Handout 3 – More on the National Debt

In this handout, we are going to continue learning about the national debt and you’ll learn how to use Excel to perform simple summaries of the information. One of my colleagues, Dr. Chris Malone, has collected data on the U.S. national debt that goes back as far as 1791. The data can be found in the file NationalDebt.xlsx found on the course website. Using this file, answer the following questions:

Questions:

1. In which year was the national debt the largest?

2. In which year was the national debt the smallest? Note: Use the directions above and the sort function to accomplish this task. Once you have obtained this value, hit the undo button.

3. Create a plot of the national debt over time. To do this, you’ll want to create a scatterplot in Excel.

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Directions: First, highlight the cells containing the data. Next, you can use the sort function located in the Data tab to choose the column you want to sort by.

Directions:

a. Highlight the data in columns B and C. b. Then under the Insert menu choose the scatterplot option as shown below.

Sketch the graph you get below.

4. Use two or three sentences to discuss what you learned from looking at this plot.

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The graph created above shows an increasing trend in the national debt over the years. This shouldn’t be too surprising since it is unreasonable to assume the U.S. would accumulate zero debt in a given year. However, the goal would be to at least slow the rate in which the national debt is increasing each year. As was seen in Handout 2, one way to observe the change in the national debt from year-to-year is to compute the Absolute Change from year-to-year. For example, the absolute change from 2016 to 2017 would be:

$20,244,900,016,053.50 - $19,573,444,713,936.70 = $671,455,302,116.80

Next, let’s find the absolute change for every year in the data set. This would take forever if we did this by hand, but we can use formulas in Excel to accomplish this task much quicker (and with fewer errors!).

First, you’ll want to close (without saving) and reopen the data set so it’s again sorted by year.

Next, label Column D by typing “Absolute Change” into cell D1.

Enter the following formula into cell D2 to compute the absolute change from 2016 to 2017. This tells Excel to subtract the value in cell C3 from the value in the cell C2 (which is what I did above).

Once you hit enter, Excel should return the values as follows:

To do this for the remaining years in the data set, you can copy this formula down the column for the remaining rows of values. To do this click on cell D2 which has the formula you want to copy. Then move your mouse to the bottom right corner of the cell until your mouse pointer turns into a thin cross-hair (It should look like this +). Next click and drag all the way to the last cell with data (D228). When you let go, Excel will automatically fill all these cells with the formula and the values should appear in each cell. (Note: If you end up with the same number in each cell, then the formula wasn’t copied accurately.) You may want to check a few cells just to make sure the auto-fill worked properly. The first few rows should look like the ones below.

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Questions:

5. What does it mean if the absolute change from year-to-year is really close to 0? Explain.

6. What does it mean if the absolute change is a really large positive number? Which year had the largest positive change?

7. What does it mean if the absolute change is negative? Are there any negative values?

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Directions: The easiest was to sort the data using the absolute change is to do the following.

Copy the Absolute Change column (just this column) in the worksheet. Then click on the column next to it (Column E) and choose Paste Special from the paste

menu.

Next, choose values from the menu that pops up.

Lastly, you can now sort based on the “new” Absolute Change column (I called mine Absolute Change2) to find the largest (sort by descending values). Once you’re done, you’ll want to unsort the data by hitting undo.

8. What is the most recent year that the U.S. national debt decreased from the previous year?

9. Suppose the absolute change values were the same every year. What would this mean?

10. Are the absolute change values roughly the same? Explain your answer.

Now, create a plot of the absolute change values from 1980 to 2017. Sketch your plot below.

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Directions:

First, you’ll need to highlight column B and column E at the same time. To do this, click on column B, then hold down the Ctrl key and click on column E (while holding the Ctrl key down). Your spreadsheet should now look like the one below.

Next click the Insert tab and again choose a scatterplot.

11. Discuss the general trends in this plot. What is learned from considering a plot like this? Explain.

12. From the graph, we can see the change is not constant. Discuss the trends in this plot for much of the 1990s. Also, what happened to the change between the years 2000 and 2008? What about after 2008? Can you think of any events in history that may explain these trends? Discuss.

Another method of measuring change that was discussed in the previous handout was Percent Change. We could also compute the percent change in the U.S. national debt from 2016 to 2017:

= 0.034 or 3.4%

We can interpret this value as:

The amount of U.S. national debt increased about 3.4% from 2016 to 2017.

Your next task is to find the percent change from the previous year for all the years in the national debt data set.

Label Column F “Percent Change.”

Next, enter the following formula into cell F2 to compute the percent change from 2016 to 2017.

You should then get the following answer in the cell.

You can then copy this down like you did the last time (see the bottom of page 3 for directions).

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Questions:

13. What would it mean if the percent change was really close to 0? Explain.

14. What would it mean if the percent change was a large positive number?

15. Which year had the largest positive percent change? You’ll need to copy the data to another column like you did previously (see page 4 for directions) Use the internet to determine what event(s) in history caused this.

16. What is the most recent year in which the percent change in our national debt was actually negative? Interpret this negative percent change in context.

Create a plot of the percent change values from 1980 to 2017. Sketch your plot below. This will be done using a similar process given on page 5.

17. Discuss the general trend in this plot. What is learned from considering a plot like this? Explain.

Political parties often get into heated discussions regarding the national debt. The stereotypical Republican tends to favor less government and often argues that they favor policies that reduce the national debt. On the other hand,

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Directions: The easiest way to do this is going to be to use the average function.

First, in an empty cell type =AVERAGE().

Next, highlight the data you want to find the average of.

Once you hit enter, the average of the values will appear in the cell.

the stereotypical Democrat tends to support social programs which are often thought to raise the national debt. Using the national debt data, compute the Average Percent Change over the terms of each of the U.S. Presidents listed below.

Political Party of President Years in Office: President

Average Percent Changefor each President

Republican Democrat

1980 – 1988: Ronald Reagan1988 - 1992: George H. W. Bush1992 – 2000:Bill Clinton2000 – 2008:George W. Bush2008 – 2016:Barack Obama

18. Does the generally accepted notion that Rpepublicans tend to reduce the national debt and Democrats tend to increase the national debt appear to be true based on these results? Discuss.

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Directions:

First, you’ll want to copy the national debt data into the population tab. Highlight column C and click copy.

Go to the Population Data tab and copy this data into column C as shown below.

Note: Many other factors affect the national debt besides the policies a president may favor. For example, the good economic times during the Clinton presidency likely contributed to less debt overall. Determining how much the change in debt occurs during a presidency because of his actions versus because of the factors beyond the president’s control is a difficult task.

In Handout 2 we looked at the national debt in terms of the Debt/Citizen ratio. Some may argue that the huge increase we’ve seen over the last 200 years is due to the U.S. population significantly increasing over this same time period. One way to investigate this would be to calculate the Debt/Citizen ratio over the years. The second tab in the national debt data set has the U.S. population values for some, but not all, of the years. For example, the Debt/Citizen ratio for 2017 would be:

= $62,030.49 per person

Questions:

19. What was the Debt/Citizen ratio for 2010?

20. What was the Debt/Citizen ratio for 1800? What about 1900? What about 2000?

21. Based on your answers to the previous questions, how has the national debt per person changed over the past few hundred years?

22. What is the Debt/Citizen ratio for each of the years from 1990 to 2017? Do these calculations in Excel using the population data.

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Directions:

First, you’ll want to copy the national debt data into the population tab. Highlight column C and click copy.

Go to the Population Data tab and copy this data into column C as shown below.

Create a plot of the Debt/Citizen ratios from 1990 to 2017. Refer to the directions given on page 5 to help you create the plot. Sketch your plot below.

23. How has the Debt/Citizen ratio changed over these years? Discuss.

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We also investigated the Debt/GDP ratio in Handout 2. Let’s again take a look at this information. Below is a table which summarizes the GDP for the U.S. over that last 35 years (source: http://www.bea.gov/iTable/iTable.cfm?

ReqID=9&step=1%20-%20reqid=9&step=3&isuri=1&903=5#reqid=9&step=1&isuri=1&903=5).

Year GDP1980 $2,862,505,000,0001990 $5,979,589,000,0002000 $10,284,779,000,0002010 $14,964,372,000,0002017 $19,500,600,000,000

Find the Debt/GDP ratio for each of these years.

Year GDP19801990200020102017

24. What trend do you see?

Note: These notes were adapted from those created by Dr. Tisha Hooks.

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