Lesson 28 THE NATIONAL DEBT

I. Read and memorize the following words, word- combinations and word-groups:

treasury bonds — казначейські облігації

e.g. Treasury bonds: Promissory notes (IOUs — I owe

you) issued by the U.S. Treasury, national debt — державний борг

e.g. National debt: Accumulated debt of the government,

liability — відповідальність, заборгованість, борг; пасив e.g. Liability: An obligation to make future payment; debt. But those same bonds are an asset to the people who hold them.

asset — актив

e.g. Asset is anything having exchange value in the market

place; wealth.

internal debt — внутрішній борг

e.g. All of the debt held by U.S. households, institutions,

and government entities is referred to as internal debt.

external debt — зовнішній борг

e.g. All of the bonds held by foreign households and institutions is referred to as external debt.

refinancing — рефінансування, додаткове фінансування

e.g. Refinancing: The issuance of new debt is payment of debt issued earlier.

deficit ceiling — максимальний розмір дефіциту

e.g. Deficit ceilings are explicit limitations on the size of

the annual budget deficit.

budget deficit — дефіцит бюджету

e.g. The amount by which government expenditures exceed government revenues in a given time period. Is referred to as budjet deficit.

debt ceiling — максимальний розмір боргу

e.g. An explicit, legislated limit on the amount of outs-

tanding national debt is a debt ceiling.

II. Give English equivalents of the following:

максимальний розмір дефіциту максимальний розмір боргу

позичати гроші	рефінансування
зовнішній борг	казначейські облігації
внутрішній борг	зменшення боргу

III. Fill in the blanks with appropriate words;

1. The U.S. Treasury must finance the deficit by ... money. 2. Approximately 86 per cent of U.S. national debt is ... . 3. The national debt represents not only a liabi­lity but an ... . 4. ... debt can eliminate the initial opportunity of debt-financed spending. 5. The only way to limit the national debt is ... the budget deficits. 6. New ... have been issued to replace old ... .

internal borrowing asset to eliminate bonds external

IV. Read and translate the text:

We try to take a closer look at annual budget deficits and the national debt they create. The national debt grew sporadically until World War H, then sky-rocketed. A string of

huge deficits in the 1980s increased the national debt to $3 trillion. The U.S. Treasury must finance the deficit by borrowing money. To do so it sells U.S. Treasury bonds.

The first thing to note about the national debt is that it represents not only a liability but an asset as well. Every dollar of national debt represents a dollar of assets to the people who hold U.S. Treasury bonds. Most U.S. bonds are held by government agencies, American households, U.S. banks, insurance companies and other institutions. They represent internal debt. Approximately 86 per cent of the national debt is internal.

The last major group of bondholders is foreign. All of the bonds held by foreign households and institutions is referred to as external debt. At present, external debt accounts for about 14 per cent of total U.S. debt.

New bonds have been issued to replace old bonds. This refinancing of the debt is a routine feature of the U.S. Treasury's debt management.

The most of America's national debt is internal. External debt, however, poses some special problems and can be a more legitimate worry. External debt can eliminate the initial opportunity of debt-financed spending and impose a real burden on future taxpayers.

The only way to limit or reduce the national debt is to eliminate the budget deficits that create debt. The first step in debt reduction is a balanced annual budget deficit. A balanced budget will at least stop the debt from growing further.

A deficit ceiling of zero compels a balanced budget.

Explicit debt ceilings are another mechanism for curbing the national debt. They are at best a substitute for deficit cei­

lings, If a limit is set on the national debt, the only way to stay within that limit is to reduce or eliminate the annual federal deficit.

Deficit and debt ceilings are largely symbolic efforts to force consideration of real trade offs, restrain government spending, and change the mix of output.

V. Answer the following questions:

1. What creates the national debt?

2. Who bears the burden of the national debt?

3. What does the national debt represent?

4. Why does the U.S. Treasury sell its bonds?

5. How much does the external debt account for?

6. What are the mechanisms for curbing the national debt?

VI. Define the terms:

budget deficit	internal debt
Treasury bonds	external debt
national debt	refinancing
liability	deficit ceiling
asset	debt ceiling

VII. Translate into English:

1. Купуючи казначейські облігації, люди позичають гроші урядові. 2. Президент Франклін Рузвельт обіцяв збалансувати федеральний бюджет, але не зміг зупинити зростання

дефіциту бюджету. 3. У період з 1790 до 1917 року державний борг США перевищував валовий національний про­

дукт лише в роки громадянської війни. 4. Однак після 1917 року розмір дефіциту різко зріс. 5. Уряд США володіє 1/3 усіх казначейських облігацій. 6. На приватний сектор припа­

дає майже половина державного боргу. 7. Іноземні позики підвищують рівень споживання, інвестицій і фінансування. 8. Сполучені Штати Америки використовують позики для фінансування урядових витрат.

VIII. Read and dramatize the following dialogue:

A.: It may be comforting to know that most of the U.S. national debt is owned internally, and much of it by the government itself.

S.: How much of a «burden» does the debt really represent?

A.: It is not so evident. None of the debt has been repaid since you were bom. The federal government has borrowed more money each year to finance deficits, adding to accumulated debt.

В.: see, the federal government has simply borrowed new funds to pay debts off, but every debt requires debt- servicing.

A.: Yes, with $3 trillion in accumulated debt, the U.S. government must make enormous interest payments each year. In 1991 the U.S. Treasury paid over $173 billion in interest charges,

В.: Who gets the interest payments?

A.: As noted, most of the nation's outstanding debt is interna! — that is owned by domestic households and institutions. Therefore most interest payments are made to people and institutions within the United States. Most debt servicing is simply a redistribution of income from taxpayers to bondholders.

B.: It seems to me that in many cases the taxpayer and bondholder are the same person.

A.: In all cases, however, the income that leaks from the circular flow in the form of taxes to pay for debt servicing returns as interest payments.

B.: As a result, total income is unchanged. Now I understand why in policy debates, the aggregate size of the national

debt is the focal concern. The key policy questions are whether and how to limit or reduce the national debt.

IX. Make up your own dialogue using the following expressions:

to reduce the annual federal deficit	to limit national debt
to eliminate the budget deficit	to finance the deficit
to get interest payments	to impose a burden on
to replace old bonds	internal debt
external debt	debt ceilings

X. Change the following sentences using participle phrases instead of the subordinate clauses:

M o d e l A : The man who was sitting at the window made an interesting report yesterday.

The man sitting at the window made an interesting report yesterday.

1. People who hold bonds and stocks hope to realize a financial gain from these assets, 2. The U.S. Treasury that finances the deficit, sells U.S- Treasury bonds. 3. Explicit debt ceilings that curb the national debt are another mechanism of economic forces, 4. The federal government that borrows money to finance deficits, adds to accumulated debt. 5. Much of a burden that represents a debt is paid by the government itself.

M o d e l В: The decisions which were adopted at the conference are supported by many scientists. The decisions adopted at the conference are supported by many scientists.

1. All of the debt that is held by U.S. households, institutions and government entities is referred to as internal debt. 2. The ways to limit the national debt which were discussed at the conference are worth consideration. 3. The problem of external

debt which was touched upon during the round-table talk is considered now. 4. The news which was received yesterday impressed everybody greatly. 5. National debt which is owned internally is referred to as internal debt.

XI. Translate into English using Participle I, Participle II where it is necessary:

1. Робота, яку він розпочав, дуже важлива, 2. Студенти прослухали кілька лекцій про державний борг, які прочитав

відомий професор. З, Як звуть доповідача, який розпові­

дає зараз про заборгованість? 4. Представники іноземних фірм сиділи в конференц-залі І обговорювали питання рефінансування об'єктів. 5. Банки та страхові компанії ску­

повували облігації, випущені казначейством країни. 6. Рішення щодо зовнішнього боргу, яке було ухвалене на конференції, змінило подальшу політику країни.

XII. Communicative situations:

1. You are a member of the government of a country N.

Try to limit or reduce the national debt of the country. Speak about it.

2. Discuss the government's attempts to curb the national debt.