Understanding The Federal Budget
Chapter 1: History of the National Debt*
Chapter 1: History of the National Debt begins
with an explanation of the relationship between federal expenditures,
revenues, deficits, and the national debt and why it is important to view
these entities relative to the size of the economy. Particular attention is
paid to definitions and concepts that are needed to understand these
The history of the national debt from 1929 to the
present is then examined in this chapter. It is shown that the primary sources
of this debt are 1) increases in defense expenditures associated with war, 2)
economic downturns associated with recessions and depressions, and 3) cutting
taxes in response to increasing government expenditures.
The appendix at the end of this chapter gives a brief
explanation of some the ways we measure aggregate economic variables (such as
total output, the average price level, and productivity) and why these
aggregate measures are important to an understanding of the federal budget.
Understanding The Federal
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chapter was formally Chapter 11 in
Where Did All The Money Go?