Federal Deficits and the National Debt

Self-Check Questions

Debt has a certain self-reinforcing quality to it. There is one category of government spending that automatically increases along with the federal debt. What is it?

Hint:

As debt increases, interest payments also rise, so that the deficit grows even if we keep other government spending constant.

True or False:

  1. Federal spending has grown substantially in recent decades.
  2. By world standards, the U.S. government controls a relatively large share of the U.S. economy.
  3. A majority of the federal government’s revenue is collected through personal income taxes.
  4. Education spending is slightly larger at the federal level than at the state and local level.
  5. State and local government spending has not risen much in recent decades.
  6. Defense spending is higher now than ever.
  7. The share of the economy going to federal taxes has increased substantially over time.
  8. Foreign aid is a large portion, although less than half, of federal spending.
  9. Federal deficits have been very large for the last two decades.
  10. The accumulated federal debt as a share of GDP is near an all-time high.

Hint:

  1. As a share of GDP, this is false. In nominal dollars, it is true.
  2. False.
  3. False.
  4. False. Education spending is much higher at the state level.
  5. False. As a share of GDP, it is up about 50.
  6. As a share of GDP, this is false, and in real dollars, it is also false.
  7. False.
  8. False; it’s about 1%.
  9. False. Although budget deficits were large in 2003 and 2004, and continued into the later 2000s, the federal government ran budget surpluses from 1998–2001.
  10. False.