Why is the United States’ public debt so high?

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A few days ago, the debt of the North American country reached its historic peak, reaching $ 22 billion dollars and economists warn the State to be careful

Why is the United States' public debt so high?

This February 11, the public debt of the United States reached its historical peak, reaching then $ 22 billion dollars, surpassing its highest point that had been about $ 21 million in March of last year.

Leer en español: ¿A qué se debe la elevada deuda pública de EEUU?

According to The Balance, the US debt is the sum of all the outstanding debt of the federal government, that is, it is the measure of how much you owe to your creditors. Two thirds of this in the hands of the public and, the government owes this to buyers of Treasury bonds, which include companies, individuals and foreign governments.

This also includes intergovernmental debt. The US Department of the Treasury owes several departments that have titles in the State Account. Here, for example, programs such as social security and pension programs, health programs such as Medicare and Medicaid, the defense spending budget, among others, such as education and transportation, are included.

The Balance states that the US debt is the largest sovereign debt in the world, being even larger than the country produces in one year, when in 1988 the debt was only half of the economic output. From 1989 to 2018, the debt increased by 653%.

Why does the United States owe so much?

This has had various reasons. The portal clarifies that this is an accumulation of the federal budget deficit. Each program, such as those mentioned above, as well as tax cuts, are added to the debt. This first reason is partly attributed to the Obama presidency, where the debt increased 100%, going from $ 10 billion to $ 20 billion. However, the tax cuts that have been taking place since Bush has also contributed to the increase of this.

On the other hand, it is the frequency with which the US presidents have borrowed from the Social Security Trust Fund , which was created to finance the baby boomer's pension upon retirement, although more has been used. to finance the increase in government spending, thus putting the same fund at risk.

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There is also the effect of the wars in Iraq, Libya, and Afghanistan. According to Investopedia, a large part of the budget was allocated to the defense because it is continuously involved with these conflicts, which has cost the State. It is estimated that around $1.3 trillion has been invested in these events, causing a considerable burden on the national debt.

What problems does the debt bring?

The effects of this vast debt are debated among economists. Some believe that a deficit is necessary for the economy to continue growing, and others claim that they have great consequences. However, there are points in common in the discussion.

As explained by Jared Bernstein of the Center on Budget and Policy Priorities to CNBC, if there is an economic crisis like the one in 2008, the US government is going to be increasingly difficult to deal with. This seems to be one of the biggest concerns regarding the high debt.

On the other hand, Sonja Gibbs, director of the Capital Markets and Emerging Markets Policy Department, also told them that as the debt increases, it is more complicated to stimulate the economy to generate growth.

Another effect is mentioned by the Peter G. Peterson Foundation, where they clarify that this has led to interest costs to grow more quickly, as they are projected to grow from $ 315 billion from 2018 to $ 914 in 2028. So, for the year 2026, it would be the third category that takes the most budget.


LatinAmerican Post | Valentina Moya

Translated from "¿A qué se debe la elevada deuda de EEUU?"

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