The Economic Debt Situtation

The national debt is money owed by the federal government. It is indirectly considered a debt of the citizens, since citizens must ultimately pay it off. It consists of government bonds, bank loans, and according to some measures, unfunded liabilities such as pension plan payments and goods and services the government has contracted for but not yet paid (On the Issues). Our current excess of national debt has been caused by many different problems starting far into the past. A succession of over-spending administrations and congress have combined projects, entitlement programs, and defense spending and caused the total of our national debt to spiral out of control. Another cause of the United States debt is consumers buying much more than what is within their means. When this happens consumers are taking out loans in great numbers. Because they are already outside of their means of spending, they do not possess the currency to pay back these loans in a timely manner. Thus, the outrageous interest builds up, and the consumer finds his or her self in a greater debt each month. When this same process happens to millions and millions of consumers for years, it causes the debt of the nation to increase dramatically.

There are many consequences of the national debt that are already affecting our generation in a negative way. Goods and services are much more expensive. The cost of borrowing by producers, manufacturers, transporters, and retailers all has to be added to the price of the final product (Greaves). Consumers have much less money to spend. They are burdened by the cost of mortgages, overdrafts, credit cards, and personal loans. There is a surplus of goods and services because the population can't afford to buy up all the goods and services being produced. This in turn creates a cut throat competition. Businesses try to cut prices and costs to grab a share of this limited purchasing power in the economy. So they cut wages and shed jobs (Greaves). The national debt also causes inflation. This is guaranteed because producers constantly have to borrow more, and must add the cost of that increased borrowing to the price of the goods produced. And it causes negative effect on international trade. Surplus goods in the national economy have to be disposed of somehow. The obvious way to do this is to try to export those goods (Greaves).