US debt clock

1- How does the government borrow money (by selling bonds)
2- Who owns the national debt (who has purchased those bonds)? If the bonds are purchased by local citizens, then the interest paid on the debt will be spent in the US, thus increasing our employment and GDP. If foreigners purchase bonds, then the interest on the bond will be sent to the countries where they reside in, thus increasing their GDP.
3- We are expected to incur a deficit when the economy is in a recession. The government is spending more to encourage spending and taxes will be lower since incomes are lower (see previous chapter). At a time when we are experiencing full employment (at the natural rate of unemployment) we should be running a surplus which will have paid for the deficits accumulated previously. Today, that is not happening and despite record low unemployment you see that the federal government is growing. That implies that there is a problem with the way expenditures and revenues have been set up.
4- How bad is the deficit for future generations? A positive view of the deficit is to analyze how much worse the economic situation would have been if we had not gotten into a deficit at that time in our business cycle.
5- How can the deficit be reduced? = spending less and taxing more. Each has a negative consequence and this is a constant theme of political discussions. (page 314 – taxing the rich)
This week’s additional assignment will be based on US debt clock. The answers to the Keynesian assignment are posted where the questions were placed.