By K. Harris
With the ongoing discussions of the American Rescue Plan in Congress, there has been much discussion of U.S. debt. As of today, the estimated amount of national debt is 28.95 trillion dollars and climbing. Everyone is talking about how big the amount is, but what does it actually mean for a country to be in debt?
The simple answer is that the government spends more than it takes. The government makes its income from different types of taxes that citizens pay. They then use this money to pay for different services in the country like health care, defense, infrastructure, and many other important areas that keep a country running. But, for quite a long time, they haven’t had enough money to pay for all of these services at once, so they borrow from investors and banks. They do this by giving them treasury bonds. The investors and banks basically buy U.S debt. They then profit from the government paying interest on the treasury bonds. Upwards of twenty-two trillion dollars of the debt is held by the public and the remaining is money that the government owes itself. Weird, right? The debt that is held by the public is divided into four areas:
- 6% State/Local government
- 15% Federal Reserve
- 39% Foreign Investors (The two biggest buyers are China and Japan)
- 40% U.S Investors
Since 1980, the national debt has increased by a very large amount. Recently, the government has needed to borrow more money because of a law passed at the end of 2017. The Tax Cuts and Jobs Act lowered taxes and it resulted in the government needing to borrow more to fund their services.
All this said, why should people care that the U.S is in debt? Well, an America deep in debt could cause a debt crisis. The U.S can be so deep in debt that they won’t be able to pay for their services or cover their debts. Also, another crisis ala Covid could strike and they won’t be able to get out of it. The government has tried to raise taxes and cut spending but it hasn’t been working out well as their budgets, particularly in the defense arena, continue to grow exponentially. The best minds the U.S. has haven’t been able to make a dent in the debt. At some point, one has to wonder where this is all headed. It can’t be good for the future of the country.
Categories: Business, News, World News
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