One of the most important factors that is a driver for financial growth in any economy is the accessibility of credit since it can be used to allocate resources into profitable areas that will in turn lead to growth in production as well as work. Borrowing money is one of the ways to have access to credit. Excessive borrowing might result in the economy amassing huge debts which is an issue in itself as this may hurt future ages in the reimbursement of the debt. In this paper, we will analyze the present debt conditions in the United States including the historical backdrop of debts in the US. Specifically, we will look at the debt circumstances during the time of G.W. Bush and Barrack Obama organizations. This paper will analyze the consequences of a large amount of national debt to the economy of the United States and how it hampers financial growth.
The present federal debt of the United States is about $19.8 trillion which makes it $60,819 federal debt for every individual (usgovernmentdebt.us). If we look at the federal debt as a percentage of GDP, it comes out to 106.2% for US. This debt excludes the state debts, nearby debts; office debts, such as unfunded liabilities, for example, qualification programs, incorporate Medicare and Social Security.
Let’s now take a look at the history of the debt in the United States since the fulfillment of autonomy in 1776. The Unites States has always had a fluctuating national debt as a percentage of GDP. When America achieved freedom, the nation was under debt. It was more than $75 million which kept on increasing to about $120 million by 1815. In 1835, President Andrew Jackson reduced the debt to zero and the US was free of debt. President Jackson began selling government-owned western grounds and blocking real spending on infrastructural projects. Nevertheless, the flourishing was short-lived, and the state banks began printing cash and offering simple credit.
During the time of President GW Bush (2001-2009), the United States debt escalated altogether. The important turning points during this period were the recession and financial crisis which influenced the United States during the period 2007 and 2009 (Debt.Org, 2013). To reset and to meet expectations of the economy, Bush needed to rebuild the economy with new projects, for example, the Asset Relief Program of 2008. These projects cost the federal government a lot of money and when Bush was leaving office, the national debt remained roughly at $10.2 trillion. During the tenure of Barrack Obama (2009-2017), the national debt of the United States had increased to $ 19.9 trillion. There were a number of other components that added to this surge of national debt such as Medicare and other obligatory projects combined with declining federal wages brought by Bush's tax breaks (Amadeo, 2017). Obama tax breaks additionally kept on decreasing the national livelihoods. Obama organization likewise expanded military spending a specifically on the fear wars in Iraq and Afghanistan which expanded the federal spending plans and debts (Amadeo, 2017).
Having a specific degree of debt is in fact useful for a growing economy but there are real consequences of having an especially large national debt. One of these consequences is the massive interests that are charged on such debts. Furthermore, a large national debt can place the nation into a possible financial crisis. Basically, debts accompany conditions in which the borrower is required to stick to so as to meet all requirements for the debt. This implies the government is constrained by outside establishments regarding the way wherein such debt is used which influences the sort and way where such assets are used. It may also negatively affect monetary growth since a great part of the resources are spent in repayment of the debt.
In my opinion, a large national debt may not really hamper financial growth. This is because of the fact that debt gives an impetus to growth particularly when the borrowed funds are placed into productive use. Debts empower an economy to back significant projects which help to improve the financial welfare of its residents just as firms (Krugman, 2012). This lifts the productive limit and expands government income which eventually is directed towards upgrading further monetary growth. By and large, I don't feel that it is possible for the US to default on its national debt later on. The United States stays an on a very basic level solid economy with elevated expectations of living, low unemployment, and a well-working economy. For whatever length of time this condition of monetary undertakings is kept up, the United States will keep on giving the expected resources to back the national debt.
Essentially, Nobel Prize winning economist Paul Krugman isn't worried about the elevated amounts of national debt of the US since he believes that for the economy to escape an excessive number of difficulties, for example, unemployment trap and low monetary growth, it needs debt. Krugman also believes that one man’s expense is another man’s income and hence the direct co-relation between income and expenses should take care of the national debt if the common people do not default on their debts.He accepts that debt carries some weight but a lot of different things matter more if an economy is to become a well-performing economy (Krugman, 2012). Hence, having debt is essential to tending to key monetary difficulties without which an economy can't succeed.
To conclude, the debt situation of the United States is an outcome of a few different factors and it has expanded considerably since the independence. Among the key factors that have shaped the debt circumstance of the United States includes the American Revolutionary War, the American Civil wars, the world wars, monetary downturns, for example, the American financial downturns, recessions and financial crisis. Presently, the United States national debt remains at roughly $ 19.8 trillion and is evaluated to increment in the coming decades.