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OUTLINE: US Budget Deficit & Rising National Debt: Adverse Economic Effects
Topic Outline:
Thesis: Rising budget deficits contributes to the increase in national debt and this threatens US baking and financial stability, standard of living, and the ability to economically recover from its distressed state.
l. Rising Budget Deficits,
ll. Rising National Debt
lll. Threatens Baking and financial stability, standard of living, and the ability to economically recover
Sentence Outline:
Thesis: Rising budget deficits contributes to the increase in national debt and this threatens US baking and financial stability, standard of living, and the ability to economically recover from its distressed state.
l. Rising budget deficits year on year as a percent of GDP will increase the national debt size and share of economic output.
ll. Rising National debt as percent of GDP is unsustainable, increases chance of default, and poses severe economic consequences for the immediate, short, and long term projections.
lll. Finally, threatens baking and financial stability, standard of living, and the ability to economically recover for the short, immediate & long term projections and with numerous negative effects and consequences.
Paragraph Outline
l. Rising budget deficits year on year as a percent of GDP will increase the national debt size and share of economic output. It has proven by numerous studies, budget deficits increases national debt as a percent of GDP regardless of their annual size because they are indicate the public finances are in red ink and being spent beyond what is taken in. Thus, budget deficits are required to fill the amount of funds short the government needs to continue its operations, and to prevent a default and collapse in the immediate term. However, budget deficits come from money and funds that is borrowed from various sources and must be repaid back with interest; and this in turn causes the total national debt as a percent of GDP to rise as well as total amount of interest payments on debt to its holders. As the size of debt increases over as a percent of GDP overtime, the credibility of debt decreases and credit downgrades & worthiness of occurs, interest payments are required to increase as a percent of debt owed as bondholders require more due to fears and uncertainty about ability to repay back, , and the budget deficit increases even more as interest payment eat up more of general budget and so does the national debt. The result will be more long term and structural budget deficits and sustained increases in the national debt until a major fiscal crisis occurs to correct the budget deficits and rising debt levels.
ll. Rising National Debt as percent of GDP is unsustainable, increases chance of default, and poses severe economic consequences for the immediate, short, and long term projections. The immediate economic consequences is the risk of credit downgrade as rating agencies believe public finances are not orderly, sustainable, balanced, and likely to be safe as vehicles for investment and returns. This immediate effect will causes interest rates on everything go up, make it more difficult for all areas of society to get credit, pay back existing loans, and grow their businesses and in turn slow economic growth, reduce tax revenue, and cause more budget deficits adding on more national debt. The short term effect will be a weaker dollar, resulting from massive printing via US treasury directed by Federal Reserve to sell to foreign central banks, investors, financial institutions, etc. from a vast array of sources. The effects of the dollar weakening will be its ability to buy less, have internal and external value less overtime, and reduce spending power by all Americans. The long term effect will be fiscal crisis and the increased risk of debt default with severe economic consequences such as massive unemployment, crash in stock market, rapid crash in housing prices, severe depreciation of dollar and massive inflation, long term job loss, loss of confidence in the fiscal and financial system, reduced government services and programs in all areas, and a much smaller economic output as a result of huge economic contraction.