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    ECON 2 GROUP 3 Handling National Debt After ARRA

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    honghagiang.forwork
    The document summarizes how the US handled the national debt in the aftermath of the American Recovery and Reinvestment Act (ARRA). It discusses that the ARRA increased government spending and debt. To manage the debt, the US government ran budget deficits, issued treasury bonds for the Federal Reserve to purchase, and increased the debt ceiling to borrow more. While this raised short-term debt, the deficits were seen as necessary to stimulate the economy during the recession.

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    ECON 2 GROUP 3 Handling National Debt After ARRA

    Uploaded by

    honghagiang.forwork
    12 views17 pages
    The document summarizes how the US handled the national debt in the aftermath of the American Recovery and Reinvestment Act (ARRA). It discusses that the ARRA increased government spending and debt. To manage the debt, the US government ran budget deficits, issued treasury bonds for the Federal Reserve to purchase, and increased the debt ceiling to borrow more. While this raised short-term debt, the deficits were seen as necessary to stimulate the economy during the recession.

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    The document summarizes how the US handled the national debt in the aftermath of the American Recovery and Reinvestment Act (ARRA). It discusses that the ARRA increased government spending and debt. To manage the debt, the US government ran budget deficits, issued treasury bonds for the Federal Reserve to purchase, and increased the debt ceiling to borrow more. While this raised short-term debt, the deficits were seen as necessary to stimulate the economy during the recession.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    12 views17 pages

    ECON 2 GROUP 3 Handling National Debt After ARRA

    Uploaded by

    honghagiang.forwork
    The document summarizes how the US handled the national debt in the aftermath of the American Recovery and Reinvestment Act (ARRA). It discusses that the ARRA increased government spending and debt. To manage the debt, the US government ran budget deficits, issued treasury bonds for the Federal Reserve to purchase, and increased the debt ceiling to borrow more. While this raised short-term debt, the deficits were seen as necessary to stimulate the economy during the recession.

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    You are on page 1of 17

    HOW DOES THE US HANDLE

    THE AFTERMATH OF ARRA ON


    NATIONAL DEBT?
    Group 3
    Pham Gia Khang, Hong Ha Giang,
    Nguyen Dang Thuc, Ly Phuc Thanh
    AGENDA
    What is ARRA? The aftermath

    A. Empirical Evidence
    What is it and its effect?
    B. Explanation

    How did the US government manage the national debt?


    How did the
    A. Methods B. Debt Ceiling C.Budget Deficit
    I. What is ARRA?
    Definition ARRA ($ billion)
    $275 $288
    The American Recovery and Reinvestment Act of 2009
    (ARRA) was a fiscal stimulus bill signed by President
    Barack Obama on Feb. 17, 2009, aiming to stimulate the
    economy by preserving jobs and creating new ones.

    It earmarked expenditures for: It targeted: $224


    nationwide healthcare tax cuts Recovery Relief Reinvestment
    infrastructure tax credits
    education improvements and extended unemployment benefits to families
    I. What is ARRA?
    The effect of ARRA cannot be deemed negative or positive
    due to controversial points of view
    (in terms of Job Creation and Retention, Timing of Effects,...)

    Congress added to ARRA spending in subsequent budgets,


    eventually raising the total cost to $831 billion
    between 2009 and 2019
    II. Aftermath
    Empirical Evidences

    Government debt increased after the


    Great Recession. As the government
    needed resources to support many
    areas during the Recession, therefore,
    the government debt increased as a
    result.
    II. Aftermath
    Empirical Evidences

    The increase in debt ratio indicates the


    ability to repay the debt. High ratio
    indicates high possibility of a default.
    Explanation
    Hypothesis

    The increase in government debt is resulted from an accumulative increase in


    primary deficit and real interest rate
    Tax Revenue
    Empirical Evidence

    Since 2010, due to the effect of fiscal


    years, US tax revenue, gradually
    increased, except for 2019 - 2020
    Government Spending
    Empirical Evidence

    From 2009 to 2020, the expenditure of the


    United States also increased gradually
    Government’s budget
    Empirical Evidence

    From 2000 - 2028, the US government runs


    a budget deficit
    Real Interest Rate
    Empirical Evidence
    (US Real Interest Rate (%) from 2008 - 2021)

    From 2008 - 2011, the real


    interest rate decreased
    sharply
    From 2011 - 2019, the real
    interest rate increased sharply,
    despite fluctuations
    From 2019 - 2021, the real
    interest rate decreased
    significantly
    Conclusion
    From hypothesis to empirical evidence

    As the US government has run deficits since


    2008, the deficits contribute to the existing
    debt of every year. Applying the above formula
    of government debt in year t the debt increases
    over time.
    III. How did the US government
    handle the debt
    Methods

    Run budget deficit Issue Treasury bonds for the Fed to buy Borrowing debt to pay debt
    III. How did the US government
    handle the debt
    Debt ceiling

    To avoid default, the US government set a limit


    for government debt. During ARRA, the US
    government invested in many sections and
    increased the debt ceiling to lend more to
    relieve the burden on the government budget.
    Witnessing a strong increase since October
    1990 and a sharply increase on Aug 2021 and
    still increasing until now.
    III. How did the US government
    handle the debt
    Runs budget deficits

    The government ran budget deficits during this


    period as a deliberate strategy to support
    economic recovery. While this increased the
    national debt in the short term, it was
    considered necessary to combat the economic
    downturn in the long run.
    III. How did the US government
    handle the debt
    Why does the US government use deficits

    The US government decided to use economic


    growth (increase spending and investment with
    a sustained interest rate level) to prevent debt
    increases over the ceiling and resulting in
    default.
    run deficit -> GDP increase -> ratio decrease
    Thank you for listening
    Reference

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