Wednesday, July 27, 2011

Curriculum Resource: US Debt Ceiling Issue

It is hard to teach our middle schoolers what the big debate over raising the debt ceiling is about, in part because it can be hard to understand it ourselves.  But I think the Washington Post has some great resources to help explain the debt problem in a way that even we, I mean, middle schoolers, can understand.

A great place to start is their "Five Myths and Five Truths about the Debt Ceiling" piece.

Here are two great graphics that help explain what has created such a debt crisis (in terms of budget expenditures and economic conditions):

Yellow is Bush Tax Cuts, Blue is Economic Recovery Act,
and Green is cost of  Wars in Iraq and Afghanistan
(from The Washington Post)

The Washington Post also has a wonderful interactive graphic that shows which US Senators and Representatives voted for the three programs that are driving the big increase in our national deficit.  That Venn Diagram that is is almost exclusively the Democrats who voted for the combination of the wars and the stimulus package, and almost exclusively the Republicans who voted for the wars and the tax cuts.

Another graphic demonstrates that the debt has continued to rise, regardless of which parties controlled either the White House or the Congress:


  1. Don't forget my favorite news source:,20913/

    "But seriously" - I understand the numbers (I think) but I don't understand their relevance for actual life events. That is, what will change in the world, if anything, if the debt ceiling will rise 5% more, say? These decisions seems totally abstract. I don't know if it will hasten the upcoming big "payday" (a series of big economy crashes) and by how much, and nobody probably does, either, because the system is inherently complex and thus not predictable.

  2. You are right--nobody does know what will happen. However, this data helps us understand better what has happened.

    As you can see on the one chart, Clinton held the debt ceiling level for his last term. Bush came in and argued that tax cuts would help the economy. However, the only way he could get them passed with some Democratic support was saying they would expire in 10 years, unless they had proved their effectiveness and thus would be worthy of being renewed.

    It seems pretty clear to me that the DIDN'T work, since the economy has gone down and the debt has gone up since then. However, the Tea Party people who ran on pledges of No New Taxes are considering allowing these tax cuts to expire as New Taxes, even though that was the original deal and they have clearly added to the debt, rather than boosting the economy as promised. So they are insisting on a balanced budget amendment without looking at the tax side of things. Also, if you look at the Post's interactive graphic on who voted for what, the same fiscal conservatives are voting for continued war funding, which is the second largest contributor to our new debt.

    What almost all credible economist do know is that if the country defaults on its loans, we will be considered a higher risk investment and thus will be charged higher rates on any money we do borrow in the future, which will drive up our debt ceiling even faster. Stocks and Tbills are already going down, and so people's existing investments, including their retirement funds, will probably be reduced, perhaps significantly.

    So we don't know. But it is like shaking a Magic 8 Ball, but instead of it dealing with some minor issue (we've been using it lately when my son asks if he can be excused from the table), we are using it to decide the fate of our economy. And my personal Magic 8 Ball answer would be "Outlook not so good."

  3. I can see what has happened, but not any patterns in what has happened. For example, I can see that Clinton held the debt ceiling, but I can't see what role this action played in the world, if any. It is true that the economy has gone down during certain times, but again, I can't figure out the connection of this event to tax cuts. Economies go down from myriads of events working together in complex systems. People build mathematical models where multi-dimensional differential equations or what not stand for different economic phenomena, but connections of these models with the reality are rather feeble, and the predictive power is weak. In other words, the fact of the economy going down does not mean any ONE variable has caused it. The relationships are not of the cause-effect nature.

    When Soviet banks defaulted on loans, all sorts of things happened. Savings of some people were gone, but those who strategically moved into some properties multiplied their money by thousands. Rates were jumping up or down. Also, wars started and countries fell apart. None of that was predictable to analysts even on the day-to-day basis, other than "the chaos will continue for a while, yet" and "don't keep cash, duh."

  4. But I have to confess I always feel like an idiot saying things like those above. I have this feeling everybody else finds this information meaningful, and it's just me who fails to notice patterns. I have the same feeling about most of the history, by the way. It's not patterned, so I hear some historic tales and can't take any applicable conclusion home...

  5. Well, you are certainly right. Nobody knows what will happen. It's never happened before, and life is a lot more complicated than it was during earlier economic problems. But more and more, it seems like we're going to find out...

    I see it more, or at least understand it more, as a political crisis than an economic one. The entire American system is that that we elect lots of different viewpoints, representing disparate beliefs, but that all the extremes will compromise to find a middle ground, which will end up being the best policy for the country as a whole. But we now have a small contingent that refuse to compromise for anything less than 100% of what they want. And it is throwing everything into an inability to take any action at all.

    It is ironic? fitting? prescient that this Tea Party stand is taking place at the start of the 150th anniversary of the Civil War, since that was the last time that we had a major issue that the country was absolutely unable to compromise on. And I guess ultimately it made us a better country, but in the process, more Americans died than have ever died in any other war.

    So we'll see....

  6. Another graphic. Comparing it to Manhattan skyline this time, I think:

  7. Wow! Quite a visualization...