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PONDER AND PREDICT You will work hard for many years to build your wealth and acquire things of value. Unfortunately, wealth can be wiped out in an instant if you haven’t taken the proper steps to protect the valuable things you own. How do you protect assets against loss? ______________________________________________________ ______________________________________________________
__________________________________________________________________________________ __________________________________________________________________________________ __________________________________________________________________________________ Many politicians and economists argue that the U.S. should not run its finances like a person or a household would. People who hold this view believe that high government spending is good for the economy because money spent by the government goes directly into salaries for American government workers and contracts for companies serving the government. According to them, drastically cutting government spending would harm the economy, because government workers would have to be laid off, private companies would lose government contracts, and people who rely on government benefits would see their income reduced. Proponents of deficit spending say that government should be able to spend more than it makes. They say that the US government is not like an individual or a family; it can afford to go into debt because it can regulate interest rates and because it has massive amounts of wealth and income to use as collateral and to pay interest. However, other economists and politicians claim the U.S. should plan government spending as you would plan a personal budget. They claim that when the government spends more than it takes in, it actually harms the economy, by driving up prices through inflation and increasing interest rates for everyone, because the government borrows so much money. They warn that, just like a person who keeps borrowing more and more money, the government will have higher and higher interest payments as time goes on, and that one day, creditors may stop lending money to the U.S. government. Advocates of these views say Congress should pass PRODUCT PREVIEW DEBATE, PERSUADE, INFORM Balanced Budget Amendment or Not? The United States government has a budget, but it definitely doesn’t follow the principles of personal or household budgeting you learned in this lesson. In 2016, it was estimated that the federal government spent $544 billion dollars more than it made in revenue from other sources. Cumulatively, years of overspending have left the federal government with a whopping debt of about $14 trillion. (“Budget.” Congressional Budget Office, CBO. gov, Web.) When the government’s spending exceeds its revenues it is called deficit spending .
THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY 269
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