The national debt of the United States of America is a staggering number to read – currently, it rests at $14.46 trillion, which is nearly as much as the GDP of the entire country in 2010. (US Department of Treasury, 2010). Currently, members of Congress and the President are in talks about whether or not to raise the debt ceiling, as the existing debt limit has already been reached. Republicans believe that we should not raise the debt ceiling any further, and should instead cut spending however possible. Democrats, on the other hand, feel that raising the debt ceiling would buy time to create better solutions to the national debt issue, and that the cuts required to get the national debt under control would be far too much to keep the country’s infrastructure running. No matter the end decision, the national debt has had huge ramifications for the US economy.
For one, the value of the dollar has decreased substantially – in order to bail out the banks as a result of the 2008 recession, the United States had to take out a number of loans to foreign countries, which carry substantial interest rates that need to be paid back. As a result, higher taxes need to be implemented in order to gather more revenue from the people, otherwise the government will default on those loans, leading to a depreciation of US currency. (The Economist, 2009).
The United States currently possesses a gigantic trade deficit – the amount we are importing far exceeds what we export to other countries. In order to sustain this system, more and more foreign investments have to be brought in, putting more financial dependency on foreign countries for what amounts to financial aid. This gives them increased power over the financial institutions that help run America’s economy, such as the major banks and credit agencies. According to some, the more dependent we become on foreign sources of income, the less independently America can act as a nation, as we will be held accountable to these other foreign interests (Friedman, 2008).
According to economists, the financial path that the government is on cannot be sustained for much longer, and dramatic action has to be taken to curb spending and pay back our debts. Otherwise, the value of the dollar will go down far too much, and a new currency might crop up as the world’s reserve currency. If that occurs, America will no longer be the financial powerhouse it currently is, and might lose some of its power. In light of this ultimate consequence, the ramifications of the national debt (and what happens when we do not do anything to pay it) are severe.
Future generations should most definitely worry about the ramifications of accumulating such a large amount of debt. We are clearly spending more than we are capable of, and a solution must be reached. It is impossible for us to maintain our level of affluence for more than 50 years, maximum, at which point our debts will exceed our income and we will not be able to repair the damage. America will lose its power and effectively go into default on its loans. When this happens, the level of prosperity we enjoy now will be a thing of the past.
Works Cited
FRIEDMAN, THOMAS L.. "Swedish Spoken Here." The New York Times. N.p., 4 Oct. 2008. Web. 21 July 2011. <http://www.nytimes.com/2008/10/05/opinion/05friedman.html?ref=opinion>.
The Economist. "Buttonwood: Birth pains." The Economist. N.p., 14 May 2009. Web. 21 July 2011. <http://www.economist.com/node/13653915?story_id=13653915&source=hptextfeature>.
United States Department of the Treasury, Bureau of the Public Debt. "Debt position and activity report". TreasuryDirect. 2010. Retrieved July 21, 2011.
