The lesson explains the concept of the debt ceiling, or debt limit, and the national debt, their implications on the US government’s financial operations and the potential consequences of hitting the debt ceiling. It also discusses extraordinary measures and possible solutions to address the national debt, including raising the debt ceiling, cutting spending, increasing revenue and implementing structural reforms to entitlement programs.

CONCEPTS

Use this video lesson on the topic of an introduction to the national debt and the debt ceiling. Learn basic economic and related concepts of

• Debt Management
• Budgeting
• Government spending
• Credit
• Taxes

GRADE LEVEL

7-12th grades. Middle School. High School

TIME REQUIRED

30-45 minutes. It may be necessary to adjust the lesson plan and allocate more or less time to certain topics, depending on the needs and interests of the students.

PROCEDURE

Hand out the worksheet below (see the GET LESSON button near the bottom of the page).

Show students the video and have and have them complete the worksheet.  Review the questions on the worksheet.  A more comprehensive and detailed lesson plan can be accessed below for further instruction and study.

Understanding the Debt Ceiling

After watching the video, have students tell what the most important things they learned from the video.

Additional Resources

See our additional resources on basic economics and finance:

• Basic Economics and Finance lessons

 

Lesson Plan: Understanding the Debt Ceiling and National Debt

Objective:

Students will be able to understand and explain the concept of the debt ceiling, national debt, and its impact on the economy.

Materials:

• Video: “Understanding the Debt Ceiling and National Debt” (see above).
• Whiteboard and markers
• Handouts with key terms and questions
• Computer or mobile devices for research

Procedure:

Introduction (10 minutes)

Begin the class by asking students what they know about the national debt and the debt ceiling. Write down their responses on the board.

Introduce the topic by explaining that the government borrows money while it spends more than it earns, and that the national debt and debt ceiling play a crucial role in this process.

Video (15 minutes)

Show the video “Understanding the Debt Ceiling and National Debt.”

Encourage students to take notes during the video, paying particular attention to the key terms and concepts covered in the video.

Discussion (20 minutes)

Divide the class into groups of 3-4 students and distribute handouts with key terms and questions related to the video.

Ask the students to discuss the questions in their groups, using the handouts and their notes from the video as a reference.

Walk around the classroom and provide support and guidance as needed.

Research and Presentations (25 minutes)

Ask students to use their devices to research the impact of the national debt on the economy.

Instruct them to find at least three different sources of information and take notes on the key points.

Ask students to work in groups to prepare a brief presentation on the topic, including the key points they found during their research.

Each group should present their findings to the class, highlighting the different perspectives they found.

Wrap-Up (10 minutes)

Ask the students to summarize what they learned about the national debt and the debt ceiling.

Discuss the impact of the national debt on the economy and the role of the government in managing it.

Assessment:

Students will be assessed based on their participation in the discussion including the accuracy of their research, and the quality of their presentations.

 

Understanding the Debt Ceiling

In recent years the debt ceiling has been a contentious topic with political negotiations often breaking down and leading to the threat of government shutdown. Meanwhile, the national debt has kept rising due to ongoing budget deficits and an absence of fiscal responsibility. Raising the debt ceiling was a necessary measure to avoid an economic catastrophe, yet it also raised questions about government borrowing and its long-term effect on GDP of the United States.

Congress must navigate the complex budget process and consider debt reduction strategies in order to avert a debt ceiling crisis that could negatively affect credit ratings agencies, financial markets, and even lead to inflation or higher interest rates. Effective public debt management and responsible tax policy will be essential in solving these problems and guaranteeing long-term economic stability.

What is the debt ceiling?

A government’s debt ceiling is a legal limit on how much money they can borrow to finance operations. It sets an upper limit to how much debt a government may accumulate. In the United States, Congress periodically raises or suspends this limit in order to continue borrowing money. Without sufficient resources, governments may face defaulting on loans with severe economic repercussions.

What is the national debt?

The national debt is the total amount of money a government owes its creditors – individuals, businesses and other governments. It builds up over time due to spending more money than it receives in revenue. It includes both public debt owed to individuals and organizations outside of government as well as debt held by government accounts such as Social Security Trust Fund. In America alone, this total has increased steadily over the years until now stands in trillions of dollars.

What Happens if the Debt Ceiling Is Hit?

If the debt ceiling is breached and not raised or suspended, the government could find itself without enough money to meet its obligations such as Social Security, Medicare, government salaries and interest on the national debt. In such a scenario, they would have to prioritize which bills to pay and delay or default on. This could have serious economic repercussions such as higher interest rates, decreased value of US dollar, decline in financial markets and potential recession or depression.

What are extraordinary measures?

Extraordinary measures refer to accounting and cash management techniques the US Treasury Department can utilize temporarily in order to avoid breaching the debt ceiling. These measures may include suspending investments in certain government funds, such as the Civil Service Retirement and Disability Fund, and redeeming Treasury securities held by government accounts such as the Social Security Trust Fund. These measures enable the Treasury to free up extra cash to meet government obligations without borrowing additional money. However, these are only temporary solutions; if the debt ceiling isn’t raised or suspended, eventually there would be no other options left for paying its bills on time.

What can be done about the Debt Ceiling?

The debt ceiling can be raised or suspended through legislative action. In America, for instance, Congress has the authority to do this by passing a bill which then gets signed into law by the President. However, raising the debt ceiling can be a politically sensitive issue, with some lawmakers using it as leverage to extract concessions from their opponents. In addition to raising the debt ceiling, policymakers can also address the national debt by cutting government spending, increasing revenue through taxes or implementing structural reforms to entitlement programs such as Social Security and Medicare. Ultimately, finding a sustainable path forward requires an integrated and balanced approach that addresses both revenue and spending needs.