National Debt: Macroeconomic Perspective
For years, the issue of the Government's national debt (and its payment) has been a major political issue. As of July 1st, 2004 the Federal Debt has reached an all time high of 7.252 trillion dollars (that means that each person in the United States is be over 24,000 dollars in debt). According to economists, the debt will increase by 1.6 billion dollars per day!
In economical terms, a debt occurs when an individual or group borrows money and is charged interest on that loan. The Federal Government through deficits (spending more than what is collected in taxes) in budget spending created this debt of over seven trillion dollars. In the Revised Circular Flow Model in the appendix, we can see that there is a leakage of government spending into interest paid on its debt. The dollar amount in interest that the borrower (the government in this case) must pay to simply maintain the debt is called the debt service. Currently the debt service of the federal treasury is 576 billion dollars annually; approximately 32% of the Government's total receipts (similar to and individual's income).
With every borrower there must be a loaner, and this is true with the Federal Government's loan. Currently, the debt is distributed in several areas: (See Revised Circular Flow Model in Appendix)
Debt from all governmental trust funds totals over 3.05 trillion dollars.
Included is the 1.59 trillion dollars that has been taken from the Social Security Trust (this amount is equal to approximately 90% of the total Federal Budget).
Over 4.2 trillion is owed to the General Public in the form of U.S. Securities.
In the first part of the debt, the government has taken money from various
trust funds (account...
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...skills to invent more efficient and productive technology to lower production costs. Therefore there must be an increase in the level of education to ensure productivity increases.
With these changes made to the federal government I feel that the growing threat of National Debt can be neutralized. All we must do is the following:
Congressionally force the passing of only balanced budgets to prevent further debt.
Congressionally force that the budget pay all debt service prior to increases in any other area of the budget
Raise taxes to restore the trust funds that are exponentially creating debt
Use Monetary Policy to counteract unemployment through lowering of the discount rate.
Congressionally prevent the FED from issuing more U.S. Securities until debt is under control
Maintain a favorable balance of trade in the long term by increasing funds for education
One thing that I have learned about college is that you have to sometimes talk about things that make you uncomfortable or scared in order to learn. I do not think I am alone in saying that the United States’ current debt situation is terrifying. Ten trillion dollars alone is an expansive and unimaginable amount of money, and since PBS produced Ten Trillion and Counting in 2009, the national debt has grown to twenty-one trillion. As stated, the documentary was produced during the first months of former President Barack Obama’s first term and focused on former President George W. Bush’s relationship with national debt during his eight year tenure. Ten Trillion and Counting explains some of the questionable decisions that former President Bush made, especially regarding fiscal policy.
Moreover, individual borrowers are not the only ones who face the consequences of the loan default. The federal government recovers around 80% of the total defaulted amount of student loans, losing billions of dollars each year. The latest data from the U.S. Department of Education indicates that student loan default rates have been rising. Official 2011 default rate is 10%. ("Comparison of FY 2011 2-Year Official Cohort Default Rates to Prior Two Official Calculations"). The New York Federal Reserve reported that as of March 31, 2013 outstanding student debt surpassed credit card debt and was approaching the $1 trillion mark (Quarterly Report on Household Debt and Credit). If student loan default rates stay unchanged, the federal government will lose $200,000,000,000 of taxpayers’ money over the next few decades because of student loan defaults. Below is the chart representing the outstanding credit card and student loan debt over the last ten years (Quarterly Report on Household Debt and Credit).
The federal deficit refers to the difference between all the amount the government attains from taxes plus receipts (other revenues) and the outlays (the cash the government spends). On its part, the national debt refers to the overall debt as a result of accrued deficits in addition to the accrued off-budget surpluses. The national government with regards to on-budget deficits can borrow money by offering treasury securities to the public, which then adds to the total debt.
However the interest we pay on our nation 's debt is very small compared to the overall budget. According to the Center on Budget and Policy Priorities only 7% of the total budget is spent on interest which is relatively low compared to things like social security which took up 24% of the budget in 2014 (Policy Basics). As long as the United States can continue to keep the interest rates low the debt will continue to be a begin threat. If the creditors of the U.S. were to spike their interest rates, America would be in trouble, however America has fairly good credit, and it should remain that way unless there is another scare like the government shutdown in 2011 (Riley). Overall the threat of the nation debt is a very minute problem in the grand scheme of things. According to The Richest, only five nations in the entire world are completely debt free, which is astounding when you consider that there are about 195 countries in the entire world (Mathers; How Many). These figures show how extremely difficult it is for a country to run without having a certain amount of debt, and America having debt should not be a concern. America is not even in the top ten countries whose debt make up the majority of their GDP (Country List). Which means that at the moment American’s should not be overly
The national debt is usually a frightening topic citizens of any country, however, in the United States, twenty trillion dollars of national debt is one of the major fears of the economy. Along with this fear comes every politician claiming to be the person to lower this astronomical debt to ease concerns in the modern American economy. In Hamilton’s Blessing, John Steele Gordon tries to alleviate these concerns by showing a plethora of benefits and good the debt has been able to do throughout the history of the United States. The central premise of the book and the main guideline for John Steele Gordon’s thinking is that the debt was used to save the Union in the 1860’s, the American economy in the 1930’s, and the wellbeing of mankind during
Every day in New York City, hundreds of people walk past a huge digital billboard with giant numbers across its face. Each person who walks past this billboard sees a slightly different arrangement of numbers, growing larger every second. This board is the National Debt Clock, representing the over 14 trillion dollars currently owed by the United States. While some people claim that the national debt is caused by the falling economy, most maintain that the debt itself causes the poor economy (Budget Deficits 2007). Rising debt leads to higher interest and investment rates, and cuts into our national savings. Ignoring the national debt leaves the major burden of paying it off to later generations, while meanwhile allowing our country’s economy to further drop and our dependency on other nations to rise.
In general, an increase in government spending and decrease in the collection of government taxes and other receipts, increases the debt held by the local government. Government taxes and receipts fluctuate annually, and are frequently less than government spending. In the past, the U.S. public debt has increased for the duration of wars and recessions. When the government consumes more than what it accumulates in taxes, there is a budget deficit and the government then borrows from the private sector or from foreign governments to protect their spending. The compilation of historical borrowing is what materializes the government debt.
... trillion and counting. By contrast, the total U.S. debt at the end of Reagan’s second term was 1.0 trillion. What does all of this mean?
Government spending is a controversial topic. Even though the government has a set budget each year that Congress and the President of the United States collaborate on, the United States continues to fall deeper in debt. According to U.S. National Debt, the U.S debt has been larger than our total annual gross domestic product since 2012. In other words, our debt is larger than the value of all the goods and services produced in the country within a twelve month period. “It is said that the U.S is currently $19.2 trillion dollars in debt (U.S. National Debt).” As long as Congress and the President continue to run yearly budget deficits, the U.S debt will continue to rise.
U.S Federal Deficit and Debts:Understanding the history and context. (2011, November 1). Utah Foundation. Retrieved January 25, 2014, from http://www.utahfoundation.org/img/pdfs/rr7
The U.S. National debt affects consumers every day, but probably most notably in Americans facing higher taxes, higher interest rates, and the U.S. government cutting back on services, weaker job markets, and lastly inflation. The national debt exists as a result of government shortfalls, or deficit budgets in which the government's expenses exceed its revenues. Internal debt includes the amount borrowed from sources within the country. The government raises this money by selling bonds, bills, securities, and government. Along with internal debt, countries are also likely to have external debt. External debt is the money borrowed from foreign sou...
Debt is slowly pushing America’s economy into an unstable state. This will eventually result in a dramatic increase of taxes, which will subsequently decrease the overall budget of most Americans. National debt is increased even more when people abuse credit, accepting debt into their lives. Unless America focuses its efforts to discouraging materialism by spending less money than what its overall income is, it will proceed further into debt, risking even higher taxes and bankruptcy. Our nation has to overcome its nurtured materialism before we can truly expect to improve its economic status.
Alexander Hamilton once said, “a national debt, if not excessive, will be to us a national blessing.” The debt of the United States of America is by far excessive. As of April 27th 2014, at 7:45PM GMT, the estimated apparent debt is $17, 444, 8555, 980, 176.09; which makes each of the 318, 108, 108 citizens owe a portion of $54, 839.39 and demonstrates the daily increase in debt of $2.40 billion. Evidently, such a crisis did not arise over night. Numbers have steadily soared with the occasional dip and fluctuation. As for the deficit, the U.S. continues to spend more than it receives in revenue, adding to the cumulative debt. If the government continues expenditures in such increased amounts, the country will never eliminate its trillions upon trillions of debt.
Per usgovermentdebt.us the national debt is over nineteen trillion dollars. This extremely high amount could be America’s down fall, and how it should be lowered, is a widely debated issue.
The article titled “You Are What You Owe,” centers around the recent gridlock in Washington over the debt ceiling (Mallaby, 2011). The article explores what would have happened had the United States government not come to an agreement on the American debt ceiling. The article also relates the United States crisis to previous counties that have faced this crisis in the past (Mallaby, 2011). The article reports on the finance and economic conditions in 2011 in the United States during the debt crisis (Mallaby, 2011). The article also discusses the American credit and bond strength and government’s securities, as well as the United States federal debt (Mallaby, 2011). The Gross Domestic Product or GDP, for different countries is also discussed in this recent article (Mallaby, 2011). The United States foreign economic relationships are also explored in the article titled, “Yo...