

Thursday, 16 June 2011 10:25 By David Rosnick and Dean Baker, The Center for Economic and Policy Research | Report

Washington, D.C.- As talk of the debt ceiling and deficits reaches a fever pitch in the media and on Capitol Hill, a great deal of inaccurate information has clouded the reality of the national debt and deficits. A new issue brief from the Center for Economic and Policy Research describes 7 key facts about the debt, deficits and the dollar, and shows why a clear, unfiltered understanding of them is crucial to current policy debates.

7 Things You Need to Know about the National Debt, Deficits, and the Dollar,” breaks down the basic economics of these issues in a manner unclouded by political agendas or partisan spin. It demonstrates the relationships between the national debt, budget and trade deficits, and the dollar and why these relationships matter.

The brief discusses the following points:

  • The national debt is not literally a generational transfer
  • The high dollar, not the budget deficit is what causes the trade deficit and foreign borrowing
  • A large trade deficit requires that we have a very large budget deficit, extremely low private savings, or some combination thereof
  • The stock and housing bubbles led to an enormous reduction in private savings through the wealth effect
  • In times of economic weakness like the nation is experiencing now, deficit spending actually helps the economy to grow
  •  High and rising private sector health care costs in the United States are responsible for the bulk of the federal budget deficit
  • Social Security has a dedicated stream of financing and does not directly contribute to the federal debt

There has been a great deal of hype and misinformation in discussions of the debt and deficit over the past few years. With the economy still reeling from the effects of the Great Recession, “7 Things You Need to Know about the National Debt, Deficits, and the Dollar” is a must-read primer on these issues and the relationships between them.

Read the full report here.

Dean Baker

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.

David Rosnick

David Rosnick has written numerous policy papers including, The Burden of Social Security Taxes and the Burden of Excessive Health Care Costs with Dean Baker, March 2005; Poor Numbers: The Impact of Trade Liberalization on World Poverty, with Mark Weisbrot and Dean Baker, November 2004; NAFTA at Ten: The Recount, with Mark Weisbrot and Dean Baker, March 2004. He is the architect of CEPR's online calculators, including the Housing Cost Calculator, which compares the cost of owning a home relative to renting. He received his Ph.D. in Computer Science from North Carolina State University and his M.A. in Economics from George Washington University.


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Seven Things You Should Know About the National Debt

Thursday, 16 June 2011 10:25 By David Rosnick and Dean Baker, The Center for Economic and Policy Research | Report

Washington, D.C.- As talk of the debt ceiling and deficits reaches a fever pitch in the media and on Capitol Hill, a great deal of inaccurate information has clouded the reality of the national debt and deficits. A new issue brief from the Center for Economic and Policy Research describes 7 key facts about the debt, deficits and the dollar, and shows why a clear, unfiltered understanding of them is crucial to current policy debates.

7 Things You Need to Know about the National Debt, Deficits, and the Dollar,” breaks down the basic economics of these issues in a manner unclouded by political agendas or partisan spin. It demonstrates the relationships between the national debt, budget and trade deficits, and the dollar and why these relationships matter.

The brief discusses the following points:

  • The national debt is not literally a generational transfer
  • The high dollar, not the budget deficit is what causes the trade deficit and foreign borrowing
  • A large trade deficit requires that we have a very large budget deficit, extremely low private savings, or some combination thereof
  • The stock and housing bubbles led to an enormous reduction in private savings through the wealth effect
  • In times of economic weakness like the nation is experiencing now, deficit spending actually helps the economy to grow
  •  High and rising private sector health care costs in the United States are responsible for the bulk of the federal budget deficit
  • Social Security has a dedicated stream of financing and does not directly contribute to the federal debt

There has been a great deal of hype and misinformation in discussions of the debt and deficit over the past few years. With the economy still reeling from the effects of the Great Recession, “7 Things You Need to Know about the National Debt, Deficits, and the Dollar” is a must-read primer on these issues and the relationships between them.

Read the full report here.

Dean Baker

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.

David Rosnick

David Rosnick has written numerous policy papers including, The Burden of Social Security Taxes and the Burden of Excessive Health Care Costs with Dean Baker, March 2005; Poor Numbers: The Impact of Trade Liberalization on World Poverty, with Mark Weisbrot and Dean Baker, November 2004; NAFTA at Ten: The Recount, with Mark Weisbrot and Dean Baker, March 2004. He is the architect of CEPR's online calculators, including the Housing Cost Calculator, which compares the cost of owning a home relative to renting. He received his Ph.D. in Computer Science from North Carolina State University and his M.A. in Economics from George Washington University.


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