By Mackenzie Pedersen, Staff Writer
Let me ask you this:
- What is the United States Financial Debt Crisis?
- Who does this affect?
To answer the first question plainly: The United States Government spends more money than it receives from tax revenue. This creates a deficit. The government then borrows money to make up the difference, which then manifests debt. You can think of this in terms of owning a credit card. Your credit card company provides you a limit of how much you can borrow, but if you don’t pay it, it becomes debt. The difference however is that Congress sets the borrowing limit as well as the spending. Moreover, during the early 20th century, the United States government created what is called a ‘Debt Ceiling.’ This ceiling is the limit set by congress that the United States can borrow.
When it was first established, the ceiling was established very high for the time period, but as we have come into the 21st century, Congress has had to vote to raise the debt ceiling at least 10 times. Currently, the amount of money that has been borrow by the United States government has exceeded 20 TRILLION U.S. DOLLARS as of Sept. 8, 2017! This debt is expected to increase by $1 trillion every year, or more! This can spawn a massive dilemma. For example, if the debt to gross domestic product (GDP) ratio of a nation becomes too high, lenders may become concerned that a country cannot generate enough revenue to eventually pay back its debt. The Balance reports that “According to the International Monetary Fund, that level [for concern occurs at] 77 percent for developed countries,” and the current GDP to debt ratio for the United States sits at 103%! So what in the world is the government spending this money on?
There are three specific areas that consist of most of the government spending: Social Security, Medicare, and Medicaid. It is estimated that 62%, or $2.535 trillion, of the 2018 Federal Budget will go to these mandated benefits. Of these, Social Security holds the largest expense of $1.005 trillion. Medicare comes in second at $582 billion with Medicaid following closely behind at $404 billion. In addition to the Mandated Benefits, the government maintains obligations to Discretionary Benefits (such as military spending, infrastructure, education, etc.), and of course the interest that has accumulated from these massive loans. As of 2017, the amount of loan interest that the government is responsible for paying is $269 billion, which is more than the government spends on education altogether. If that doesn’t seem dangerous enough, it is expected to increase dramatically to $818 billion by 2027!
As for the second question… who does this debt affect in the long run? MILLENNIALS! Anyone around the age of 30 and younger are likely to be left to carry this significant debt. So why should millennials care exactly? For starters, if you have ever gone to college, 92% of those student loans you have heard such wonderful things about go straight to the government, and are thus being used to pay for some of this debt. Additionally, if the United States eventually defaults on its loans or debts increase so much that lenders don’t want to provide to the United States anymore, millennials could face a more catastrophic crisis than seen by Greece. The Congressional Budget Office predicts that if the financial debt crisis continues in this trajectory, in less than 30 years, a four-person family income will be reduced by $16,000. Additionally, this type of debt can cripple future investments and economic growth such as in infrastructure, education, and research and development.
So how can we solve this problem? Stop Congress from excessive spending. This happens year after year after year, and according to The Balance this year’s “federal budget is $4.094 trillion. The U.S. government estimates it will receive $3.654 trillion in revenue. That creates a $440 billion deficit for October 1, 2017 through September 30, 2018.” Will the spending ever end?
In simple economic terms, if the United States can increase economic growth, then the government can receive more in tax revenue. If we pair this idea with ceasing additional governmental spending, then the debt can begin to be managed. You can think of this in terms of your credit card again. Say, you get a better paying job and you stop using your credit card all together. Because you are not adding to the debt you’ve accumulated on your credit card and you’re able to pay more towards your credit card, you can pay it off! However, if government spending continues to increase without repaying its debt, this could result in a default on the national debt, which would have a devastating snowball effect that could trigger a severe recession: inflation of the U.S. dollar, increased costs for corporations, mortgages, consumer loans, and various government payments such as Social Security, Student Loans, Medicare, Federal Wages, etc. would cease.
From one millennial to another, I urge you to take a stance on the looming crisis at hand. One of the first things you can do is sign this ‘Up to Us’ pledge. This pledge simply states: “as a young adult, I recognize that my generation has an essential role to play in helping to build a strong fiscal and economic future for our nation… [through] a non-partisan campaign that empowers millennials across the nation to make their voices heard on the issue of our long-term national debt.” Additionally, you can write to your local state representative. Raise your voice!
Also, here are some additional videos to watch if you want to learn more on the matter:
Why We Need to Abolish the Debt Ceiling
The Debt Limit Explained
How to Solve America’s Spending Program
America’s Debt Crisis Explained
Donald Trump’s $20 Trillion Problem
The Debt Ceiling Explained: Why You Should Care?
What you need to know about the federal debt ceiling, and why you should care