4 Issues A $22 Trillion Dollar Debt Can Cause On The Economy

February 15, 2019

A national record was broken this week as the country’s debt grew to be over $22 trillion.

So let’s take a look at the negative effects that this debt can have on the United States:

1.Because the U.S. pays interest on its debt those payments increase as the debt grows. Soon, interest rate payments are expected to rise to levels they haven’t seen since the early 1990s.

According to the Congressional Budget Office, The U.S. will be spending more on interest than on agriculture, veterans’ programs or Medicaid.

2. With a large portion of the federal budget earmarked for interest payments, it leaves less room for other spending which limits options for the U.S. if another economic downturn occurs.

3. Spending on interest payments does nothing to boost the economy. However, it’s not the payments that are the cause of this. Take for example, spending on infrastructure which does boost the economy by adding jobs, increasing trade, and circulating money throughout businesses. In contrast, interest payments will only impose a burden on the future generation.

4. William Gale, co-director of the Tax Policy Center and a senior fellow at the Brookings Institution said that, “Borrowing more increases the demand for loans, so the government is competing against business and students and everyone in the market for loans.

He went on further to say that “If the government wants to borrow more, that jacks up interest rates on everyone else and crowds out what other people might do.”

Sincerely,

Doc Wellington

Retirement insider