American economic issues Essay Example | Topics and Well Written Essays - 1000 words

American economic issues - Essay ExampleBecause debt plays such an integral part in the economy, it must be measured appropriately to bring the long-term impacts it brings forth. Currently, the national debt held by the in the public eye(predicate) is over $13 trillion, which is around 74 percent of the countrys economy, as measured by piggish Domestic Product (GDP) (Fisanick, 2010). The gross debt, which includes money owed to other parts of the federal official government, is over $18 trillion. The National debt has accumulated to that because, over the last 40 years, the federal government has generally spent to a greater extent than it collected in revenue. When this occurs, the government must borrow money to cover the difference. The government borrows by selling securities such as treasury bonds, then agreeing to bondholders back with interest. Over time this borrowing accumulates into the national debt. Presence of a National debt in the economy directly affects the publi c in the following ways The high cost of living High debt levels mean higher interest rates on everything from credit cards to mortgage loans. Since incomes do not rise at the same rate as interest rates, what follows is a pinch in consumer pockets as goods and services become more expensive. Slower wage growth In times of high debt and high-interest rates, every dollar an investor spends buying government debt is a dollar not invested elsewhere in the economy, hence slower economic growth. Reduced fiscal flexibility The debt levels doubled between 2008 and 2013, as a response to the 2008 financial crisis.