Logan Turner
What is debt?
A nation’s debt and its budget deficit are two related but different things. A deficit is the difference between how much money a government takes in each year (through taxes and international trade) and the amount of money that the same government spends each year (through programs like national security and healthcare). If the government is unwise in how it spends its money and it spends more money than it takes in, it has a budget deficit. On the other hand, if the government’s income surpasses the spending, it experiences a budget surplus. National Debt is an accumulation of previous deficits and surpluses.
History of US Debt
In a nation founded by war, it is no surprise that the United States had debt since its conception. America has a recorded debt of $43 million at the end of the Revolutionary War. The National debt was a common political struggle at the time with every side offering up their own solutions or remedies. It wasn’t until January 8th, 1835 when former President Andrew Jackson brought the national debt to $0 for the first (and only) time in US history. He achieved this by selling government-owned land in the west which came at a cost. Debt began to grow quite soon and the United States was just as prepared for it as they were prior to Jackson. The policies vetoed by Jackson would have expanded US infrastructure making debt easier to manage for the future.
US Debt Milestones
Already reached $33,000 by the end of 1735
Exceeded $500 million by the 1860s
Met $20 billion during WWI and then $200 billion after WWII
In 1982 the debt reached $1 trillion
Debt is currently $23 trillion (March 5th)
The national debt is 500,000 times as much as it was after the revolutionary war
Contributors to Debt
As I mentioned, America started with a large amount of Debt due to the country being founded on war. It is a common trend that debt increases by quite a lot during and after a war. Understandably so, the government prefers to spend a lot of money on their national security. Healthcare is another large contributor to the national debt. More and more Americans are in need of federally subsidized healthcare which is costing the United States a lot of money with no way to create revenue from it. One more factor that leads to debt is large fluctuations in demographics. Sudden booms of population offset the economy when they are in need of government support first when the generation is born and then again when the generation ages. This occurrence was especially evident during the baby boom. Government programs aren't equipped to deal with these sudden fluctuations and it may take years to recover.
How Other Countries Compare
A good comparative metric is a country’s debt per capita. Debt per capita is measured by taking a nation's total debt and dividing it by its population. To start, the United States has a debt per capita of $58,000. Many European countries such as France ($87,000), United Kingdom ($125,000), Switzerland ($213,000) and Sweden ($94,000) have a higher debt per capita than the United States. That is not to say that our economy is better off than those, just that our current debt seems to be a bit exaggerated. The real issue is the exponential increase in debt. America’s debt is climbing faster than most of these countries I mentioned.
What does this mean for Americans?
In order to combat the debt, governments try to squeeze more money out of their citizens by increasing taxes. Even after tax cuts, the taxes continue to increase to combat the debt affecting consumers and property owners. Big national debts lead to marginal economic growth in the short term however, it also leads to a weak job market due to less government spending on services that would otherwise create jobs. Another impact of the national debt that affects many Americans is higher interest rates on loans and credit cards.
Works Cited
“COUNTRY COMPARISON :: DEBT - EXTERNAL.” Central Intelligence Agency, Central Intelligence Agency, www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html#mc.
“Debt vs. Deficits: What's the Difference?” Peter G. Peterson Foundation, www.pgpf.org/blog/2016/10/debt-vs-deficits-whats-the-difference.
“Key Drivers of the National Debt.” Peter G. Peterson Foundation, www.pgpf.org/the-fiscal-and-economic-challenge/drivers.
“REPORTS.” Debt to the Penny (Daily History Search Application), www.treasurydirect.gov/NP/debt/current.
The fact that America has been in debt since its founding is an interesting fact that I didn't know before, but now that I think about it, it really does make sense. It's also interesting that our debt per capita is lower than many countries but climbing faster.
ReplyDeleteI was reading the blog post and I find it interesting on what the history of debt in the US. From when it began in or during the Revolutionary War and also why the government raises our taxes and trying to squeeze more money out of citizens in America. I was also surprised that President Andrew Jackson bought the national debt because he is on the $20 bill.
ReplyDeleteI didn't realize how early our debt began to grow. America was founded on a lot of ambiguous things, but debt is not one of the things that comes to mind (though maybe it should). Wartime has an immense impact on a nations economy, and despite us never having fought any major war on our own soil, we still come up with a pretty big number. I wonder how our war debts compare to other countries who have had to fight on their own lands. Great post!
ReplyDeleteThis blog post is a really interesting outlook on the United States' national debt. What was really interesting to me was that our national debt per capita is actually much less than other countries, like France or Great Britain. Also, it was interesting to see that the United States was essentially in debt since its startup, and has continually added more over time.
ReplyDeleteDebt grew very fats, according to your topic here. I feel that debt should definitely be something we look into more because the rates are increasing. Also, salary vs hourly is defensibly something everyone should pay attention to when getting a job because the pay could greatly differ.
ReplyDeleteI did not realize how our debt began to grow. Debt per capita is a lot less than other countries which is pretty interesting as well. Lower than France or Great Britain. So interesting to read about America being in debt mainly from the start and just added up over time. Good article!
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