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.
I thought that this was interesting because I knew that one of the most popular political topics was talking about making tax cuts and lowering taxes. The one thing that I do not think people consider is that if taxes are cut, then the national debt defecit just keeps growing. If you really think about it, it would actually be better for our country to raise the taxes so that we as a country could pay off the national debt faster because when looking at a debt calculator, the debt at this current time is only increasing. It is up to over 80,000 dollars of debt per person.
ReplyDeleteI have always heard about the National debt and I really didn't know why that was in the first place. I had always wondered how we've been able to do tax cuts and also be progressive with our national spending but it looks like there was a cost to it. Eliminating our debt kinda seems like an impossible task, I just wonder what effects it has on us and why we aren't trying to put a dent into it?
ReplyDeleteI always have knew that our nation debt was bad but I never thought about how to fix it and how political party played into it. Increasing taxes and/or decreasing government spending is a good way to fix our debt. How would that look like? What would we cut on government spending and who should we increase taxes on?
ReplyDeleteI feel like whenever the election comes up in the news, a lot of talk surrounding the national debt comes up as well. Is there a reason why we keep building the debt and not pay it off? Is it because countries are too scared to demand the money from us, or is it our ignorance to pay off this debt?
ReplyDeleteyou talk a bit about government spending, and that to lower the debt the government must cut it's spending. But what exactly are the things the government is spending its "money" on. Like, the military, education systems, foreign trades etc? It would be nice to know what specifically the government should spend less on in order to lower our debt, or at least to know the percentage of what things are being spent on by the USA. that would make the overall goal more obtainable by having a more specific plan.
ReplyDeleteI've heard a lot of things about the national debt and how insanely high it is, but this is eye-opening. Do you really think that it will EVER be possible to pay off a debt that large? Is it truly worth it financially to even try at this point? Just before 2020 started, there was a sudden huge jump in spending-- was that due to the virus?
ReplyDeleteHere's something I think many people don't realize about the national debt: We have a LOT of time to pay it off. Think of any debt the US has as a loan, and like with any loan, it can be paid off with monthly payments. People often choose to take out longer loans to lower their monthly payment. The US, as a country and therefore monolithic in time, can spend as long as it needs to pay off its investors. Or as long as those investors are willing to wait to be paid back. As long as every investor waits their agreed time to be paid back, nothing catastrophic will happen. Focus on the monthly (or whatever timescale the government uses) payments and their magnitude. As long as that number is manageable, the national debt won't be a problem.
ReplyDeleteI didn't know that our debt is the highest it's ever been and that it will stay that way until we actively fix it. Why doesn't the government try harder to get rid of our debt? What happens if these countries ask for the money they are owed? I find this very concerning especially that it is continuing to get worse. Hopefully we keep our amount of debt manageable and start to make active contributions to lower it.
ReplyDeleteIt's crazy to think that our government in more than 27 trillion in debt. I can't even begin to process that large of a sum on money. I understand that it's obviously terrible to be in that large of debt to citizens as well as other countries, but I am confused on what being in debt is doing to the country? The government is still trading with other countries and continuing to provide funding, so how exactly is the debt holding us back?
ReplyDeleteI had figured we were in a high amount of debt but definitely not that much, nor did I know it is the highest it has ever been, but with the growing and changing world everyday I guess that seems right. With this debt though it feels like we are never paying it off and it only keeps growing. How much time do we have to pay this off? Is there a deadline or are we just going to keep avoiding it?
ReplyDeleteI think we can agree about that we don't usually think about the national debt in our day-to-day activities. Maybe that shows that it doesn't matter as much as we think it does. That's why I think we won't really ever chip away at the debt. It's one reason to raise taxes for more social programs or for the greater good of the population, but do you think people would be fine raising taxes to relieve a debt that we don't really feel effected by?
ReplyDeleteI find it super interesting that usually the same people that have the most negative things to say about the national debt also are the ones that don't want to take any steps to fix it. It is essential to fix the national debt because there are repercussions to the ever-increasing sum of money. The Peter G. Peterson foundation states that an effect of the national debt growing is lower incomes nationwide and lower public investments in organizations like schools or in infrastructure. I think by everyone chipping in a little bit more, by means of raising taxes proportionately to everyone's income, we will feel the better impacts further down the road.
ReplyDeleteI found it really interesting that you stated we could go to 30 trillion in debt before anything gets done to fix it. I loved that idea that we are going back before we can fix anything. Continuing off of that, how do we have 1.7 trillion for another stimulous check yet we are continuing to fall deeper and deeper into debt? These are ideas that are very confusing to myself and as we continue through this pandemic, it will be interesting to see what happens from here involving our debts and our economy as a whole.
ReplyDeleteI like how you posted a graph to show how drastic it has become over the years from 1990-2020 we were under 5 trillion in debt and now we are over or around 30 trillion in debt and we are doing nothing to fix it. It amazes me people are able to keep track of this ammount of money that are in debt
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