What Is Public Debt?
In the midst of the near-constant discussion of the impending recession, you may have noticed some din about our worsening national deficit . But you may be confused as to how this public debt arises and what it means to manage the country’s finances.
You can think of this as a credit card balance. If you add up the transactions for a month, you get a deficit. If you don’t pay all this amount, the balance will increase – it’s like a government debt. US spending exceeds its revenues, and the deficit, measured annually, adds to the growing government debt.
The Treasury issues bills of exchange, bills of exchange and bonds to raise money to cover its expenses. If Treasury bonds are part of your investment account , you are doing your part to keep this fair country functioning. Government bonds are considered one of the safest investments because the United States has historically always paid back its creditors.
National debt is far from new, although in the recent past it usually arose during the war. But since the 1980s and 1990s, we’ve seen it jump and grow exponentially. We last had a budget surplus instead of a deficit in the late 1990s, but those good times hardly affected the government debt. Look at it!
Yes, you get it right: we have reached $ 22 trillion. The last two trillion in government debt is partly attributable to President Trump’s tax cuts . There is a lot of talk about some areas of spending because they take up a lot of space in the federal budget. Medicare, Medicaid and Social Security are huge expenditures, and the US has a huge defense budget. There is also transport, benefits for veterans and public education.
When the government is faced with a deficit, it has two main options: cut spending or raise more money. If he spends less money, government programs that many people rely on may be forced to reduce their ability to meet these needs, or to cut program areas altogether. If the government decides to raise taxes, you will feel the impact on your paycheck as payroll taxes increase.
Believe it or not, the government limits the amount of debt; this is called the debt limit or debt ceiling. In August, a new budget agreement was approved to increase government spending and suspend the debt ceiling until 2021.