Bài giảng Macro - Chapter 11 Deficits, Surpluses, & the Public Debt

Chapter 11Deficits, Surpluses, & the Public DebtSLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGEIn this chapter you will learnWhat a budget deficit and a budget surplus are, and their connection to the public debtAbout the recent history of Canada’s budget surpluses, deficits and public debtThe misconceptions about budget deficits and the national debtThe substantive issues about budget deficits and the public debtThe effect of the recent budgetary surplusChapter 11 TopicsDeficits & Debt: DefinitionsBudget PhilosophiesThe Public Debt: Facts & FiguresFalse ConcernsSubstantive IssuesDeficits & Surpluses: 1990 to the PresentOptions for the SurplusesDeficit & Debt: DefinitionsBudget DeficitAnnual amount by which government expenditures exceed taxesE.g. 1996/97 deficit = $13.5 billionPublic DebtAccumulation of all past deficitsE.g. 2000 public debt =$650 billionChapter 11 TopicsDeficits & Debt: DefinitionsBudget PhilosophiesThe Public Debt: Facts & FiguresFalse ConcernsSubstantive IssuesDeficits & Surpluses: 1990 to the PresentOptions for the SurplusesBudget PhilosophiesAnnually Balanced BudgetG = T every yearIntensifies the cycle (pro-cyclical)Politically responsible?Budget PhilosophiesCyclically Balanced BudgetG = T over each business cycleDeficits in recessionary downswingsSurpluses in inflationary upswingsCounter-cyclical (stabilizes the cycle)Not workable in practiceAnnually Balanced BudgetBudget PhilosophiesCyclically Balanced BudgetAnnually Balanced BudgetFunctional FinanceBalancing the budget is of secondary importancePrimary focus is on stabilizing economy (counter-cyclical policies)May result in a large public debtChapter 11 TopicsDeficits & Debt: DefinitionsBudget PhilosophiesThe Public Debt: Facts & FiguresFalse ConcernsSubstantive IssuesDeficits & Surpluses: 1990 to the PresentOptions for the SurplusesThe Public Debt: Facts & FiguresThe Public Debt: Facts & FiguresCausesWarsRecessionsLack Of Political WillThe Public Debt: Facts & FiguresQuantitative AspectsDebt & GDPrelative size of the debt now decreasingInternational Comparisonsour debt has grown rapidlyGlobal Perspective 11-1Canada has a relatively high public debt, as a percentage of GDPThe Public Debt: Facts & FiguresQuantitative AspectsDebt & GDPInternational ComparisonsInterest Chargesrecently have begun to declineThe Public Debt: Facts & FiguresThe Public Debt: Facts & FiguresQuantitative AspectsDebt & GDPInternational ComparisonsInterest ChargesOwnershipforeign-owned debt an issue© 2002 McGraw-Hill Ryerson Ltd.Macroeconomics, Chapter 1117Total debt: $651 billionThe Public Debt: Facts & FiguresQuantitative AspectsDebt & GDPInternational ComparisonsInterest ChargesOwnershipAccounting & InflationChapter 11 TopicsDeficits & Debt: DefinitionsBudget PhilosophiesThe Public Debt: Facts & FiguresFalse ConcernsSubstantive IssuesDeficits & Surpluses: 1990 to the PresentOptions for the SurplusesFalse ConcernsBankruptcy Refinancing TaxationBurdening Future Generationsmost of the burden is on current taxpayersChapter 11 TopicsDeficits & Debt: DefinitionsBudget PhilosophiesThe Public Debt: Facts & FiguresFalse ConcernsSubstantive IssuesDeficits & Surpluses: 1990 to the PresentOptions for the SurplusesSubstantive IssuesIncome DistributionIncentivesExternal DebtCrowding Out & the Stock of CapitalIgInvestment (billions of dollars)Real interest rate (percent)Increasing the debt mayput upward pressure oninterest rates. The higher interest rates may reduce private Investment (Ig)16141210 8 6 4 2 05 10 15 20 25 30 35 40The Crowding Out EffectFigure 11-2© 2002 McGraw-Hill Ryerson Ltd.Macroeconomics, Chapter 1123The Crowding Out EffectQualificationsPublic InvestmentPublic-Private ComplementaritiesIgReal interest rate (percent)16141210 8 6 4 2 05 10 15 20 25 30 35 40The Crowding Out EffectThe crowding out effect may be partially offset by increased private investment, due to improvements in infrastructureInvestment (billions of dollars)Figure 11-2© 2002 McGraw-Hill Ryerson Ltd.Macroeconomics, Chapter 1125Chapter 11 TopicsDeficits & Debt: DefinitionsBudget PhilosophiesThe Public Debt: Facts & FiguresFalse ConcernsSubstantive IssuesDeficits & Surpluses: 1990 to the PresentOptions for the SurplusesDeficits & Surpluses: 1990-2000deficits were enormous during the early 1990sbudget surpluses appeared in late 1990ssurpluses expected to grow through the 2000s© 2002 McGraw-Hill Ryerson Ltd.Macroeconomics, Chapter 1128Source: Department of FinanceAnnual budget deficits throughout most of the 1980s & the first half of the 1990s gave way to surpluses in the late 1990sChapter 11 TopicsDeficits & Debt: DefinitionsBudget PhilosophiesThe Public Debt: Facts & FiguresFalse ConcernsSubstantive IssuesDeficits & Surpluses: 1990 to the PresentOptions for the SurplusesOptions for the SurplusesPaying Down the Public DebtReduce TaxesIncrease Public ExpendituresCombinations of PoliciesChapter 11 TopicsDeficits & Debt: DefinitionsBudget PhilosophiesThe Public Debt: Facts & FiguresFalse ConcernsSubstantive IssuesDeficits & Surpluses: 1990 to the PresentOptions for the Surpluses