1. What might be the costs of having such a large national debt?

2. Did the promise that tax cuts would result in a growing economy that would pay for any

budget shortfalls come true during the Reagan years?

A good answer should contain the following:

Possible Answers:

1. Unable to afford new/existing programs in the future

Higher taxes to pay off debt in the future

Inability to respond to crises that demand expensive solutions

2. No. Although the economy did grow, the growth wasn't enough to overcome the revenue lost in the tax cuts. As a result, the national debt grew dramatically during the Reagan years.

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1. What might be the costs of having such a large national debt?

When a country has a very large debt like the U. S., people may think that the country will not be able to pay off the debt. It's the same situation as a person who has a lot of debt, even more debt in a year than income in a year: people will believe that he or she will probably not be able to pay off the debt.

When this happens, people will invest less in the economy, the debt will become more expensive because the interest rate will be higher, and this in turn could lead Congress to enact policies such as tax hikes or debt renegotiations, which are always negative for an economy.

2. Did the promise that tax cuts would result in a growing economy that would pay for any budget shortfalls come true during the Reagan years?

Reagan's tax cuts did not lead to increases in tax revenue. On the contrary, tax revenue, as predicted by many, actually fell. This, in addition to increased military and social security spending, led to large budget deficits during the Reagan administration.