Tag Archives: National Debt

National Debt

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The U.S.National Debt grows because the Federal government consistently spends more than it collects in revenue. This persistent gap between spending and revenue has existed for over two decades.

As of 8:40 am on August 19, 2024 (https://www.usdebtclock.org/)

Excessive fiscal spending and changes in tax policy play a significant role. Policies like the Inflation Reduction Act, the Chips Act and Obama Care, impact government spending, extensions of tax cuts and new tax legislation, like the Tax Cuts and Jobs Act of 2017, impact government revenues.

Essentially, new federal spending without offset taxes to pay for it and tax cut without correlated cuts in spending are the root causes of increasing deficit spending and skyrocketing National Debt

Lawmakers must focus on long-term fiscal sustainability. Delaying action will make addressing the debt even harder. A gradual, spending-focused approach is essential, including reforms to mandatory programs like Social Security and Medicare.

Tax increases must be part of the solution, and policymakers should prioritize less distortionary taxes (such as consumption taxes) or tax reforms that broaden the tax base. For instance, returning to Clinton-era policies could bring more working families back onto the tax rolls.

In summary, addressing the debt requires a balanced approach, thoughtful policies, and a commitment to fiscal responsibility.

References:

  1. https://econofact.org/addressing-rising-us-debt

Ballooning National Debt

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After years of steadily increasing deficits and debt, federal spending has skyrocketed, taking U.S. debt to levels not seen since World War II.

According to the U.S. Treasury, the national debt is approaching $35 trillion.

What does that mean for the country, its citizens and the future?

Many economists warn that a rapidly growing debt load could diminish U.S. economic growth, restrict government spending on vital programs (e.g., military, Medicare, Social Security, etc.) and increase the likelihood of financial crises.

Currently, interest payments on the National debt consumes a quarter of the annual fiscal budget.

High debt-to-GDP ratios can slow down economic growth, leading to lower wages, increased inflation, and higher taxes.

While the National debt of $34 trillion figure seems daunting, it’s essential to consider inflation. As the economy grows, the debt naturally increases. However, addressing the fiscal budget deficit remains crucial.

The national debt indirectly affects citizens through policies, taxes, and government spending. It influences interest rates, inflation, and overall economic stability.

Over the long-term, managing the debt sustainably is vital for future generations. Balancing spending, revenue, and economic growth will determine the country’s financial health.

References:

  1. https://www.cfr.org/backgrounder/us-national-debt-dilemma

National Debt and Federal Spending

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Higher taxes, alone, are not the solution to out-of-control federal government spending. Americans need to understand and address the problem.  And, they need to convince politicians and bureaucrats to end their unfettered spending habits.

The national debt enables the federal government to pay for federal programs and services even if it does not have funds immediately available. Increased in federal government spending further increases the deficit.

The federal government spends money on a variety of goods, programs, and services to support the American public and pay interest incurred from borrowing.

  • If the government spends more than it collects in revenue, then there is a budget deficit.
  • If the government spends less than it collects in revenue, there is a budget surplus.

From FY 2019 to FY 2021, spending increased by about 50%, largely due to the COVID-19 pandemic. In fiscal year (FY) 2022, the government spent $6.27 trillion, which was more than it collected (revenue), resulting in a deficit.


Federal government spending pays for everything from Social Security and Medicare to military equipment, highway maintenance, building construction, research, and education. This spending can be broken down into two primary categories: mandatory and discretionary. These purchases can also be classified by object classand budget functions.

Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt.

References:

  1. https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/
  2. https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/

Federal Spending and U.S. National Debt

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In response to the COVID-19 pandemic, more than 50% of increased federal government spending between 2019 and 2021 was for assistance to individuals, which more than tripled to $1.1 trillion in 2020 and increased by another $300 billion in 2021, according to USAFacts.

In fiscal year 2021, the federal government spent 68% more than it collected, resulting in a $2.8 trillion deficit. The deficit decreased from fiscal year 2020 when the federal government spent 91% more than it collected.

Most federal government spending happens in two ways:

  • Direct spending on federal programs (such as for the military and social security) and
  • Indirect spending through transfers to state and local governments in the form of grants (such as for infrastructure) that those governments then spend. State and local governments raise money both through federal grants and revenue raised through state and local revenue sources.

Source:  USAFacts

THE U.S. NATIONAL DEBT IS NOW MORE THAN $31 TRILLION

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The U.S. national debt has now surpassed $31 trillion. Everyday the U.S. government spends over $1 Billion in interest payment on the National Debt.

The $31 trillion gross federal debt includes debt held by the public as well as debt held by federal trust funds and other government accounts, according to the Peter G. Peterson Foundation. In comparison, the U.S. gross national product, a monetary measure of the market value of all the final goods and services produced and sold in a specific time period by countries, is $25.25 trillion according to Bureau of Economic Analysis.

In very basic terms, gross federal debt can be thought of as debt that the government owes to others plus debt that it owes to itself.

The National Debt is now more than $31 trillion. What does that mean?

America’s high and rising debt matters because it threatens our economic future, reports the Peter G. Peterson Foundation. The coronavirus pandemic may have rapidly accelerated our nation’s fiscal challenges, but we were already on an unsustainable path, with structural drivers that existed long before the pandemic.

Making the hard choices to put our nation on a more sustainable fiscal path will help ensure a stronger and more resilient economy for the future. Otherwise, staying the course means a bleaker economic future for the nation and threatens the economic well-being of all Americans.

References:

  1. THE NATIONAL DEBT IS NOW MORE THAN $31 TRILLION. WHAT DOES THAT MEAN?, The Peter G. Peterson Foundation, October 4, 2022. https://www.pgpf.org/infographic/the-national-debt-is-now-more-than-31-trillion-what-does-that-mean
  2. https://www.bea.gov/news/2022/gross-domestic-product-third-estimate-gdp-industry-and-corporate-profits-revised-2nd