Thursday, June 16, 2011

7 Things You Need to Know about the National Debt, Deficits, and the Dollar

There's a new briefing from CEPR called “7 Things You Need to Know about the National Debt, Deficits, and the Dollar.”
The brief discusses the following points:
  1. The national debt is not literally a generational transfer
  2. The high dollar, not the budget deficit is what causes the trade deficit and foreign borrowing
  3. A large trade deficit requires that we have a very large budget deficit, extremely low private savings, or some combination thereof
  4. The stock and housing bubbles led to an enormous reduction in private savings through the wealth effect
  5. In times of economic weakness like the nation is experiencing now, deficit spending actually helps the economy to grow
  6. High and rising private sector health care costs in the United States are responsible for the bulk of the federal budget deficit
  7. 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.

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