The National Debt and How to Fix it
Written by: Will Nysse
The national debt is currently higher than it’s ever been and that will remain true until we make some sizable changes in the economy. Before we tackle how that can be done allow me to explain the national debt a bit. As you likely know, a national debt occurs when a government is running a deficit for an extended period of time, that is to say that the government spends more than they collect in a given fiscal year. The national debt as of writing this post is about $27.8 trillion. Why is that?
There have been multiple factors: one being politics. It has been politically trendy in recent years, especially through the previous administration, has been to push for tax cuts or increasing government spending, and general expansionary fiscal policies. When executing these policies, the economy grows. However, continually enacting policies of this nature can cause the economy to stop growing due to things like inflation. Cutting taxes and increasing government spending both contribute to the deficit because cutting taxes decreases government collection and increasing spending speaks for itself.
Beyond how the debt was acquired, who it is owed to is another issue. The debt is owed in two parts, the debt held by other countries and that which is held by the public. As it stands, the debt held by other countries sits at around about $6 trillion, led by China, Japan, and the UK. The rest is held by the US public through government bonds. Given this information it can be said, both logistically and economically, that the only way to really start chipping away at the debt is through contractionary fiscal policy.
This would entail increasing taxes and/or decreasing government spending. If the government collects more to offset its expenditures then the debt could soon take a turn towards improvement rather than the continue on a seemingly endless track of deficit spending and increasingly irreparable damage. I won’t get into the political repercussions of increasing taxes, or decreasing government spending for that matter, although that is likely a big reason for such policies not being enacted. I think it’s very possible to eventually start getting the debt to decrease using these methods, but we’ll likely hit $30 trillion before anyone really is able to do it.
Works Cited
“ACCOUNT CENTER.” Government - Welcome to the Government Section of TreasuryDirect, www.treasurydirect.gov/govt/govt.htm.
Amadeo, Kimberly. “The US Debt and How It Got So Big.” The Balance, 6 Apr. 2020, www.thebalance.com/the-u-s-debt-and-how-it-got-so-big-3305778.
Amadeo, Kimberly. “Why You Should Care About the Nation's Debt.” The Balance, 24 Aug. 2020, www.thebalance.com/what-is-the-national-debt-4031393.
Investopedia. “National Debt.” Investopedia, Investopedia, 29 Sept. 2020, www.investopedia.com/updates/usa-national-debt/.
Staff, Investopedia. “Expansionary Policy Definition.” Investopedia, Investopedia, 14 Dec. 2020, www.investopedia.com/terms/e/expansionary_policy.asp.
