ten trillion and counting

Government Borrowing

Lesson Objectives:

Students will explore:

Important economic terms related to government budgeting and borrowing
The process used for developing a government budget
Trade-offs that must be made when developing a budget
How government pays its debt
What can happen if the percentage of debt to GDP is too high

Materials Needed:

Ten Trillion and Counting DVD or Internet access to watch the video online
Student handouts: Glossary and Be a Budget Hero (Note: This activity requires access to the Internet. If classroom access is not available, assign this as homework prior to teaching the lesson. Students can complete it by using computers at home, in your school's media center or the public library.)

Time Needed: The lesson should take about 45 minutes. Watching the video clip and the discussion questions take about an hour. Add another hour if you use the entire film. An optional extension activity, You Make the U.S. Budget, requires research that will take students a class period to research and a class period to present and debate.

Procedure:

As a class, read and review the glossary of economic terms provided.
Distribute the Be A Budget Hero handout to students. Review the following background information with students concerning government budgets and borrowing:

Spending is part of fiscal policy. If you spend more than you have in your budget, it creates what is called a budget deficit. Total debt or surplus is the addition of the budget deficit or surplus from preceding years plus interest owed to anyone that is financing that debt.
A trade-off involves giving up something in order to gain something else in return as well as understanding the upside and downside to the choices that were made. You can ask the students, "Can you tell me an example of a trade-off decision you have had to make recently?" Also ask, "What trade-offs do you think the U.S. has to make when it comes to spending priorities?"
In order to understand whether the overall debt is too big for a government, total debt is often compared to the gross domestic product (GDP), which is the total value of all the goods and services produced in a country. The following link ranks countries according to their debt-to-GDP percentages. Note that the U.S. percentage is 60.8, putting it at number 23 out of the 126 countries listed. Countries with high debt percentages include Japan, Italy, Norway, France and Canada.
Governments generate revenues to cover budgetary obligations through taxation. If tax income does not generate enough money to cover spending, governments need to borrow. This borrowing takes place in the forms of bonds.
Deficit spending can help minimize or end a recession. However, if a government has too much debt and needs to borrow too much, or people or countries stop lending the money, problems could include:

The need to pay more interest
Inability to pay for important programs
Inflation
Lower growth rates
Future tax increases

As a class, if time permits, watch the entire video of Ten Trillion and Counting. If time does not permit, watch segment 5, "The Greatest Threat Is Health Care," which begins at 40:00 and runs for 7 minutes.
Use the discussion questions to guide the students through what they watched in the video.
Have students enter the following Web site that contains the Budget Hero Game.
Prior to having students play the game, review the instructions on the handout and have students click the link and complete the briefing.
Discuss and debate each of the questions on the handout. Seek multiple opinions about each of the questions and prompt students to share why they prioritized their budget decisions differently from their classmates.

Optional Extension Activity:

Divide the class into six groups.
Distribute the handout You Make the U.S. Budget and review the directions with students. Each group should complete the budget assignment and also research one of the six categories and prepare a presentation. You may wish to assign each group a category, or let them choose, making sure that each category is allocated.
When their research is completed, each group should share its findings with the whole class. Discuss with the class what would be an acceptable budget for everyone.

Resources:

The Congressional Budget Office Web site includes charts, graphs, projections, historical data, Webcasts and blogs on key issues surrounding the U.S. government budget.

Method of Assessment:

Class participation
Completion of homework assignments