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The national debt of the United States stands at over $26.7 trillion as of now. This translates to almost $81,000 per person in the US.
The key reason why the national debt of the United States continues to rise is due to expenses exceeding revenue. That is, government revenue is usually less as compared to its revenue owing to several factors.
Since the government spends more than what it earns, it faces a budget deficit each year. The government has to borrow money in order to cover the deficit. But when it borrows money to cover the budget, the national debt of the United States also continues to rise.
Certain factors like social security, foreign wars, financial recessions and healthcare challenges have contributed immensely to the United States national debt.
The current state of the economy virtually guarantees that borrowing will persist well into the future. An inadequate tax system (where the government earns less revenue compared to its public expenditure), aging population, rising health problems (leading to chronic diseases, disabilities and added burden on the healthcare system) and overseas intervention mean that the government will have to continue borrowing to cover the budget deficit. Thus, the national debt of the United States will continue to climb.
Here is an explanation behind the key factors behind the rising national debt of the United States.
Rapidly changing demographics where the percentage of seniors continues to rise is a key reason for rising national debt. The population is aging rapidly due to certain factors.
People are choosing to have fewer children. Many are now starting families at older ages. This implies a rising percentage of senior citizens.
An aging population means that healthcare costs and social security costs will both rise. This is extremely troubling since the tremendous costs associated with healthcare and social security are responsible for the steep rise in the national debt of the United States.
As the population continues to rapidly age, this means that more and more retirees are now eligible for social security benefits. As people grow older, disabilities increase. Hence, an aging population means that besides retirees, the social security system will also have to fund far greater numbers of disabled persons.
An aging population also implies a higher incidence of chronic diseases. In fact, age is perhaps the greatest risk factors for practically all chronic diseases. Senior citizens of retirement age and above are at a much higher risk of chronic illnesses than younger people. Therefore, healthcare costs rise with an aging population. The cost of healthcare programs like Medicare and Medicaid will skyrocket with an aging population. Hence, the national debt of the United States will go up exponentially as the population ages.
America is aging rapidly. Over the course of the next 17 year, ten thousand people will reach retirement age every day. Senior citizens are also expected to live longer due to healthcare advances and rising life expectancies. Social security, disability and healthcare costs for sustaining older people will rise due to longer lifespans of senior citizens.
Besides senior citizens, health problems and associated disabilities are rising in all age groups and demographics. Hence, recent decades have seen a sharp rise in healthcare costs. Rising healthcare costs will have a powerful adverse impact on the national debt of the United States.
The healthcare system currently comprises almost a fifth of the whole economy. It is also one of the fastest rising components of the US budget.
Besides aging population and higher incidence of illnesses in almost all age groups the inefficiency of the US healthcare systems further exacerbates the problem. US citizens pay around 3 times as much as the OECD average for healthcare. Sadly, they get far less compared to the steep amount they pay. Despite such a massive expenditure, the US healthcare system has failed to provide the results that it should be delivering. Unless the US healthcare system improves, the national debt of the United States will continue to rise.
The tax system of the United States does not provide enough revenue to cover all public costs. The combined cost of healthcare, foreign wars, social security and other public expenditures far exceed revenue from the tax system.
Tax cuts implemented during the Bush era and the current Trump administration have not helped matters. Massive tax cuts mean the government has to borrow to address dwindling funds. Thus, the national debt of the United States has continued to rise, fueled in part by inadequate tax revenue.
The US has had the misfortune of suffering two massive economic downturns in quick succession. The economic recession in 2008 was the greatest financial downturn since the Great Depression of the 1930s. The current economic fallout from the covid outbreak has been so massive that the Trump administration has resorted to unprecedented financial stimulus packages to provide impetus for the failing economy.
Unfortunately, financial stimulus packages are basically free money handouts for the public. These packages are not investments in the economy. While investments can provide benefits in the long term, expenditures cannot. The benefits of such expenditures pale in comparison to the problems that will arise in the near future. One such important problem is the sharp rise in the national debt of the United States. Due to COVID-19, the government may have to approve even more financial stimulus packages quite soon. Millions of Americans have accumulated a staggering amount of credit card debt and need debt relief. In short, the government will have to borrow money to dole out free cash to the multitudes. Such an approach can help the masses for very short periods but it will prove disastrous for the economy in the future.
The national debt of the United States is a grim problem that needs a quick solution. This is necessary for protecting the economy as well as future generations from the adverse impacts of the national debt of the United States. It is not fair for future generations to struggle under the burden of the enormous debt problem that continues to grow worse.