Economic Policy • Economic Policy
Objective: Students will define the national debt and consider issues that impact it.
- Describe the different approaches represented by supply-side and demand-side fiscal policy. How are these policies reflected in the platforms of the Democratic and Republican parties in the modern day United States?
- Briefly describe the primary areas where the U.S. government spends money. What surprises you the most about where government spending goes?
Notes on Implementation:
- Extend the activity by having students create an infographic about the national debt. The infographic should include facts and statistics designed to educate their peers about what the national debt is and how it is affected by historical events.
- Have students conduct research to create a timeline of factors influencing the national debt since 2000. Students may consider the impact of specific events (such as the September 11 events and subsequent military actions) and policies (such as taxation measures and congressional actions to raise the debt ceiling).
- Provide additional support to students by reviewing key terms (such as debt, deficit, surplus, balanced budget, revenues, expenditures, and GDP).
Student Activity: Students can access the below activity in the Economic Policy Topic Center within the American Government database.
The national debt (or public debt) is the federal government's total unpaid debt. When the government spends more money on goods and services (like Social Security, welfare, Medicare, national defense, interest, health, and education) than it takes in (largely from taxes), it must borrow money. When the government spends more money than it collects, the budget has a deficit. Deficit spending causes concern because the government must borrow money to pay for its spending and is charged interest on the money it borrows until repayment.
In this activity, you will learn about the national debt, discuss factors that contribute to the national debt, and give an opinion about the debt and whether or not the federal government should be required to have a balanced budget.
1. Begin by thinking about what you think of when you hear the word debt. Create a word web to record some ideas.
2. Review the resources above to learn more about the national debt. Find definitions for the following terms: GDP, interest debt, balanced budget, deficit spending, mandatory spending, discretionary spending.
3. In addition, visit US Debt Clock.org to see the current debt in real time. On your word web, add one or two words or phrases that describe how you felt when you saw the debt in real time.
4. The line graph below shows the U.S. federal debt as a percentage of gross domestic product (GDP). GDP is a measure of the value of all the goods and services sold by the country in a year. Basically, GDP is what the country earns. The debt is what the country owes. Economists use the debt to GDP measurement to evaluate the country's ability to repay its debts.
Use the line graph to answer these questions:
At what point in history prior to 2010 was the national debt to GNP ratio the highest?
What accounts for this spike?
During what decade of the nineteenth century (1800s) was did the debt increase?
What accounts for this spike?
Why did the national debt increased in the 1930s?
5. Next, review this infographic, showing information about the federal budget in 2017. Take a look at the "Spending" pie. Are you surprised about the amount of the budget allocated for interest on the national debt? What surprises you most about where government spending goes?
6. Discuss your findings with a partner. What factors have led to the major increases in the national debt? Based on what you have read, do you think the national debt represents a problem? Do you think the federal government should be required to balance its budget? Are there areas of the budget that you think should be cut back to reduce the national debt? Why or why not?
Through economic policy, the government seeks to maintain stability for the national economy.
Possible Answers for Activity:
At what point in history prior to 2010 was the national debt to GNP ratio the highest? In 1950.
What accounts for this spike? World War II.
During what decade of the nineteenth century (1800s) was did the debt increase? In the 1860s.
What accounts for this spike? The American Civil War.
Why do you think the national debt increased in the 1930s? New government programs were put in place to pull the country out of the Great Depression.
In discussion, students should recognize that the national debt is affected by outside events, especially war, as well as by the economy, as seen in the Great Depression. Students may also recognize that mandatory spending, especially for Social Security, Medicare, and Medicaid contribute to the government's debt problem.
Some students may say that the rising debt is a problem because of the size of the debt, which is the highest it has ever been in history, and the fact that it will be passed down to future generations. Students who believe the debt represents opportunity may indicate that it enables the government to support its programs and keep the economy running smoothly.
"Economic Policy." History Hub, ABC-CLIO, 2019, historyhub.abc-clio.com/Support/Content/2182462?cid=257. Accessed 6 Dec. 2019.