The US national debt stands at roughly $29 trillion. Is the national debt an issue of concern?

Nicholas Na

The national debt is the amount of money that the United States (US) federal government owes to lenders such as treasury investors who may be local or foreign. A country usually incurs debt when there are insufficient government funds to fund certain sectors or when they want to pursue an expansionary fiscal policy. This essay argues that rising national debt should be of concern to a larger extent.

Considering the US’s high debt to GDP ratio of 122%, the US’s national debt is an economic threat as it runs a high risk of defaulting on its loans, which would result in a series of negative consequences for the US, such as a policy of austerity. Austerity measures are implemented by governments that cannot fulfill their spending commitment, and it calls for a reduction in government spending and increased taxation to increase public funds. With the possibility of higher taxes, it would result in decreased consumer expenditure, hence decreasing aggregate demand. A decrease in real GDP will result in the country falling farther away from full employment and the recession deepening. A notable real-world example of the implementation of austerity would be in Greece during the 2008 financial crisis, and the policy of austerity simply resulted in widespread protests by many of its citizens, due to the adverse effects such as the loss of jobs.

However, rising US national debt may not be as much of a concern considering how it may be incurred and utilized in profitable sectors to obtain revenue that can help the US service their debts. Self-liquidating debt is a type of debt used for projects that would increase economic growth to service the debt. An example of debt that is beneficial in the US is President Biden’s Build America Bonds, where borrowed funds are utilized for infrastructures like transit systems and roads that can increase the number of people being employed. From these bonds, household income can be increased, which in turn helps to increase tax revenue to offset the debt costs.

In conclusion, this essay believes that rising US national debt should be of concern since there will be a decrease in real GDP and overall economic well-being which outweighs the possible benefits of debt. It’s important for the US to spend its national debt wisely to help future generations service the debt instead of burdening them with it.

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