How Should We Combat Our Ever Increasing National Deficit
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By Zach McGraw
As of May 2021, the United States national debt is approximately $26.51 trillion dollars, which is roughly 130 percent of the U.S. GDP. Many believe this number is worthy of being considered a national crisis, while others think it is extremely misleading, prompting the question: How much of an impact does the national deficit have on our lives?
Prominent politicians such as Rand Paul have called for the lowering of the national debt, saying, “We have seen currencies and countries fall under their unsustainable debt. Interest on the debt this year alone is $261 billion, more than we spend on the Departments of Commerce, Energy, Homeland Security, Housing and Urban Development, Interior, Justice, State, the EPA, NASA, NSF, and the Small Business Administration, combined. While our national debt continues to grow, investors will become uncertain of the government's willingness or ability to pay U.S. debt obligations. It is time that we get our fiscal house in order to prevent potential catastrophe and keep this outrageous national debt from falling on our children and grandchildren.”
People wary of the debt often believe that an overload of debt will drive away any potential investors.
Another concern is that debt can only be paid off by printing more money and simultaneously creating high inflation rates. Athenian student Phillip McClure elaborated on this issue.
“I am okay with the prospect of having debt—it is important to find a balance where we can pay off the debt we take in, but spending without any boundaries will only create problems we will have to deal with in the future.”
Other students such as Kasey Kazliner view the the national debt as a complex issue, being both good and bad, “I’m worried about the debt getting too large but at least the government is using this money to actually be a force of good for society, instead of using it to give tax breaks to the rich like they usually do,”
Another area of concern for people worried about the debt is the historical implications of countries racking up too much debt; some look at Greece when referencing this issue. In 2009 Greece’s budget deficit was 12.9 percent of its GDP, far higher than the European Union cap of three percent. Greece caused a global scare after the recession when they announced that they may default on their loans, which might have caused another recession.
But economists say this is actually an example of how the government deficit is not as harmful as we believe it is. Top economists such as Stephanie Kelton believe we are looking at the debt incorrectly, and that there are two players in an economy: a currency user and a currency issuer. The reason why many perceive the debt as dangerous is that they look at the debt from the lens of a currency user, who sees the debt like a household budget where you can’t spend more money than you have. But the other part of this equation is the currency issuer, who sets the value of the currency and controls inflation and the percentages each person pays in taxes to the government. Kelton says that Greece was a currency user since they had recently joined the EU, making it possible for them to go broke, but a currency issuer like the United States does not operate under the same set of rules.
While the government has been operating under these guidelines for a while, political activists and economists question if the deficit is being used productively.
Jason Holt, a tech investor, said in an interview, “The U.S. has been increasing the debt for a while now, which in itself is good; but the sad reality is that when America increases its deficit it usually is just going to tax breaks for the rich and benefits for powerful corporations.”
The deficit can be used for good, but oftentimes it contributes more to the wealth gap than it takes away. Depending on whom you ask, the deficit may either be considered a crisis, or an opportunity to help the economy and American citizens in need.
