The United States has recently hit the $30 trillion mark in national debt for the first time in history, as reported by The New York Times. To put things in perspective, the same number stood at $22.7 trillion at the end of 2019. So, what’s happened to push the number higher? And what exactly does a $30 trillion national debt mean? Below, we’ll dig into these questions and some of the details beneath the headlines.
How did we get here?
The U.S. is known as a country that spares no expense. We are a nation of heavy spending and borrowing, and as per a previous Breezy Explainer, we cannot simply print money with real value. For these simple reasons, debt builds up. This debt is an accumulation of each year’s budget deficit, or how much money the government spends that goes over the amount of money that the government brings in. And in the case of the current number, the scale of the debt has much to do with the fact that the country has had to spend vast amounts of money on COVID-19 relief, all while international trade and commerce have suffered.
How are Americans impacted?
The national debt is often brought up as a kind of financial boogeyman, with no real explanation of tangible consequences. So how does it actually impact ordinary Americans? A piece at AskMoney dug into this question in some detail, explaining that generally speaking, the higher a country’s national debt is, the lower the standard of living becomes. This is because as more tax revenue is spent on the debt and its interest, less money is invested in other government expenditures that can benefit citizens. In some cases, the government also decides to raise taxes in order to offset the annual deficit.
Is $30 trillion even a real number?
While $30 trillion is, in fact, a real number you can count to adding up the nation’s debts (please don’t try), the good news is that the country doesn’t really owe that amount of money right off the bat. A piece at Quartz does a nice job of explaining that just like with your own personal debt, the U.S. doesn’t have to pay trillions immediately. This debt is set to be paid over a long period of time, during which myriad other economic changes (some of which we’ll speak to below) have the potential to offset it. As such, the debt doesn’t affect the economy as much as it sounds like it would.
What can be done?
The national debt doesn’t fall on the citizens’ shoulders. The government takes steps in order to reduce the annual deficit and hopefully, reduce the national debt as well. As was previously mentioned, raising taxes is one of the easiest ways for the government to generate revenue. Another way is by selling this debt to interested investors, and by cutting spending. CNN explains that while it is important to reduce government spending, however, it’s difficult to decide exactly where to do so, and how changes like these should be implemented. It’s a complex issue to say the least. Even if there are theoretical changes that would reduce the number –– like slight reductions to lucrative defense spending or mild tax hikes on corporations and the ultra-wealthy –– they tend to be politically divisive and thus difficult to approach.
While $30 trillion is a dramatic number and a very real problem in some respects, it is not the crippling economic burden it’s sometimes framed as. This is particularly important to be aware of as we continue to endure uncertain economic times in light of the pandemic.