It is no surprise that America has struggled with its national debt, which has reached a staggering $34 trillion. The national debt has increased by 97% of last year’s GDP, and forecasts suggest that it may escalate further to 116%-123% of GDP by 2034. Shockingly, this surpasses the debt-to-GDP ratio during World War II, which was the most expensive war in United States History. According to Bloomberg, 88% of its simulations point to an unstable trajectory for America's national debt. Last summer, the yield on the treasury bills 10-year climbed to its highest level in five years by 5%. This increase highlights the growing concern surrounding America’s national debt and increasing unstable levels of debt.
The Biden administration and Congress are aware of the urgent need for change but face significant obstacles due to divisions in Congress. Republicans advocate for substantial spending cuts without specifying which departments will be getting cut; meanwhile, Democrats prioritize achieving debt stability through measures of interest rates and tax revenues. However, it is unlikely that any meaningful action will be taken until a crisis occurs.
4 comments:
I'm really interested to see what will be done with this? I think Biden will just leave it to whoever gets elected next and even if he is, politically it may be th best call to leave it to the next person. Seems like a vicious cycle that may never end.
It's really interesting to hear about these simulations. It's very concerning to hear that debt levels are likely to keep rising. I'm sure the national debt will be a hot topic throughout the upcoming Presidential debates.
This doesn't come as a shock to me. The US has been using consumer spending as a main driver of economic activity for decades now. Instead of growing the economy in a healthy way we have introduced a massive amount of services and encouraged everyone to spend beyond their means. The savings rate in the US is low, and we've covered in class how by lowering household savings, economic activity increases at the macro level. This is the exact opposite of command economies, which encouraged savings and took demand away from markets in doing so.
It is unfortunate to see differing ideologies clash and potentially lead to a crisis when it could be avoided. In my opinion, a combination of both of these approaches would be optimal as taxes have been slashed continually over time, and government spending is exceptionally high.
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