The U.S. national debt has surged to an unprecedented $34 trillion, marking a significant departure from the turn of the century when total debt stood below $6 trillion.
This record-breaking figure is largely attributed to what critics describe as irresponsible spending practices and recurring deficits in the annual budgets implemented by the government. This trend is likely to continue; the Congressional Budget Office forecasts a doubling of the national debt over the next three decades.
The national debt, a cumulative representation of budget deficits, occurs when the government spends more money than it collects. The national debt is essentially owed by the government, which borrows money by issuing bonds. These bonds are purchased by various entities including institutional investors, individual citizens, and even foreign governments. In essence, the government borrows from its own citizens and from other countries. But the debt also includes intergovernmental holdings, where the government borrows from its own departments.
While some proponents, particularly on the left, advocate for a modern monetary policy that downplays the consequences of accumulating national debt, concerns about the rising debt levels persist.
The first concern is the interest that is paid on the debt. A significant portion of government revenue may be allocated to servicing the interest on the national debt. This reduces the funds available for essential services or investments in the economy.
High levels of government borrowing can lead to higher interest rates, which may “crowd out” private investment. This occurs when government borrowing absorbs available funds, leaving fewer resources for private businesses and individuals to invest.
Despite a certain level of apathy from the older generation, it is the younger generations who stand to bear the brunt of these dues. Accumulated national debt poses a substantial burden on future generations, potentially resulting in higher taxes or reduced government services, particularly affecting programs like Social Security and Medicare that already constitute a significant portion of government spending and face challenges of insolvency.
Furthermore, the irresponsible debt levels curtail the government’s flexibility to respond effectively to economic downturns or crises. Think of government deficits like using credit cards. An individual should generally not use their credit cards on things they can’t afford, but they may need to during a financial emergency. The same is true for the government. It is not irresponsible for the government to spend more money during a time of crisis (like COVID-19, for example). But when Congress routinely approves funding for things we shouldn’t be spending money on in the first place, it makes it harder to respond when the country faces an economic crisis.
As the national debt continues to climb, a growing chorus of economists and policymakers advocates for a return to fiscal responsibility, emphasizing the potential long-term consequences of unchecked government spending. While numerous political issues occupy our attention, the national debt is a growing threat that should be addressed for the sake of the youngest generations.
