The U.S. debt situation can indeed be considered problematic. From an economic point of view, the concern risks a default. If declared, it will significantly limit the possibilities of the Treasury Department, which will no longer be able to raise additional funds in the form of loans. To ensure that the national economy does not take a severe hit, the federal debt ceiling is periodically raised by Congress at the legislative level. However, most recently, the U.S. national debt exceeded $31 trillion, and this amount of the country’s anti-record is a harsh cause for concern (A true progressivism, 2012). It will slow economic growth and increase interest payments in the country, which will cause a prolonged financial crisis.
The country’s employment level is one of the leading indicators of economic growth. Economic instability, inadequate market infrastructure, discrimination, and pandemics are the leading causes of the issue. In line with the same policy, government spending cuts have led to the loss of hundreds of thousands more jobs. Debt repayment cannot entirely solve unemployment because of the grounds listed above. However, it will undoubtedly contribute to economic stability and provide opportunities for the self-employed, thereby reducing the scale of the concern.
A balanced budget is a rare phenomenon in world practice since its deficit, as its surplus, depends not only on government spending and taxation policy. Reducing expenses can create more suitable conditions for attracting capital into the economy, and setting the tax burden at a lower level stimulates consumption and investment growth. At the same time, higher taxes can only generate excessive losses for society, especially for the middle class. Therefore, in this case, it would be most appropriate to apply a reduction in spending, which would benefit both the state and the population.
Wealthier citizens should not pay more because even assuming that this is possible, the situation will not change significantly. This taxation would only increase the dissatisfaction among the population and cover a small part of the necessary funds. Current tax policy has undergone a long period of reform to help recovery from the pandemic. The U.S. tax structure is now dynamic, consistent with the debt reduction project’s commitments. However, the budget deficit is a significant problem that cannot be solved by tax rates solely.
At first glance, government debt appears to be a purely economic issue. Recently, however, it has increasingly become a political issue, and the main reason is a disagreement between the parties. Democrats and Republicans have repeatedly criticized each other’s actions because of their distinct visions of the country’s future and approach to governance. The aggravation of the debt situation has led to a critical condition and an even greater reason to criticize the party that makes management decisions and allocates resources.
I agree that the state must help the economy recover from the crisis by conducting expansionary fiscal and monetary policies. Monetary liabilities are the government’s responsibility; therefore, state authorities should try to find the most profitable exit strategy from the crisis. Liabilities can immediately burden the economy and weaken its institutions. The state’s future depends on the decisions of the institutions chosen by citizens, and they must responsibly fulfill their mission and obligations.
The labor sphere is a key and multifaceted area of economic life in the United States. Until recently, the country could be considered to have reached an optimum and sustainable level of unemployment. The distinctive feature of the labor force is high mobility and good training. However, the unemployment rate was the most significant after the pandemic in 45 years (A true progressivism, 2012). Due to the dramatic rise in the number of people in the United States who have lost their jobs, the problem still exists, and its nature has worsened. To overcome this issue, the following measures may be suggested:
- Increasing jobs;
- training and retraining the workforce;
- promotion of the hiring of a workforce;
- social insurance for unemployment;
- support for small businesses.
Eliminating most of the government seems more of a political slogan than a genuine desire to change the economic situation. It is important to note that government spending does exceed capacity. Still, there is no guarantee that the economy will improve with less parliament or changes in some politicians others. Balancing the budget is indeed a necessary measure that will solve not all but most of the economic challenges that lie ahead today. Deliberate spending and taxation policies will help balance the expenses, increasing investor confidence and leading to a fall in interest rates.
The peculiarity of the U.S. economy is that the economic growth rate depends on domestic consumption and the government measures to stimulate constant demand, which sometimes only exacerbates the debt situation. In more institutionally advanced countries like the U.S., the positive impact persists, although it is significantly smaller than in the case of a pre-threshold value. Therefore, public debt can slow economic growth, although not always significantly. Conversely, economic prosperity, on the other hand, is bound to reduce debt in the long term.
Republicans rely more on market mechanisms for economic prosperity. At the core of their monetary policy are investor and business support. Their primary tool is a stimulative fiscal policy that reduces businesses’ tax burden. However, it usually means a regressive scheme of taxation when the tax burden is shifted to the poorer segments of the population. Democrats, on the other hand, advocate the need for active government intervention in the economy. Their primary tool to support the economy is government spending. They advocate progressive taxation, support for low-income people, and condemn income inequality. This doctrine has a more positive effect on economic growth and living standards.
Personal and public debt share obligations; however, their nature differs. Personal debt refers to a specific individual who has incurred debt due to actions, for example, a loan. In contrast, the national debt is a much broader concept because it encompasses the obligations of all the country’s public bodies due to their actions. Although different in scope, both images are concerned with money and the need for its replenishment. Both debts give rise to obligations and deficits. An individual must manage his multiple needs with limited resources. In the same way, the state must have limited resources to meet public expenditures.
The pandemic caused the national debt to rise to the level of World War II. It has presented new challenges and factors that must be considered when adopting economic policies. Budget expenditures have grown considerably, and previous measures are no longer effective. The significant increase in debt was justified by the need to protect lives, save jobs and avoid a wave of bankruptcies. However, the sharp increase in debt raises vulnerabilities, especially in tighter financial conditions. The critical challenge now is to find the right balance between fiscal and monetary policy in the face of high debt and rising inflation.
The debt of the U.S. and other developed countries has increased significantly in recent years. However, the U.S. has $15,991,183,606,557 in debt, more than Japan, which was in first place for many years (The global dept clock, 2022). It is not favorable, and such a high figure will not be conducive to economic growth. Therefore, the state should take measures to overcome the crisis.
References
A true progressivism. (2012). The Economist. Web.
The global dept clock. (n.d.). Web.