US national debt has almost reached the level $33 trillion.
Every year since 2001Because the U.S. government spends more than it receives, it must borrow money to make up the difference.
“Debt has many useful purposes,” said Chris Michener, an economics professor at Santa Clara University’s Leavey School of Business. “Public debt has always been used for emergencies. It is easier to finance it with debt than to burden the current generation with taxes.”
The national debt has increased by more than 89% since the pandemic began, and many top economists agree that 2020 is not the time to worry about debt.
But now that the worst of the public health emergency is behind us, the focus is back on how to deal with the ever-growing debt. harmful to the economy.
“There are good uses for debt.” [and] There are ways to abuse debt,” said William Gale, an economist and senior fellow at the Brookings Institution.
Michael Peterson, chairman and CEO of the Peter G. Peterson Foundation, said, “The Peterson Foundation’s concern is not whether we should use government bonds going forward.” . “It should be how you use it and how much you use it. And unfortunately, right now we’re using it rain or shine.”
Economists measure a country’s debt severity based on its debt-to-GDP ratio. Nearly 100% of the US debt is held by the public.Economic Development Committee of the Conference Board The responsible debt to GDP ratio is as follows: For a country, the area of the United States is 70%.
“Debt helps the economy because it allows us to tackle large-scale initiatives like infrastructure,” said Lori Esposito-Murray, chair of the Conference Board’s Economic Development Committee. “You can deal with a crisis like a pandemic, but you have to be careful about what your debt-to-GDP ratio is, because whether it can actually service this debt or not, or whether the balance is This is because it is an indicator of stability, indicating whether or not it is tilted.
Higher interest rates can make it harder to repay your debt. The Federal Reserve has been raising interest rates since March 2022 with the aim of slowing economic activity.
But some argue that paying down debt at higher interest rates can actually stimulate the economy.
“The Fed is raising interest rates, which is providing hundreds of billions of dollars in additional income to bondholders,” said Stony Brook University economics professor Stephanie Kelton. “So people who pay high interest rates and hold government bonds are making huge profits in the form of interest income, which they can use like any other income.”
watch video See above to learn more about why the US can’t take care of its debt and whether it needs to.