U.S. Debt: An Overview

Few issues are more contentious in contemporary American politics than the federal government's budget. Those who argue in favor of a balanced budget claim that t💛he growing federal debt will have h✅armful effects on taxpayers in the future. Others counter that a government budget isn't like a household budget and shouldn't be viewed as such. They say that deficits must be run to ward off economic or foreign threats and that a nation's debt isn't an urgent problem.

Proponents of balanced budgets also support🥀 restricting the power and scope of the government. Their opponents want the government to have the power and the funds to affect 𒁏wide-reaching change, if necessary.

The history of U.S. debt goes back to the American Revolution. Almost all the deficits in the early days of our country were the result of war. The federal government managed to pay off its entire debt in 1835. This was the first time that the country was debt-free. Wars, economic conditions, and 澳洲幸运5官方开奖结果体彩网:stock market crashes have all had a hand in forcing t🌸he government to accumulate t💎he nation's debt since then.

Economists Are Divided on Deficits and Debt

Running the country with a balanced budget means the government would have to operate without a deficit. Economists are divided on the question of just how important it is for the U.S. to tackle its 澳洲幸运5官方开奖结果体彩网:budget deficit and its total outstanding debt.

• The mainstream view is that the debt isn't a big cause for concern so tackling the deficit isn't urgent.
• Others argue that the 澳洲幸运5官方开奖结果体彩网:government's debt will eventually become a problem and should be tackled now.
• Other economists argue that government budget deficits don't matter, at least up to a point. This group generally falls in the minority.

Arguments for Balancing the Budget

One of the mai🧸n points of the argument for a balanced budget is to protect coming 🍒generations from the effects of accumulated debt.

Consider the national public debt at the end of the fourth quarter of 1980. It was $930.2 billion at that time compared to $34.8 trillion at the end of the second quarter of 2024. Some say that continuously running a deficit like this would make debt more 𒁏unsustainable in the future.

The ever-rising amount of debt may also force investors to question whether the U.S. government will ever be able to repay its debts. They say that this results in 澳洲幸运5官方开奖结果体彩网:surging interest rates that will quash private-sector investment as well as the economy. Interest rates that rise too quickly could make it very difficult for the government to afford interest payments on the national debt, leading to default or still higher inflation.

Proponents of balancing the budget also claim that running large deficits when an economy is at full employment can shift economic activity from the 澳洲幸运5官方开奖结果体彩网:private sector to the public sector. This could tamp down growthꦬ in the long run.☂

No Need to Worry About Deficits for Now

Just how easy would it be to implement ways to balance the budget? Not very, according to some economists. The taxes you pay each year to the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) are counted as revenue that's used to reduce the deficit. But there's no guarantee that this revenue stream will be realized or, ultimately, how much it'll be. Not everyone pays their taxes or even files a 澳洲幸运5官方开奖结果体彩网:tax return.

The more mainstream view among economists is that the nation's debt may ultimately become a problem but it's not one we must face by balancing the budget right now. 澳洲幸运5官方开奖结果体彩网:U.S. government bonds are still considered the safest investments in the world and decades of prediction♏s of bond-market doom have yet to be realized.

Economists also caution that taking drastic measures to balance the budget could hurt the economy. A balanced budget would require steep spending cuts and tax increases that could amount to a double body blow to the nation's economy. And it could have the opposite effect, actually increasing 🤪the deficit by lowering tax revenue and causing the 🍸government to spend more on social programs.

Deficits Don't Matter—To a Point

One view of government deficits and debt that has risen to prominence is related to 澳洲幸运5官方开奖结果体彩网:Modern Monetary Theory (MMT). Proponents of MMT are usually liberal economists and politicians. They argue that deficits and debts don't generally matter because the government can simply🎃 print more money, unlike a household.

This theory only holds when inflation is weak or at least contained, however. MMT supporters say that government bไorrowing becomes a problem only when it raises aggregate demand to inflationary levels.

Arguments Against a Balanced Budget Law

Some conservatives suggest passing a law or even a Constitutional amendment requiring the governme𝓀nt to balance its budget. Running a deficit would therefore be deemed unconstitutional. Enacting a law like this would also ensure that a balanced bu﷽dget is presented to Congress and that any excess spending is capped.

Most mainstream economists argue that this is a risky way to tackle the debt, one that could hamstring the government in times of economic cris♏is or other emergencies when additional spending is required. Ratifying such a law could lead to increased unemployment 𝄹as well as deeper and longer recessions.

Experts say that a constitutional amendment may also lead to a breakdown in certain federal social programs, including Social Security and retirement programs🐓 for military personnel and veterans.

Federal spending must offset revenue collected in the same year so some of these programs wouldn't be able to rely on anything collected in previous years even if they had a surplus balance.

The Bottom Line

Balancing the nation's budget isn't an easy feat and it's nothing like trying to keep your household budget balanced. The U.S. has run deficits ever since it gained independence from Great Britain. The government has to spend to keep running and providing services. Federal government debt has always been one of the safest, most attractive investments. This is why some aren't eager to balance the budget.

But those who support balancing the budget feel that not doing so spells dire financial trouble for f🍌uture geneꦆrations of Americans who will be saddled with high taxes.