U.S. Debt Crisis Joey Schuenke Hamilton High School College Reading and Writing Mrs.

Paquette January 7th, 2014

Abstract

This report will explain everything about the Debt Crisis in America and other countries. The constant rising of the Debt Ceiling that never seems to end. The Standpoint of the U.S. government on the crisis and the rising of the debt ceiling also how they are trying to fix it. And what could happen in the future if this is not handled immediately. I am researching this topic because it seems to be all over the news recently and doesnt seem to want to go away. I ended up finding that this problem will not end in the next few months and the debt ceiling will keep rising. Also there might be a debt default that will make everything worse for the U.S. and all of the countries that are dealing with the same debt problem.

Table of Contents Background - Process

Pg. 4 Background - Sources

Pg. 4 Background - Information

Pg.5 Important Players

Pg.5 & 6 Report Information - Around the World, What Will Happen in the Future, Americas Government Standpoints, Debt Ceiling, Fixing the Problems ..Pg 6 - 9 Essential Questions

..Pg 10 & 11 Appendix

..Pg 11 - 13 Bibliography

..Pg 14 & 15

Background - Process The U.S. Debt crisis has been an ongoing issue in the States for a very long time and

doesnt seem that it will be ending anytime soon. The debt crisis affects everything that involves money, it causes inflation and all of the other issues that people have been having with money

lately. I found this topic to be very interesting and everyone seems to be talking about the debt crisis these days. Im interested in this topic because its all over the news lately and seems to be causing a lot of stir in the government. Considering how high the debt has been getting in recent years I wanted to try and get to the roots of how this is even happening. The way I performed my research was by gathering as much information as possible from many websites to get a diverse and wide range of opinions and facts on the topic. All pieces were read over, annotated and subdivided to make it easier for me to make this Technical Report. Background - Sources Many sources were consulted, such as CNN.com and Badger link. I began my research by getting all of my information from one source, but that became a little bit of an issue considering that all of the information was a little biased and didnt show many different viewpoints. There could have been a lot of missed information about the topic that wasnt included in the website I was using for research. I couldnt really find much of the history behind the debt crisis because only till the 21st century did it really come up in the news. I know that the U.S. as a country has been in debt since the dawn of the States, but never has it been talked about as much as it has been today. Also there isnt much information about the future on the deal because they have only been stalling the debt instead of trying to reduce it. Background - History The U.S. debt was at $1 trillion before Ronald Reagan came into office in 1981. The debt got that high from just spending on wars and economic downturns. While Reagan was in office for 8 years he added on $1.9 trillion dollars from peacetime defense spending and permanent tax cuts. George H. W. Bush raised it another $1.5 trillion dollars in only 4 years of being in office. He spent it on the first gulf war and lower revenue from a recession. Bill Clinton

added another $1.4 trillion from two years of on-budget surpluses, deficit spending in other years. Bill Clinton was in office for 8 years as well. George W. Bush has put on the most debt in his 8 years of being president which is $6.1 trillion from Tax cuts, the wars in Iraq and Afghanistan, economic downturn in 2001 and recession starting in 2007. Barack Obama has added $2.4 trillion in only two years from 2009-11 as of now Obama has raised in $6.1 trillion the same as George W. bush but it barely has been 5 years since he first became president. The Debt now sits at $16.7 trillion. Important Players President Barack Obama The U.S. debt crisis is only going to get worse if Obama keeps spending at the rate that he is right now. This topic should be near the top of his list in things to try and fix in the next three years because the debt is going to keep rising and the ceiling will also keep rising. The reason the government shut down for that period of time was because they were arguing over to raise the debt ceiling or not and if the debt keeps climbing like its predicted to then the government will probably shut down more and more frequently. U.S. Treasury The U.S. treasury are the ones who control everything there is to the national debt and the flow of money in the U.S. They relate to this entire issue because they have been the ones keeping track of the national debt and need to keep bothering Obama about it to make sure this gets somewhat fixed in the future.

Report Information - Around the World The U.S hasnt been the only country dealing with debt issues. Debt Crisis analysts show that the debt crisis will continue for who knows how long and will

only be stalled for an unknown amount of time while affect almost every country involved with the U.S. Strengthening in both Europe and America will occur for on major reason; the crisis years have triggered wide economic restructuring. (Altman, 2013) This shows that Europe is dealing with nearly the same issues as the U.S. and tells that both will emerge better than before. China holds the largest amount of the US debt with $1.28 trillion, and Japan holds the second most with $1.14 trillion. (Wan, 2013) China and Japan are affected by this because they hold the most debt of America than any other country other than the U.S. of course. In Europe, countries arent lending across borders for example why would a german banker want to take a bet on Spain or Italy when there is still no common way of insuring deposits. (Foroohar, 2013) This shows that countries in europe are afraid of lending money because nearly every country is in some sort of debt crisis and dont think that anyone will pay them back.

Report Information - What Will Happen in the Future There are many question about what the U.S. will do in the future about their debt crisis. All that the U.S. seems to be doing about this situation is arguing for a long amount of time and raising the debt ceiling anyway. This time may be different because Republicans havent really organized a strategy around the issue yet. (Sahadi, 2013) This means that the republicans havent really come up with the right plan to solve this issue, but from recent news it seems that no one in the government can seem to solve anything. If a U.S. debt default happens, China and other investors will face great risks in their dollar-denominated assets, but still think that it will hurt the U.Ss credibility the most. (Wan, 2013) Seems that the biggest fear of people around the U.S. government is the possibility of a

U.S. debt default. A default would pretty much demolish the U.S.s credibility around the world, make many countries angry and make the debt crisis around the world even worse. Its getting tougher for capital to move around the world. Thats dangerous for everyone. (Foroohar, 2013) The Debt crisis is going to make it harder and harder to move money around the world considering everyone wants to hold on to every penny, euro, yen etc. they get. A debt default could rock the global economy, but wouldnt immediately shut the federal government down. (Wallace, 2013) This shows again the effects of a debt default and how bad it could be for the whole world.

Report Information - Americas Government Standpoint Meanwhile everyone is panicking about if the U.S. goes into a debt default or what they are going to do, no one know exactly what they are doing. Its not like the U.S. is completely ignoring the national debt, but it does seem they keep running in circles around what to actually do with it. The White House, meanwhile, said it wont negotiate on the issue. (Sahadi, 2013) As of now the government is being very stubborn on this issue and doesnt want to try and make any moves on it. The deal congress finally passed to reopen the government also required lawmakers to negotiate the budget. (Sahadi, 2013) This shows that the government has actually been negotiating the problem and were at least able to reopen the troubled government.

Report Information - Debt Ceiling The Debt ceiling is the maximum point that the debt can reach. The Debt ceiling hasnt really done what the name explains since its been raised so many times. A suspension doesnt technically raise the debt ceiling, but lets the Treasury

Department keep borrowing as needed to pay the countrys bills, thereby averting default on U.S. obligations. (Sahadi, 2013) The Debt ceiling might not cap the national debt, but every time the government raises it they do it to avoid have a default. Like explained earlier going into a debt default could create a lot of chaos around the world. The latest suspension of the debt ceiling will expire on February 7th. (Sahadi, 2013) The most recent debt ceiling raise is predicted to expire in early February which means come February the same thing that happened in October will pretty much happen again. Hopefully the government does something right that will make the government not shut down again.

Report Information - Fixing the Problems There have been many opinions brought forward to try and fix this never ending problem, but none of which has been anywhere near being successful. The only solution the government seems to be using is just to keep raising the debt ceiling. In the United States, a resurgent housing sector, a revolution in energy production, a remodeled banking system, and a more efficient manufacturing industry will fuel a boom. (Altman, 2013) Apparently the U.S. looks as if they will at some point make it out of this never ending hole and come back better than ever, but a lot of people dont look at it that way. The U.S. banking system has been recapitalized and thoroughly restructured since 2008. (Altman, 2013) There are a lot of facts that show this boom in the economy to fix the debt problem, which a good amount of people are forming around and trying to make it come true. They include an improving economy and a mix of fiscal restraint, primarily,

the expiration of stimulus measures, the strain of across-the-board budget cuts known as the sequester, and tax increases on high-income households during the 2013 fiscal year, which ended September 30. (Sahadi, 2013) This talks about the U.S. having an improving economy and other aspects that have ended recently because of the problem with the debt and the government shut down.

Essential Questions When will the government find a long term deal? All that the government has been doing is making short deal after short deal and the american people are getting frustrated. Once this long-term deal is made then the government can try and discuss making the final deal that puts an end to all of this rubbish.

How high will the debt ceiling become? At this point in time it seems that the debt ceiling is an infinite number from how many times its been raised recently. If president after president keeps spending at the rate of the last handful then no one will know how high the debt ceiling will become.

When will America and Europe get out of their Debt Crisis

It seems that many analysts of economies and other aspects of the government say that some of the pieces of the economy look very promising and at some point will get out. When America and Europe get out of the debt crisis those analysts feel that they will come back stronger than before.

Will the government shut down again? It is very unclear that the government will shut down again, but it seems that it will probably happen again since all they did was suspend the issue till a later date.

Will there be a Debt Default? If so, what will the effects of this? This was left unanswered because everyone would say that if there was a debt default not a specific time when. This question may not be answered in the future because there is a chance there will never be one, but it looks as if there is a good chance for one.

Appendix This Picture president by much the has gone up shows president how debt ceiling

This image shows the rise of the national debt in trillions from 1940 to 2005

Although today the national debt is at about $17.3 trillion

This shows people arriving at the GOP meeting to discuss the government shut down

Bibliography Wan, W. (2013, October 14). U.S. debt crisis spurs Chinese calls for deamericanized world. The Washington Post. Retrieved from www.washingtonpost.com/world/us-debt-crisis-spurs-chinese-calls-for-deamericanized-world/2013/10/14 Foroohar, R. (2013, April 15). The End of Easy Money. BadgerLink. Retrieved from web.ebscohost.com/ehost/delivery Sahadi, J. (2013, December 19). What the next debt ceiling fight will look like. CNN. Retrieved from money.cnn.com/2013/12/19/news/economy/debt-ceiling/ Boyd, H. (2011, July 14). Debt crisis paralysis -- U.S.A cash flow trouble. BadgerLink. Retrieved from web.ebscohost.com/ehost/delivery Altman, R.C. (2013, January). The Fall and Rise of the West. BadgerLink. Retrieved from web.ebscohost.com/ehost/delivery Estimate of When the U.S. Will Run Out of Money. (2011, July 29). The New York Times. Retrieved from

http://www.nytimes.com/interactive/2011/07/28/us/charting-the-american-debtcrisis.html?_r=0 Sahadi, J. (2013, December 20). Most Bizarre Budget Moves Congress made in 2013. CNN. Retrieved from http://money.cnn.com/2013/12/20/news/economy/budgetcongress/index.html?iid=SF_BN_Lead Sahadi, J. (2013, October 30). U.S. Deficit Falls to $680 Billion. CNN. Retrieved from http://money.cnn.com/2013/10/30/news/economy/deficit-2013treasury/index.html?iid=SF_BN_LN Wallace, G. (2013, December 15). Paul Ryan: Stay tuned for GOP debt ceiling demands. CNN. Retrieved from http://money.cnn.com/2013/12/15/news/paulryan-debt-ceiling/index.html?iid=SF_BN_Lead