The National Debt, why you should care
Most of us go about our daily lives and probably do not think too much about our country’s national debt. Certainly we all have heard about the record budget deficits the federal government is now running as a result of the massive government spending that has taken place over the last decade.
Sometimes you may ask why it really matters, can’t the government just print more money? The answer is yes, but that would not solve any problems, it would just create more. The problem is that the cash has to be backed by some tangible asset; otherwise it is just a piece of paper with ink on it. If you have ever heard the saying “backed by the full faith and credit of the United States” that is what the saying means.
Rather than just print money, the government is forced to raise money through whatever means it can. Taxes are of course the primary way that the government raises money. We all hate to pay taxes, but it is really our share of the bill for living in the United States of America. It is what pays for the good roads you drive on, the schools your children attend, the military that keeps you safe, etc.
Another way the government raises money is through borrowing it. Through the sale of United States savings bonds and treasury bills it raises funds. If you own a bond, you have loaned money to the United States of America. However, with record spending, this is still not enough to cover the expenditures that our government is incurring. So the government also borrows from foreign sovereign countries, like China. The interest on those loans is higher than few percent you get when buying a bond. Currently the United States government has been a good credit risk, but that might not always be the case. When countries default on loans or incur a lot of debt, their credit rating goes down. Just like you and me, if our credit score is low, the cost of borrowing goes up because it is more risky to the lender.
The above paragraph outlines a vicious cycle that is starting to happen. The deeper any person or country gets into debt, the harder it is to recover. For the United States that is also bad because it weakens the United States dollar abroad.
Our government gets the benefit of deficit spending, where you and I do not (unless we rack up debt in the form of credit cards or something similar). However, it is mortgaging the future of our children and the budget needs to be brought under control Otherwise taxes will continue to rise, programs will be harder to fund, and the position of the United States as the premier country in the world will certainly be in jeopardy. So the answer is yes, you should be very concerned about our national debt.
Most of us go about our daily lives and probably do not think too much about our country’s national debt. Certainly we all have heard about the record budget deficits the federal government is now running as a result of the massive government spending that has taken place over the last decade.
Sometimes you may ask why it really matters, can’t the government just print more money? The answer is yes, but that would not solve any problems, it would just create more. The problem is that the cash has to be backed by some tangible asset; otherwise it is just a piece of paper with ink on it. If you have ever heard the saying “backed by the full faith and credit of the United States” that is what the saying means.
Rather than just print money, the government is forced to raise money through whatever means it can. Taxes are of course the primary way that the government raises money. We all hate to pay taxes, but it is really our share of the bill for living in the United States of America. It is what pays for the good roads you drive on, the schools your children attend, the military that keeps you safe, etc.
Another way the government raises money is through borrowing it. Through the sale of United States savings bonds and treasury bills it raises funds. If you own a bond, you have loaned money to the United States of America. However, with record spending, this is still not enough to cover the expenditures that our government is incurring. So the government also borrows from foreign sovereign countries, like China. The interest on those loans is higher than few percent you get when buying a bond. Currently the United States government has been a good credit risk, but that might not always be the case. When countries default on loans or incur a lot of debt, their credit rating goes down. Just like you and me, if our credit score is low, the cost of borrowing goes up because it is more risky to the lender.
The above paragraph outlines a vicious cycle that is starting to happen. The deeper any person or country gets into debt, the harder it is to recover. For the United States that is also bad because it weakens the United States dollar abroad.
Our government gets the benefit of deficit spending, where you and I do not (unless we rack up debt in the form of credit cards or something similar). However, it is mortgaging the future of our children and the budget needs to be brought under control Otherwise taxes will continue to rise, programs will be harder to fund, and the position of the United States as the premier country in the world will certainly be in jeopardy. So the answer is yes, you should be very concerned about our national debt.