The National Debt Is Now More than $34 Trillion. What Does That Mean? (2024)

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The National Debt Is Now More than $34 Trillion. What Does That Mean? ›

The $34 trillion gross federal debt includes debt held by the public as well as debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself.

Rising debt reduces business investment and slows economic growth. It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.

Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt. Comparing a country's debt to its gross domestic product (GDP) reveals the country's ability to pay down its debt.

He said debt is an important tool for a country, and its importance is why we should be so concerned. Cochrane points out that during the Great Recession and the COVID-19 shutdown, the United States was able to swoop in fast with billions for bailouts, stimulus checks and aid programs.

The term "national debt" refers to the outstanding financial obligation of a country. The national debt is what the federal government owes its creditors. It's made up of different types of debt, such as that which is held by the public and federal government trust funds.

Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).

Of that amount, about $24.5 trillion, or 78 percent, was debt held by the public — representing cash borrowed from domestic and foreign investors. The remaining $7.0 trillion (22 percent), was intragovernmental debt, which simply records transactions between one part of the federal government and another.

The United States has the world's highest national debt with $30.1 trillion owed to creditors as of the first quarter of 2023. Washington's debt now stands at $31.4 trillion, raising further concerns about US government spending and borrowing costs.

Costly wars proved to be a theme in our nation's history. The debt was at $49 billion right before the U.S. entered World War II. When the war ended, it was $260 billion. It began rising at a fast rate in the 1980's and was accelerated through events like the Iraq Wars and the 2008 Great Recession.

Why doesn't the US pay off its debt? ›

Why Is the U.S. Debt So High? Essentially, because the government repeatedly spends more money than it receives in tax revenue. Many point to tax cuts passed by Congress as the major culprit for decreasing this income. Others point to out-of-control, politically-driven spending as the reason.

1) Switzerland

Switzerland is a country that, in practically all economic and social metrics, is an example to follow. With a population of almost 9 million people, Switzerland has no natural resources of its own, no access to the sea, and virtually no public debt.

For several years, the nation's debt has been bigger than its gross domestic product, which was $26.13 trillion in the fourth quarter of 2022. Debt-to-GDP is a useful metric for analyzing the debt over long time spans, as it puts the debt into relative terms by comparing it against the size of the national economy.

Foreign countries buy US Treasury securities since they are considered as one of the most secure assets. Among other countries, Japan and China have continued to be the top owners of US debt during the last two decades.

In 2023, aggregate local government debt had risen to 92 trillion yuan ($12.58 trillion) and the central government of People's Republic of China ordered its banks to roll over debts in a debt-restructuring. China's gross external debt in 2023 was $2.38 trillion.

In addition, household debt - mostly mortgages - is 61 per cent of GDP. Altogether, China's gross national debt is over 300 percent of GDP. A high debt burden constrains the government's fiscal firepower, preventing it from unleashing bolder stimulus and weakening its effectiveness when implementing support measures.

Disadvantages of a large national debt.

Reduced national income and savings levels- a large portion of the national income collected is used in loan and interest repayments reducing the amount available for investment purposes.

The growing debt could create additional challenges for federal fiscal management, which could in turn cause challenges for American households and individuals, too. These potential challenges include: Risks to economic growth and lower investment in the private sector.

During the Great Depression, why did people begin to question classical economics? It could not say how long the market would take to return to equilibrium. What is one of the major problems caused by a large national debt? It decreases the amount of money available to be borrowed by businesses.

At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.