EconExtra is a series of posts that go beyond the textbook, relating current events and recent developments in economics to content standards, and providing resource suggestions to help you incorporate the current events into your lessons.

#1 Present the Issue

What do World War II and the Covid-19 Pandemic have in common? They both have driven US debt to over 100% of GDP.

Here are the headlines and key takeaways about this year’s record-breaking budget deficit announced last week.  Students can read the articles for more context.

“US Federal Budget Deficit Soars to a record $3.1 trillion” (Marketwatch)

• Relative to the size of the economy, the deficit—at an estimated 15.2 percent of gross domestic product (GDP)—was the largest since 1945, according to congressional estimates.

“US debt hasn't been this high since World War II.  That's ok....for now” (CNN)

• The amount of money that the United States owes investors has hit record levels in more than a few ways, based on newnumbers reported Friday by the US Treasury.
• Both the annual deficit and total debt accumulated over the years has topped levels not seen since World War II.
• On Friday, the US Treasuryreported that for fiscal year 2020, which ended September 30, the US deficit hit $3.13 trillion (which is an estimated 15.2% of GDP) thanks to the chasm between what the country spent ($6.55 trillion) and what it took in ($3.42 trillion) for the year.
• As a share of the economy, the 2020 deficit is more than triple what the annual deficit was in 2019.
• But Powell warns that, regardless of risk, now is not the time to cut spending and Fed officials hope for fiscal policy to help more.

#2 Set the “government debt” stage with a video

There is a relatively entertaining video from Crash Course that explains deficits, debt, and how to measure debt. It was made in 2015, so at 1:45 you will likely want to pause and provide students with updated figures. (Eerily, there is a reference towards the end of the video about a pandemic.) At under 7 minutes, it flies through the material.

Alternatively, there is a video from the Economist put out this past September on the exact same topic, but with more current information and more thorough explanations. If a British accent is entertaining enough, this video gets the job done and it worth taking an extra 2 minutes.

Both videos cover measuring debt and deficits and a percent of GDP, comparing GDP growth and interest rates (cost of servicing the debt), and who purchases the debt.  Both discuss to some extent whether deficits and debt matter. You know your students and can choose the video that is more likely to “speak” to them.

#3 Focus on the question: Is the level of US debt a concern?

Start with the following FRED blog looks at US Government debt two ways. This reinforces the discussions in both videos of GDP growth and interest rates. Students could edit/manipulate the FRED graphs if they wanted other depictions of the data (open the blog, hit "customize" button at bottom left corner of a graph.)

• Debt as a % of GDP

• Debt Cost as a % of GDP

Then take about ten minutes to watch this CNBC video to hear how today’s leading economists view the current debt situation.

#4 Discuss the issue

Students can take sides for the discussion or turn it into a formal debate.

• What facts/data are they using to support their view?
• What would have to happen in the economy for the student to change their view?
• Which economist’s arguments (from the CNBC video) did they buy?

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