Fixing the National Debt - Essay Example

Comments (0) Cite this document
Final draft Title: Fixing USA’s Public Debt Name: Professor: Institution: Course: Date: The United States of America has a public debt valued slightly above 15 trillion dollars (, 2011). Because the population of USA is estimated to be 311,770,570, the national public debt translates to approximately $48,000 per citizen…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER96.6% of users find it useful
Fixing the National Debt
Read TextPreview

Extract of sample
"Fixing the National Debt"

Final draft Fixing USA’s Public Debt The United s of America has a public debt valued slightly above 15 trillion dollars (, 2011). Because the population of USA is estimated to be 311,770,570, the national public debt translates to approximately $48,000 per citizen. Since 2010, US public debt has been nearly 100 % of the gross domestic product. This ratio was 51% in 1998 (Amadeo, 2011). Therefore, U.S.A has the largest debt in the world. The public debt level needs an urgent fix and hence solutions need to be formulated to avert the impending crisis. Effects of the High Public Debt The level of US debt has adverse effects to the economy. In the next 20 years or so, the government will be obliged to pay retirees (Amadeo, 2011). The saved funds by the retirees has however been spent by the government. This means that it will have to seek new ways of meeting its requirement. This could be done by borrowing from international governments or raising taxes. Only the latter is applicable to the current debt problem in the USA since the government’s high debt disqualifies it from obtaining finance from foreign governments. An increase in tax has its cons. These disadvantages are likely to exceed its advantages. With the slow growth of the economy, increase taxes would result to reduced national consumption levels. Consequently, national income accounted as GDP will further reduce by a larger proportion than the tax increase due to the multiplier effect. Higher taxes will also reduce investment levels and may lead to relocation of investors to more tax-friendly nations. There will also be increased unemployment levels and in turn lower wealth and welfare to Americans. Increase in taxes face great opposition form citizens especially through civil and social movements. The government is therefore likely to change the terms of payments of social benefits to the disadvantage of those making claims. The government could curtail social security funds to recipients of less than a certain age, say 70, or deny this benefit to individuals with high incomes (The U.S. National Debt and How It Got So Big, 2011). Although high income earners may not need social security benefits for their basic needs, they have the legal right to receive this claim. Such actions of withholding benefit from some legal beneficiaries will lead individuals not having trust in the government, let alone the countries financial structure. Solutions to USA’s Public Debt The seriousness of USA public debt is requires immediate actions towards solving it. Among different options available to the US government include inflation. The government could induce intentional inflation the country. Many different countries have used this option to reduce value of their debt. Such countries include Israel and Russia after it split of the Soviet Union (Rudolph, 2011). This may solve the problem but with its own consequences. Consequences include reduction in real incomes of government employees and value of terminal benefit such as social security claims. A second solution to the growing public debt may be implementing reforms in the health expenditure and social security. The above phenomenon is the greatest components in the public debt (Rudolph, 2011). Even though it is almost impossible to perform such changes in the short run, the government could use them to reduce souring expenditures in the long run. Countries including Canada and Sweden have imposed strict social security policies that improved their long-term fiscal position. Since social security is meant to cushion the old and less economical productive citizens, abrupt changes in this scheme could be problematic if done hastily. It is not easy to reduce spending in health but with the crisis situation of the economy, this may be one of the most viable options in saving America’s financial sector. Reduction in discretionary spending is vital in reducing public debt. This solution is quite viable since most of the debt USA has need payment in the short run. Approximately 30 per cent of the public debt must be refinanced every year. Reduction in discretionary spending will however be successful if the government sets pace in reducing discretionary spending on war so as to lead liberalists in reducing spending which is non-war. The president of United States, Mr. Obama, has advanced a solution related to this. This is to reduce non-security expenditure by stopping this spending for five years. Reduction in discretionary spending is important in reducing the ever-growing debt-GDP ratio to below 100 % (Rudolph, 2011). Increase of revenues is necessary for the country to achieve its ambitious target to a debt ratio less that 60 per cent by 2022. Revenues can be increase by raising taxes or reducing transfer payments that are recorded as tax reliefs or interest deductions. Increase in taxes face lots of opposition from politicians and economists. However, reduction in tax reliefs and mortgage interest deductions are vital in towards ensuring a sustainable balanced or surplus budget. Some members of the National Commission on Fiscal Responsibility and Reform had proposed to the government a 15 % upward shift in tax on gas (Rudolph, 2011). Revenues should increase to reduce reliance on debt. Conclusion The US public debt level has resulted to critique by the international community. Many nations no longer trust the financial structure of the US federal government. Lack of an immediate solution to fix public debt level could lead to deep recession for the American economy. Some of the most viable solutions to this crisis include reduction in health and social security spending, increase in revenues, reduction in discretionary spending and inflationary policies. These solutions will lead to improved GDP-debt ratio and reduction in public debt. References Amadeo, K (2011). The U.S. National Debt and How It Got So Big. Retrieved on 1st December 2011 from (2011). U.S. National Debt Clock. Retrieved on 1st December 2011 from Rudolph, G. (2011). Will It Take a Crisis to Fix Fiscal Policy? Washington, DC: The Urban Institute. Read More
Cite this document
  • APA
  • MLA
(“Fixing the National Debt Essay Example | Topics and Well Written Essays - 750 words”, n.d.)
Retrieved from
(Fixing the National Debt Essay Example | Topics and Well Written Essays - 750 Words)
“Fixing the National Debt Essay Example | Topics and Well Written Essays - 750 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
Fixing Urban Schools
...? Fixing Urban Schools Policy Review MEMORANDUM Fixing Urban Schools March 11, Problem ment: There is a lot of pressure on the system of public schools. Since the 1980s courts, state legislatures and education departments have disassembled local administrative systems and school boards. The schools are now in the hands of state officials, mayors or local appointed boards. This happened in a few states. The takeover by state governments and courts is a way to stop the political gridlock on public school systems. The move intends to reduce the hold of bureaucratic routine, and create room for those with new ideas. Placing new leaders in control of struggling schools is the best way to bring change to urban...
5 Pages(1250 words)Essay
Three major political approaches to fixing the problem with the national debt
...? Three Major Political Approaches to Fixing the Problem with the National Debt There are currently three major political approaches to fixing the problem with the national debt include: 1).Cutting down government expenditures and give more tax breaks and incentives to small and big business. 2) Emphasize our exports by lowering our dollar value or forcing our trade partners – China – to regulate more accurately its currency.3) having a balanced budget amendment. i) Identify the notable political advocates of all three positions. The first political advocates for all the above three position discussed above were the republicans followed...
3 Pages(750 words)Research Paper
National debt with regards to taxes
...? National debt with regards to taxes Grade (December 10th, National debt with regards to taxes National debt refers to the money that is owed by the government, in form of the federal governments debts, state government debts and the debts owed by the local authorities, which may be owed to the central bank, to the public or to the private sector, in form of government bonds, or to the foreign creditors and foreign governments (Agonist Learning Center, 2009). While the debt could just be owed by the government, the citizenry and the potential investors have all the...
5 Pages(1250 words)Essay
Our National Debt (USD) Today
...Our National Debt (USD) Today Instructions Fill out the worksheet provided for the article topic and fill in the information that includes text, journal, magazine, newspaper, web URL, or other written source from where you obtained the article. This assignment is due the beginning of each class session with the exception of article 1. Student Information Name Date Summary Why did you choose this article? (Provide a brief reason why this article over others) Response:I chose this article because I find it very interesting in the sense that a serious topic can be discussed in a funny way. I think if people read articles like these, they would fully understand macroeconomics. Also, people would appreciate the importance... of their...
2 Pages(500 words)Article
...Debt The current global recession and the increased spending on war on terror have affected American economy drastically so that the fiscal deficit of the country has increased a lot. The phenomenon fiscal deficit happens when the government spending exceeds the revenue it generates excluding the money borrowed. In other words, fiscal deficit will put each citizen of a country indebted to some external financial sources. Thus even the new born babies are indebted to somebody even from the beginning of their life on earth. It is essential for a government to avoid the fiscal deficit as much as possible by the repayment of massive public debt in order to save the current and future generation from the...
2 Pages(500 words)Essay
Fiscal Policy: Government Expenditures and Revenues, Budget, National Debt SLP
...Fiscal Policy: Government Expenditures and Revenues, Budget, National Debt SLP Task: Jollibee Foods Corporation is an entityin the expansive cuisine sector. In its endeavour to attain global presence, the entity has entered new lucrative economies. This multinational entity faces multiple hitches in executing its operation. The challenges emerge due to the disparity in the fiscal policies of nations in which it has subsidiaries. Changes in the respective economic policies would boost the fortunes of this entity. The American economy’s performance is unpredictable following a lengthy recession (Shalal-Esa, 2009). However, the Federal government has instituted apposite measures that have...
2 Pages(500 words)Admission/Application Essay
U.S. National Debt
...U.S National Debt According to the article, Treasury Direct 2012 the size of the U.S National debt as per August 31st 2012 stands at $16,394,000. Debt held by the public amount to 11,272,626, and the Intergovernmental holdings amounts to 4,743,144, which totals to 16,015,770. The Total Public Debt subject to limit soared to 15,976,711 while the Statutory Debt Limit amounted to 16,394,000. The debt is rising at a high rate since the amount seems to increase gradually every month. In July 2012, the total Public Outstanding Debt amounted to 15,933,235, which increased to 16,015,770 in...
1 Pages(250 words)Assignment
US National Debt & Social Security/Medicare
...US National Debt Countries across the world are experiencing an increase in debts. The US has seen its debts rising to 62% percentof the economy in 2010. Economists point at the global financial crisis as the cause of this rise. Additionally, during the worldwide recession, most countries including the US saw slow growth in the economy. Countries in the world are spending more money on pensions and health care programs. It is the reason for the increase in debts. Economists argue the US will have the biggest debt in 2040. The level of debt will be unsustainable. Researches indicate that unfunded obligations held by...
1 Pages(250 words)Essay
United States National Debt Ceiling
...United s National Debt Ceiling Introduction Debt ceiling of United Sates of America is a legislative mechanism to the fix the upper limit of the national borrowing. The whole debt ceiling is issued by the Treasury of the country. Debt ceiling includes intra-government accounts and public debts. Fixing the debt ceiling is a significantly important macroeconomic factor for the country. Debt ceiling does not directly mange the national deficit. Debt ceiling crisis of 2011 was significantly debated topic in the US Congress....
8 Pages(2000 words)Essay
U.S. National Debt Research Paper
...U.S. National Debt Public/national debtis the amount of money owed by the nationalgovernment. Public debt is measured in terms of the unpaidTreasury securities issued by the Treasury as well as government agencies. Gross national debt comprises of: Debt held by the public: forinstance securities held by privateinvestors (individuals and corporations), localgovernment, foreign states and Federal Reserve System. Debt held by government accounts(intragovernmental debt) Generally, public debt reduces due of tax and other receipts and increases due to government spending....
7 Pages(1750 words)Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Let us find you another Essay on topic Fixing the National Debt for FREE!
Contact Us