Do you believe the growing national debt, now over $18 Trillion, is a big deal for your generation?
Arianna Mendez – FL, Florida International University 2014 Masters Degree, Bio – $18 trillion of national debt is a perplexing sum. For most Americans, the rising national debt is an abstract and inconceivable concept. So what is the national debt? The national debt is the total of past budget deficits, minus what the federal government has paid off with budget surpluses.
Throughout U.S history, budget deficits have been common. In the last half century, the federal government has run a deficit 45 out of 50 years. When the federal government runs a deficit, the United States Treasury borrows the money to make up the difference, and this creates a “federal debt.”
As of February 15, 2015 at 11:09 AM, the national debt was $18,122,145,276,366 and climbing. So what are the effects of such gargantuan debt?
High national debt has a negative effect on long-term economic growth. When government debt grows, private investment shrinks which lowers future growth and stagnates wages. Slow economic growth lowers incomes and standards of living in the short and long-term.
Like personal debt, national debt is easy to accumulate, but difficult to pay off.
With U.S federal, state, and local government debt at 106% percent of GDP and rising, policymakers must consider the long-term negative effects of deficit spending. High national debt affects Millennials directly on the subject of student loans. A higher national debt leads to higher interest rates on all loans.
Higher interest rates create a “crowding out effect,” and this phenomenon discourages individuals and businesses from borrowing money, which in turn reduce their spending and investment capability. High-interest rates create “across the board” inflation, which stifles short term and long economic growth.
So what can be done to lower our national debt? The answer may lie with our neighbors to the north. Canada’s much venerated turnaround and continued economic gains occurred at a time when the country was on the verge of bankruptcy. In1995, Canada cut government spending by 10 percent over two years, reduced federal employment, and reduced barriers to trade and labor movement.
These reforms were radical but effective. Canada’s GDP growth temporarily slowed when government spending declined. It took a decade just to bring the country’s debt-to-GDP ratio back to its pre-recession level.
In the long-run, these reforms created the turnaround story that is Canada today. The 1995 Canadian budget got deficits under control, turned the growing debt into a shrinking debt, and put Canada in a position to take advantage of the late ’90’s boom.”
The United States must change course on deficit spending to be competitive in the 21st century and remain the “shining city on the hill” for Millennials and generations to come.
Josh Lim – PA, University of Warsaw 2012 Graduate, Ateneo de Manila University 2014 Graduate, Bio – Benjamin Franklin brought to us the idea that “in this world, nothing can be said to be certain, except death and taxes.” For the most part, this is true—death is as inescapable as it is the possibility of having a taxable income. However, given the current state of the American (and global) economy, perhaps it may be better to tweak this into something more relevant: that we can’t escape debt and taxes.
I’ve just started a new job at an Internet startup, and I can’t help but worry about these two realities as I start making it out there in the world. It’s one thing I have to worry about paying my taxes on time, which I have to do next year. It’s another thing, however, to have to worry about taxes and the looming prospect of having to deal with the ramifications of the United States’ $18 trillion debt burden—something that’s still growing every day.
We may not realize it, but a high debt burden carries a lot of ramifications. Look at Japan, for example. Japan has the world’s highest debt burden with the country’s debt-to-GDP ratio standing at 237% of GDP, and so far, it’s had considerable difficulty in trying to reduce that burden.
In the 1990s, it disastrously experimented with a 2% hike in the national consumption tax to pay off debts, bumping the tax to 5%. It looks minimal, but people stopped spending, and the country went further into recession—even inducing the country’s deflationary spiral that it was only able to get out of recently—because people refused to spend.
Luckily for us, the United States’ debt burden is much smaller, with our debt-to-GDP ratio standing at only 106% of GDP. However, in an economy that has only begun the long, hard road to recovery, and where current economic realities are more unfavorable to the social and economic advancement of the young, I am worried about the effects American debt could pose on the American economy, and young people in general should be too.
Why should the growing national debt be a big deal for the young? The answer is quite simple, really: whether we like it or not, the issue of American debt for our generation is like being caught between a rock and a hard place. On the one hand, we have to make sure the economic ramifications of a large debt burden, in addition to also considering other economic factors, do not derail our chances at making it in life.
As it is, it’s hard for the young to find work, to leave home, and to strike it big in this economy. What more when we have to pick up the tab for making sure the government works and, well, we’re all either underemployed or not employed at all?
On the other hand, to expand on it further, we must consider when we are of age; we will be the ones responsible for ensuring our country’s fiscal house is in order. If we are poorly equipped now to deal with the effects of a poor economy, what more when we will be directly responsible for shaping fiscal policy?
Especially in a time where we’ve become more disillusioned with government, it becomes our responsibility to step up and rise to the challenge of navigating around our debt burden. I trust that we young people can come up with those solutions.
So where does this leave us? Debt is naturally scary. However, it is very important to our survival, and we must control it before it controls us.
Nana Osei – SC, College of Charleston Student, Bio – The growing national debt is a big deal, not only for my generation but for all American generations. The increasing debt crisis is allowing for foreign powers to control companies and assets within the United States. $18 trillion is not paid off by the government in cash but rather in bonds that give foreign powers, most specifically China, control of companies run within the United States.
This leads to currency alteration normally weakening the dollar by foreign powers having so much of it. In other words, if we cannot control our spending and slow down the increase in national debt, my generation will experience a country that is a puppet to foreign power. Currently our future generations are being set up for a burden no other generation has faced within the U.S.
Senate Majority Leader Mitch McConnell, when discussing congress’s approach to slowing down the debt, stated, “A national debt that has Americans stealing from their children and grandchildren, robbing them of benefits that they will never see, and leaving them with burdens that will be nearly impossible to repay.” McConnell is explicating the uniqueness of this situation and how it is something no other generation of government has faced.
There are foreign nations dependent on the interest being made on the U.S. debt. If we were able to immediately pay off our debt tomorrow, they would be seriously impacted in a negative way. So the debt is allowing for other countries to be supported.
However, the amount of national debt is too high and is leaving our country in a vulnerable position. Solely having U.S. interests in mind, Congress must develop a plan to slow down, seriously slow down, the debt ceiling. And within ten years, they must attempt to lower that ceiling.
This is why it is a major problem not only for future generations but a current problem too. The sooner a plan is put into the place, the better chance we have at helping the future.
Paul Bremmer – Wash D.C., St. Bonaventure University 2012 Graduate, Bio -Try to picture 18 trillion of anything. What would that even look like? It’s hard to fathom one trillion, let alone a trillion times 18. And yet, our federal government has managed to rack up $18.1 trillion in debt.
One of my high school teachers put it like this, “If Jesus Christ had set aside one million dollars every day, starting with the day He was born in Bethlehem, He still would not have saved up one trillion dollars by today. In fact, He wouldn’t even be three-quarters of the way to one trillion.”
That gives you an idea just how insane our national debt is. It’s not an imminent threat like terrorism or illegal immigration, but it continuously hangs over us like an ominous storm cloud.
The greatest danger is that the foreign countries that hold our debt (China and Japan being the largest holders) will one day wake up and realize the U.S. will probably never be able to repay them. When that happens, they will demand greater interest payments on the debt. Interest payments will consume a larger and larger chunk of our federal budget every year, leaving less room for discretionary spending.
China, in particular, has the ability to hold us hostage, because they hold $1.25 trillion of our debt. If the U.S. ever tries to make a move on the world stage China doesn’t approve of, China may threaten to sell off its debt holdings, which would cause U.S. interest rates to rise, slow the U.S. economy, and possibly collapse the dollar. Therefore, our sky-high debt gives China leverage over our foreign policy.
But of course, not all of our national debt is owed to foreign governments. A significant chunk is owed to our own Social Security Trust Fund. This is where the debt really hurts my generation, because the government has already spent the money that is supposed to be available to us when we retire.
Many analysts predict Social Security won’t have enough money to cover the benefits promised to the Baby Boomers, who are already at or nearing retirement age. So even though my generation may be paying Social Security taxes now, the benefits may have dried up once we finally go to collect them.
We will be made victims of the irresponsibility of previous generations.
Vinny Harshaw – OH, Wittenberg University 2012 Graduate, Bio – As a 24-year-old college graduate still transitioning into what we call “the real world,” I absolutely think the U.S. debt of more than $18 trillion is a big deal. I, like probably the majority of college graduates, believe I am smart and capable enough to contribute to the success of a company or organization I choose.
However, my fear is the larger effect this deficit will have on the stability of businesses in the future. I’m also alarmed about the potential erosion of entitlement programs such as Social Security and certain forms of health care benefits by the time I’m old enough to qualify.
Now is the best time for young adults to learn and take responsibility for our own personal finances, because we will not have the same security our parents had. Unfortunately, many of us may get used to the hustle of switching between multiple jobs. That might have its benefits but could also be very stressful.
Recently President Barack Obama gave his final State of The Union speech. His main goal for the economy was to support “middle-class economics.” His intentions were outlined with these goals: tax relief to working class families; closing loopholes for the super-rich; providing free community college education; expanding paid-sick leave rules; and strengthening cyber security. I believe these goals are in line with the direction America must take to help reduce the nation’s debt.
Cutting down on the outsourcing of jobs, which the president has addressed, to create more jobs in the U.S. would greatly supplement success, as well.
America runs on a consumer-based economy, meaning most of the U.S. GDP growth (about 75%) comes from Americans buying stuff. For instance, it helped that a rise in consumer confidence resulted in Americans shopping more during the past holiday season. Our holiday spending greatly contributes to economic growth.
I believe there will be a huge problem if the middle class cannot find employment and also, if we do not provide entrepreneurial career training in our high schools. In times of need, knowing how to draft a business plan and strong financial structure could be very beneficial to those without a job who could become self-employed.
The most dramatic experience for me was during the government shutdown in 2013. I remember speaking with federal employees from Wright-Patterson Air Force Base whose pay was withheld during their long furlough and hearing what a struggle it was to support their families. The federal government shutdown left 900,000 federal employees without work. Significant acts like these scream there is a problem, and we need to resolve our level of indebtedness.
Though it may help, I don’t believe a spike in taxes alone will be effective enough to fix the debt issue. The U.S. must stop outsourcing jobs as much as possible, start incentives to create new jobs domestically, and invest in employment training opportunities that will give every citizen a chance to secure a job with decent pay.
Also, the U.S. must limit raising the debt ceiling. Unfortunately, since President Richard Nixon in 1971 cancelled the gold standard that tied dollars to gold, there has not been a cap on how high our debt can grow. It’s time to decide on that now.
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