How did we acquire debt?
The United States of America acquired debt initially when Andrew Jackson developed the idea of using a line of debt to have credibility as a nation. Creating the National bank was the first steps towards the exponential growth of debt. From there it was the decades of using money the United States never had. Creating roads, hiring government workers, and increasing the military sizes all require vast amounts of money to keep the country growing at such a rapid rate. Social security and the most recent medicare has increased the debt tremendously over the past 7 years. The constant increase of the debt ceiling has allowed the government to continually spend money and ask for more loans from foreign countries. The loans and increased government spending causes recessions to constantly occur.
How can inflation be resolved?
Inflation can’t be resolved in the way that it would go away. However we can reduce how much our money inflates over time. The government has been keeping interest rates artificially low over the past years the result of this has been a high rate of inflation. while interest rates and inflation are not directly related as one goes down the other usually goes up. Another factor that can help control inflation is wage control, when workers are paid more prices go up and the more inflation we see.
How does inflation occur?
Inflation is strictly a monetary phenomenon. The supply of money increases faster than the underlying rate of economic growth, you cannot have inflation. Conversely, if the rate of growth of money is greater, then you will have inflation. Some people mistakenly think of "prices" as inflation, and while prices often reflect inflation, they are not in themselves inflation
Who do we owe the most debt to?
In the past the government has large amounts of government budget left over after a year and plans to spend it on reducing the government debt by paying back loans. One of the greatest recoveries in the economy was seen during Clinton’s administration when they used their budget surplus to pay off their debts. The economy boomed for multiple years providing evidence for the use of a reduced national debt. The only other instances in which debt was decreased was after wars. Post World War II had the largest economic recovery after a war as it was one of the few wars not funded by taxation of Americans. Taxing the Americans more causes an economic downfall as we saw shortly after the Korean war.
How did the US deal with debt before?
It is normal for a nation to have an increase in debt. A proper amount of debt would stimulate the economies: creating jobs, improving infrastructure, etc. Actually, the last time United States decreased the national debt was about 60 years ago in 1957, when the debt went down from $273 billion down to $271 billion. But this doesn't mean the government is acquiring debt carelessly since 1957. Other than the debt number, a better figure to look at when accessing the debt condition is debt/GDP ratio. When Nixon became the president in 1972, America maintained the ratio at about 30 percents for ten years. Since 1986, the debt/GDP ratio had been swinging around 50 and 60 percents, which was fine, until 2008. By the end of the 2008, the ratio hit 68%. And then Obama took over, issued various policies, like Obama Stimulus Act, Obama Care, Tax Cuts, and raised the ratio to 101% in six years. (Barack Obama and George W. Bush were two biggest contributors of the national debts, added $ 6.167 trillion dollars and $ 5.849 trillion dollars separately in their administrations.)
Have the US ever gotten out of debt?
No, the United States has never gotten out of debt. We have gotten to points in history several times where we have a budget surplus but never really “gotten out of debt.”
What ways can the US reduce the national debt?
To decrease the debt there are multiple large scale solutions. However they see, irrational as one of them is for every single American to pay $54,000 just to get America out of debt. This solution doesn’t create a positive increase in the American economy as the country will decide to ask for more loans. More secure paths to decreasing the national debt would be to cut government spending on areas such as Social Security or Health care. Billions can be saved by cutting money towards the Department of Agriculture and Defense, however does the savings outweigh the risk of decreased defenses within America. The United States are at a point where the country should never logically be out of debt but the country should begin cutting spending to gradually decrease the debt.
Who does the US owe debt to?
The united states is in debt to lots of other countries the two countries who hold most of the United States foreign debt is China and Japan. In addition the United states also owns lots of money to domestic brokers and companies the amount s about 1 trillion. The government owns its own people almost as much as it ows the country of Japan. In fact most of the Debt is to ourselves 4.7 trillion of the debt is owed to social security and the federal reserve.
What are the consequences of having too much debt?
Before really answering this question, it is hard to tell how much debt is too much. Usually, as long as the ability to pay off the debt in the future isn't compromised, no debt can be too much. But this standard is equally obscure. If we ignore this part and simply assume American debt is approaching the point of no return, these are what will happen:
- Government interest rate would increase to attract people to lend money.
- which in turn, the government have to pay more on the interest.
- When the government hard to pay back, it would print more money and causes significant inflation.
- Significant inflation brings bad credit, and no one would lend money to the government anymore
- Government have to use unpopular measures, such as imposing severe austerity, in order to afford the debt and interest payments.
Will America ever recieve back the loans they granted to European countries in past wars?
America is no longer collecting money from countries that owe us that money some of the countries have disappeared and even the US did, it wouldn't put a dent it the debt that we have.
Where does all our taxes go?
According to the Federal Budget, by the end of Fiscal Year 2014, total revenue is $3.02 trillion, total expenditures is $3.50 trillion and the debt is $18.23 trillion, which is also 107.1% of GDP. The top four spending were Health Care (27%, $1356.1 billion), Pensions (26%, $1246.7 billion), Defense (22%, $815.5 billion) and Welfare (10%, $454.3 billion). All the other expenses, including education, transportation, general government, interest, only claimed 15% (around $750 billion) of the total spending.
Could the reducing of income tax be useful for reducing debt?
It really won't the only the government is going to get out of debt is by raising taxes, however this is not as easy as a solution as it may seem. Instituting a flat tax is believed to make much more of a difference than raising or cutting taxes altogether
How might the National Debt overall benefit the economy?
Short term we may benefit from deficit spending but there is definitely a point where the debt ceiling gets to high. When it gets too high, it actually slows down the economy. Currently we are in a precarious position, and the United States is having a debt crisis. So, overall having a small amount of debt can be beneficial but when it gets to numbers like we are at currently it hurts the economy.